Consider the following information which relates to a given company: Item 2019 Value Earnings Per Share $6.43 Price Per Share (Common Stock) $39.59 Book Value (Common Stock Equity) $62.96 million Total Common Stock Outstanding 2.84 million Dividend Per Share $3.52 Analysts expect that the company could maintain a constant annual growth rate in dividends per share of 5.8% in the future, or possibly 7.79% for the next 2 years and 5.29% thereafter. In addition, it is expected that the risk of the firm, as measured by the risk premium on its stock, to increase immediately from 8.38% to 10.52%. Currently, the risk-free rate is 5.85%. Required: Determine the new required return for the firm's stock.

Consider the following information which relates to a given company: Item 2019 Value Earnings Per Share $6.43 Price Per Share (Common Stock) $39.59 Book Value (Common Stock Equity) $62.96 million Total Common Stock Outstanding 2.84 million Dividend Per Share $3.52 Analysts expect that the company could maintain a constant annual growth rate in dividends per share of 5.8% in the future, or possibly 7.79% for the next 2 years and 5.29% thereafter. In addition, it is expected that the risk of the firm, as measured by the risk premium on its stock, to increase immediately from 8.38% to 10.52%. Currently, the risk-free rate is 5.85%. Required: Determine the new required return for the firm's stock.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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