What is the expected return on the equity

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Reference no: EM13185708

Company A just paid a $3.00 dividend per share. The dividend is expected to grow at a 4% rate indefinitely. The beta of the stock of Company A is 1.5. The market risk premium is 8% and the risk-free rate is 3%.

(a) What is the expected return on the equity?

(b) What is the capitalization rate?

(d) What is the intrinsic value of the stock?

(e) If the stock is currently trading at $30, is the stock overpriced or underpriced?

(f) Would you buy or sell the stock?

Reference no: EM13185708

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