Finance and Investment
posted by Kim on .
What is the value of a common stock if:
a) If earnings and dividends are growing annually at 10%, the current dividend is $1.32 and investors require a 15% return on investmenets in common stock?
b)What is the value of this stock if you add risk to the analysis and the firm's beta coefficient is 0.8, the riskfree rate is 9%, and the return on the market is 15%?
Thank you so much, I have lost my book and I need help with this one.
You've given us data about this stock  but not the current selling price. You need to know that to determine its present value. But  with earnings and dividends (sales, too?) growing annually at 15%, it's likely that the price will grow at something considerably less than 15%. This is also shown by the low beta coefficient of 0.8.

Bayside Inc plans to pay annual dividends for five more years. The last dividend paid was $1.40 a share. Dividends are increased by 2 percent each year. What is the current value of this stock at a discount rate of 9 percent?