SML-CAPM Question: Antigone Inc.paid Out a Dividend of $1.75,and Analysts Expect It

question 28

Essay

SML-CAPM Question:
Antigone Inc.paid out a dividend of $1.75,and analysts expect it to grow at 6% for the foreseeable future.The market rate is 17%,the T-Bill rate is quoted at 4%,and Antigone stock is selling at $15.50 (beta 1.2).Answer the following questions:
a) What is the expected return on Antigone stock?
b) Are Antigone shares overpriced, underpriced, or correctly priced?
c) Is Antigone stock above, below, or on the SML?
d) What is the equilibrium price of Antigone stock?

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Definitions:

Growth of the State

The process of increase in the size and scope of government activities, often referring to the expansion of its regulatory, taxing, and coercive capacities.

Industrial Societies

Are societies that use machines and fuel to greatly increase the supply and dependability of food and finished goods. The first such society emerged in Great Britain in the last decades of the eighteenth century.

Social Control

Mechanisms, strategies, and institutions by which societies attempt to regulate individual behavior to maintain societal order and cohesion.

Social Norms

Social norms are the unwritten rules of behavior that are considered acceptable in a group or society, guiding interactions and conduct.