Respuesta :
Using this information and the CAPM, the stock's intrinsic value is $48.36
Expected Return = Risk-Free Rate + Beta * (Market Return-Risk Free Rate)
= 7% + 1.4 * (12.5% -7%)
= 14.7%
Price = Next Year Dividend / (Required Rate of Return-Growth Rate)
= 3 * 1.08 / 14.7% -8%
= 48.36
Stock intrinsic value refers to the basic, objective value contained in a thing, asset, or financial contract. If the market price is below this level, it is a good buy and above a good sell. When valuing a stock, there are several ways to reach a fair valuation of the intrinsic value of the stock.
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Hampton Corporation's common stock dividends are expected to grow by 8% per year. Recently, the firm paid a $3.00 common stock dividend. Hampton has a beta of 1.40. The expected return on the S&P 500 index is 12.5% and the rate of return on U.S. Treasury securities is 7%. Using this information and the CAPM, what is the stock's intrinsic value? a) $72 c) $24 e) $25.92 b) $66.67 d) $48.36
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