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Business, 13.12.2019 00:31 michaelbernbenn5740

The risk-free rate of return is 8%, the expected rate of return on the market portfolio is 15%, and the stock of xyrong corporation has a beta coefficient of 1.2. xyrong pays out 40% of its earnings in dividends, and the latest earnings announced were $10 per share. dividends were just paid and are expected to be paid annually. you expect that xyrong will earn an roe of 20% per year on all reinvested earnings forever.

a. what is the intrinsic value of a share of xyrong stock?

b. if the market price of a share is currently $100, and you expect the market price to be equal to the intrinsic value one year from now, what is your expected one-year holding-period return on xyrong stock?

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