You are considering two stocks. Both pay a dividend of $1, but the beta coefficient...
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Finance
You are considering two stocks. Both pay a dividend of $1, but the beta coefficient of A is 1.5 while the beta coefficient of B is 0.7. Your required return is
k = 8% + (15% - 8%) B.
a.) What is the required return for each stock?
b.) If A is selling $10 a share, is it a good buy if you expect earnings and dividends to grow at 5 percent.
c.) The earnings and dividends of B are expected to grow annually at 10 percent. Would you buy the stock for $30?
d.) If the earnings and dividends of A were expected to grow annually at 10 percent, would it be a good buy at $30?
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