Assume a major investment service has just given OasisElectronics its highest investment rating, along with a strong buyrecommendation. As a result, you decide to take a look foryourself and to place a value on the company’s stock. Here’swhat you find: This year, Oasis paid its stockholders an annualdividend of
$3.63
a share, but because of its high rate of growth in earnings,its dividends are expected to grow at the rate of
13
%
a year for the next 4 years and then to level out at
9
%
a year. So far, you’ve learned that the stock has a beta of
1.66
,
the risk-free rate of return is
6
%,
and the expected return on the market is
12
%.
using the CAPM, the required rate of return on investment is%
the value of company’s stock is $
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