The Joseph Company has a stock issue that pays a fixed dividend of $3.00 per sha

Question

The Joseph Company has a stock issue that pays a fixed dividend of $3.00 per share annually. Investors believe the nominal risk-free rate is 4 percent and that this stock should have a risk premium of 6 percent. What should be the value of this stock? Answer: Enter the answers in blue shaded cells Required return C Value of stock C The Joseph Company has a stock issue that pays a fixed dividend of $3.00 per share annually. Investors believe the nominal risk-free rate is 4 percent and that this stock should have a risk premium of 6 percent. What should be the value of this stock? Answer: Enter the answers in blue shaded cells Required return C Value of stock C

Explanation / Answer

Rf 4% Risk Premium   6% Ke = Rf +Beta(Risk prem) ke = 4% + Beta6% Dividend = 3 Price,P0 = D1/(ke-g) Growth rate is 0 P0 = 3/ke P0 = 3/(4%+Beta*6%) Note - In the Question Beta is not given. So kindly put Beta in aove equation to get the Price. Hope you are happy with the solution From next time provide complete details

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