Tangshan China's Stock Is Currently Selling for $160

question 119

Essay

Tangshan China's stock is currently selling for $160.00 per share and the firm's dividends are expected to grow at 5 percent indefinitely. In addition, Tangshan China's most recent dividend was $5.50. The expected risk free rate of return is 3 percent, the expected market return is 8 percent, and Tangshan has a beta of 1.20.
(a) What is the expected return based on the dividend valuation model?
(b) What is the required return based on the CAPM?
(c) Would Tangshan China be a good investment at this time? Explain

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Definitions:

Organization

An entity comprising multiple people, such as a company or society, structured to achieve specific goals or perform tasks.

Skill Set

A collection of skills and abilities that an individual possesses, which are relevant to a specific job or activity.

Market Research

The process of gathering, analyzing, and interpreting information about a market, including information about potential customers and competitors.

Word-of-mouth Marketing

A method of promotion where satisfied customers recommend products or services to their acquaintances.