Suppose the risk free interest rate is 3% and the expected market return is 8%....
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Suppose the risk free interest rate is 3% and the expected market return is 8%. A company, NZ1, has a beta with 1.1. The current stock price is $25.02. The dividend per share of $1.2 was just paid to the investors. The dividend growth is 8% per year in the future two years, and 4% years thereafter. What is the expected return of NZ1 stock using CAPM? What is the expected price of NZ1 stock in two years? What is the intrinsic value of NZ1 stock? What is your comment about purchase of NZ1 stocks?
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