The current risk-free rate is 3 percent and the market risk premium is 5 percent. You are trying to value ABC company and it has an equity beta of 0.9. The company earned $3.00 per share in the year that just ended. You expect the company's earnings to grow S percent per year. The company has an ROE of 14 percent. a. What is the value of the stock? Do not round intermediate calculations. Round your answer to the nearest cent. %24 b. What is the present value of the growth opportunity? Do not round intermediate calculations. Round your answer to the nearest cent.

The current risk-free rate is 3 percent and the market risk premium is 5 percent. You are trying to value ABC company and it has an equity beta of 0.9. The company earned $3.00 per share in the year that just ended. You expect the company's earnings to grow S percent per year. The company has an ROE of 14 percent. a. What is the value of the stock? Do not round intermediate calculations. Round your answer to the nearest cent. %24 b. What is the present value of the growth opportunity? Do not round intermediate calculations. Round your answer to the nearest cent.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 3P

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