Cache Creek Manufacturing Company Is Expected to Pay a Dividend

question 53

Multiple Choice

Cache Creek Manufacturing Company is expected to pay a dividend of $4.20 in the upcoming year.Dividends are expected to grow at the rate of 8% per year.The riskfree rate of return is 4% and the expected return on the market portfolio is 14%.Investors use the CAPM to compute the market capitalization rate on the stock,and the constant growth DDM to determine the intrinsic value of the stock.The stock is trading in the market today at $84.00.Using the constant growth DDM and the CAPM,the beta of the stock is _________.

• A) 1.4
• B) 0.9
• C) 0.8
• D) 0.5

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