The risk-free rate of return is 8 the expected rate of, Ask an Expert

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The risk-free rate of return is 8%, the expected rate of return on the market portfolio is 15%, and the stock of Xyrong Corporation has a beta coefficient of 1.2.

Xyrong pays out 40% of its earnings in dividends, and the latest earnings announced were $10 per share. Dividends were just paid and are expected to be paid annually. You expect that Xyrong will earn an ROE of 20% per year on all reinvested earnings forever.

What is the intrinsic value of a share of Xyrong stock?

If the market price of a share is urgently $100, and you expect the market price to be equal to the intrinsic value 1 year from now, what is your expected 1-year holding-period return on Xyrong stock?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M93061268

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