Stock XYZ trades for $63, has current earnings of $12, current dividends of $3, and...
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Stock XYZ trades for $63, has current earnings of $12, current dividends of $3, and a beta of 1.2. The risk-free rate is 4% and the market risk premium is 5%. a. XYZ's plow-back ratio is b= (answer with 1 decimal, e.g. b=0.3) b. Using the Gordon Growth Model, the growth rate implied by the current valuation of XYZ is g= % (answer an integer, e.g. 3%) c. You believe that the true growth rate is 6%. If by tomorrow all investors come to share your belief and the stock price changes accordingly, the holding period return (HPR) to buying a share of XYZ today and selling it tomorrow (no dividends are due between today and tomorrow) is HPR = % (answer an integer, e.g. 11%)
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