a. Given the data above, calculate the present value of this security. Use the constant-growth model to find the stock value.
b. One year later, your broker offers to sell you additional shares of Azure at $84.
The most recent dividend paid was $2.92, and the expected growth rate for earnings remains at 6.8%. If you determine that the appropriate risk premium is 7.02% and you observe that the risk-free rate, RF, is currently 4.98%, what is the firm’s current required return, rAzure?
c. Applying constant-growth model, determine the value of the stock using the new dividend and required return from part b.
d. Given your calculation in part c, would you buy the additional shares from your broker at $73 per share? Explain. |
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