has a beta of 1.5. The risk-free rate of return 1s premium is 6 percent. Find th

Question

has a beta of 1.5. The risk-free rate of return 1s premium is 6 percent. Find the required rate of return on capital). 5 percent and the market risk b) XYZ, Inc. will pay a dividend of $4.00 per share net next 5 yearar foreveta return on the stock (i.e., the cost of equity dividend payment by s0.50 a share every year for tnercent per tock fonm hereafter, the dividends are expected to grow atp year. The firm will incre the firm will increase the years (i.e ., XYZ's current stock value? Use the required rate of return ear forever. What is 5 per the stock from (a) return on the year forever t 6

Explanation / Answer

Ans 14%

Rate of Return = Risk free rate + Risk Premium * Beta

Rate of Return = 5% + 6%* 1.5

Rate of Return   = 5% + 9%

Rate of Return = 14%

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