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Miltmar Corporation will pay a year-end dividend of $4, and dividends thereafter are expected to grow...

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Finance

Miltmar Corporation will pay a year-end dividend of $4, anddividends thereafter are expected to grow at the constant rate of6% per year. The risk-free rate is 6%, and the expected return onthe market portfolio is 12%. The stock has a beta of 0.86.

a. Calculate the market capitalization rate.(Do not round intermediate calculations. Round your answerto 2 decimal places.)

Market capitalization rate.%

    



b. What is the intrinsic value of the stock?(Do not round intermediate calculations. Round your answerto 2 decimal places.)

Intrinsic value

Answer & Explanation Solved by verified expert
3.9 Ratings (607 Votes)
Solution a Market capitalization rate is calculated using the following formula Market capitalization rate RF RM RF Where RF Risk free rate Beta of the stock RM    See Answer
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Transcribed Image Text

Miltmar Corporation will pay a year-end dividend of $4, anddividends thereafter are expected to grow at the constant rate of6% per year. The risk-free rate is 6%, and the expected return onthe market portfolio is 12%. The stock has a beta of 0.86.a. Calculate the market capitalization rate.(Do not round intermediate calculations. Round your answerto 2 decimal places.)Market capitalization rate.%    b. What is the intrinsic value of the stock?(Do not round intermediate calculations. Round your answerto 2 decimal places.)Intrinsic value

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