Low Fly Airline Is Expected to Pay a Dividend of $7

question 123

Multiple Choice

Low Fly Airline is expected to pay a dividend of $7 in the coming year.Dividends are expected to grow at the rate of 15% per year.The risk-free rate of return is 6% and the expected return on the market portfolio is 14%.The stock of Low Fly Airline has a beta of 3.00.The intrinsic value of the stock is ______.

• A)$46.67
• B)$50.00
• C)$56.00
• D)$62.50
• E)none of the above

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Definitions:

Revenue

The income a business receives from selling a product.

Wholesale Price

The price that manufacturers charge the retailer.

Trademark

A recognizable sign, design, or expression which distinguishes products or services of a particular trader from those of others.

Invention

The creation of a new device, method, or process, resulting from study and experimentation.