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Calculate the opportunity cost of capital

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Reference no: EM133041090

Question - A share of stock with a beta of 0.83 now sells for $61. Investors expect the stock to pay a year-end dividend of $3. The T-bill rate is 6%, and the market risk premium is 9%. Suppose investors believe the stock will sell for $63 at year-end. Calculate the opportunity cost of capital. Is the stock a good or bad buy? What will investors do?

Reference no: EM133041090

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