Valuation of stock using capm

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Reference no: EM1316183

Valuation of stock using CAPM.

Cargo Point, Inc. has a beta of 1.10. The risk-free rate of interest is currently 6%, and the required return on the market portfolio is 13%. The company plans to pay a dividend of $2.91 in the coming year and anticipates that its future dividends will increase at an annual rate consistent with that of the 2003-2005 period:









Estimate the value of Cargo Point, Inc. stock.

Required Rate of Return

Kb = Rf + b(Km - Rf)


Rate of Return



Rate of return on risk free securities



rate of return on market portfolio





Km - Rf

Risk Premium

















Required rate of return



Km - Kf



b(Km - Kf)



Rf + b (Km - Rf)




Share Valuation



Net proceeds / Current Market Price



Expected dividend per share



Rate of return



Growth rate



D / (Ke - g)





Reference no: EM1316183

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