Business, 07.11.2019 05:31 fallenangelsayshush

The risk-free rate of return is 6%, the expected rate of return on the market portfolio is 15%, and the stock of xyrong corporation has a beta coefficient of 2.3. xyrong pays out 45% of its earnings in dividends, and the latest earnings announced were $9.00 per share. dividends were just paid and are expected to be paid annually. you expect that xyrong will earn an roe of 18% per year on all reinvested earnings forever.

a. what is the intrinsic value of a share of xyrong stock? (do not round intermediate calculations. round your answer to 2 decimal places.)

b. if the market price of a share is currently $22, and you expect the market price to be equal to the intrinsic value one year from now, what is your expected 1-year holding-period return on xyrong stock? (do not round intermediate calculations. round your answer to 2 decimal places.)

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