A share of stock with a beta of 0.67 now sells for $51. Investors expect the...

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A share of stock with a beta of 0.67 now sells for $51.Investors expect the stock to pay a year-end dividend of $3. TheT-bill rate is 4%, and the market risk premium is 9%. a. Supposeinvestors believe the stock will sell for $53 at year-end.Calculate the opportunity cost of capital. Is the stock a good orbad buy? What will investors do? (Do not round intermediatecalculations. Round your opportunity cost of capital calculation asa whole percentage rounded to 2 decimal places.) b. At what pricewill the stock reach an “equilibrium” at which it is perceived asfairly priced today? (Do not round intermediate calculations. Roundyour answer to 2 decimal places.)

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aUnder Capital Assets pricing model CAPM the expected returnie opportunity cost of capital can be calculated with followingequation whereKe Opportunity cost of capitalRf Risk free rate ie T bills See Answer

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A share of stock with a beta of 0.67 now sells for $51.Investors expect the stock to pay a year-end dividend of $3. TheT-bill rate is 4%, and the market risk premium is 9%. a. Supposeinvestors believe the stock will sell for $53 at year-end.Calculate the opportunity cost of capital. Is the stock a good orbad buy? What will investors do? (Do not round intermediatecalculations. Round your opportunity cost of capital calculation asa whole percentage rounded to 2 decimal places.) b. At what pricewill the stock reach an “equilibrium” at which it is perceived asfairly priced today? (Do not round intermediate calculations. Roundyour answer to 2 decimal places.)