Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Transcribed Image Text:1
2
3
4
5 Risk-free rate (TRF)
6 Market risk premium (RPM)
7 Current stock price (Po)
Market in equilibrium
8
9
10
11
12
Constant growth
18
19
20
Expected year-end dividend (D₁)
Beta coefficient
Calculate required return:
Required return on common stock
13
14
Calculate constant growth rate, g:
Total return on common stock
15 Expected dividend yield
16 Expected capital gains yield
17
Calculate stock price in 3 years, P3:
Number of years from today
Calculate P3 using Po
21
22 Alternative calculation:
23 Calculate P3 using dividends
24
B
$2.50
0.90
3.90%
4.00%
$35.00
Yes
3
C
D
Formulas
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
E
F
G
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