skip to Main Content
The smarter way
to do assignments.

Please note that this is just a preview of a school assignment posted on our website by one of our clients. If you need assistance with this question too, please click on the Order button at the bottom of the page to get started.

Salt Lake City Services, Inc., provides maintenance services for commercial buildings. Currently, the beta on its common stock is 1.08. The risk-free rate is now 10 percent, and the expected return on the market portfolio is 15 percent. It is January 1, and the company is expected to pay a $2 per share dividend at the end of the year, and the dividend is expected to grow at a compound annual rate of 11 percent for many years to come. Based on the CAPM and other assumptions you might make, what dollar value would you place on one share of this common stock?
Solution: As per CAPM, cost of equity is = Risk-free rate + Beta * (Market Return Risk-free rate) = 10% + 1.08 * (15% – 10%) = 15.4% Value of Share at the end of Year 1 = Dividend at the end of Year 1 * (1 + Perpetual growth rate) / (Cost of equity…

Perpetual growth rate) = $2 * 1.11 / (15.4% – 11%) = $50.45 Value of share as on today = Value at the end of year 1 / (1 + cost of equity) = $50.45 / 1.11 = $45.45

GET HELP WITH THIS ASSIGNMENT TODAY

Clicking on this button will take you to our custom assignment page. Here you can fill out all the additional details for this particular paper (grading rubric, academic style, number of sources etc), after which your paper will get assigned to a course-specific writer. If you have any issues/concerns, please don’t hesitate to contact our live support team or email us right away.

How It Works        |        About Us       |       Contact Us

© 2018 | Intelli Essays Homework Service®