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You are interested in purchasing the common stock of Azure Corporation. The firm recently paid...

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Finance

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You are interested in purchasing the common stock of Azure Corporation. The firm recently paid a dividend of $3.00 per share. It expects its earnings-and hence its dividends-to grow at a rate of 7.9% for the foreseeable future. Currently, similar-risk stocks have required returns of 10.4% a. Given the preceding data calculate the present value of this security. Use the constant-growth dividend model (Equation 8.8) to find the stock value. b. One year later, your broker offers to sell you additional shares of Azure at $70. The most recent dividend paid was $3.24, and the expected growth rate for earnings remains at 79% you determine that the appropriate risk premium in 6.74% and you observe that the risk-free rate (Re) is currently 5 21%, what is the firm's current required return? c. Applying Equation 8.8, determine the value of the stock using the new dividend and required return from part b d. Given your calculation in parte, would you buy the additional shares from your broker at $70 per share? Explain. e. Given your calculation in parte, would you sell your old shares for $70? Explain

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