What is your estimate of the required rate of return

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Question - Minisoft Co. just paid a dividend of $2.50. It is estimated that the company's dividend will grow at a rate of 20 percent per year for the next two years, then the dividend will grow at a constant rate of 4 percent thereafter. The company's stock has a beta equal to 2, the risk-free rate is 3.0 percent, and the required return on the market is 8.0 percent.

-What is your estimate of the required rate of return for Minisoft Co.?

-What is your current estimate of the price today of Minisoft Co.'s stock?

-What is your expected price in one year (P1), assuming the required rate of return does not change)?

-What is your estimate of the dividend yield and capital gains yield on Minisoft Co.'s stock in the first year? How do the estimates for dividend yield and capital gains yield change in the next year(Year 2)?

Reference no: EM132975708

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