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Readme [11.4K]
3 years ago
12

The Jameson Company just paid a dividend of $0.75 per share, and that dividend is expected to grow at a constant rate of 5.50% p

er year in the future. The company's beta is 1.15, the market risk premium is 5.00%, and the risk-free rate is 4.00%. What is Jameson's current stock price, P0?a. $18.62b. $19.08c. $19.56d. $20.05e. $20.55
Business
1 answer:
jok3333 [9.3K]3 years ago
5 0

Answer:

Current price of the stock of Jameson company is $18.62. Therefore, the correct option is A

Explanation:

The formula of required rate of return is:

Required rate of return = Risk free rate + Beta × Market risk premium

= 4% + 1.15 × 5%

= 4%  5.75%

= 9.75%

Computation of current stock price is:

Current stock price = Expected dividend per share / (Required rate of return - Growth in dividend)

= (0.75 + [5.50% × 0.75] ) / (0.0975 - 0.055)

= 0.79125 / 0.0425

= $18.62

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allochka39001 [22]

Answer:

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Answer:

Hope i helped:)

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