(A)Given a Risk-Free Rate of 5

question 61

Essay

(a)Given a risk-free rate of 5.5% and a market return of 12%, calculate ABC's required return on equity if its beta is 1.4.(b)If ABC just paid a dividend of $1.39 and these dividends are expected to grow at 5% pa, calculate an estimate of its price.(c)If ABC's current price is $23.73, what trading recommendation would you make?

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Definitions:

Greek Yogurt

A thick, creamy yogurt that has been strained to remove much of its whey, resulting in a higher protein content and a richer texture compared to regular yogurt.

Offering

Refers to a product or service provided by a business to its customers.

Ability

The possession of the means or skill to do something. In a professional context, it often refers to the competence or proficiency to perform a specific task or role.

Environmental Forces

External factors such as social, economic, political, and technological elements that can affect the operations and success of an organization.