Stock under the discounted cash flow model

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Reference no: EM132015121

1. ABC's common stock, which currently sells for $65.9, just paid a dividend of $0.9 per share and the dividend is expected to grow at a constant rate of 7.1% out into the future. Given all of this information, what is the expected rate of return for this stock under the discounted cash flow model? (Show your answer as a decimal to three places, e.g., if you got 12.3% then input 0.123)

2. If the market risk premium is 5.6 percent and the risk-free rate is 4.9, what is the expected rate of return for a stock with a beta of 0.88 under the Capital Asset Pricing Model (CAPM)? (show your answer in decimal form to four places)

Reference no: EM132015121

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