What is the required return on stock

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Problem: You have been researching a company that is actively involved in the renewable energy business. As you dig a little deeper you discover that it has ?led a patent for a new technology that integrates solar energy collection into asphalt roo?ng material. With this in mind you estimate that the ?rm will experience extraordinary growth of ?0% per year for two years, and another three years of unusual growth at 30% per year. After this ?ve year period you feel competition will cause the ?rms growth rate to fall to its previous growth pattern of ?% per year. Answer the following questions assuming the ?rm just paid a dividend of $0.50 per share and has a beta of 1.7. Also assume that the risk-free rate is 3% and the return on the market portfolio is 10%.

a. What is the required return on this stock?

b. How much would you be willing to pay for the stock?

Reference no: EM132494633

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