# Dyer Furniture is expected to pay a dividend of D1 = $1.25 per share at the end of the year, and that dividend is expected to grow at a constant rate of 6.00% per year in the future. The company's beta is 1.95, the market risk premium is 5.50%, and the risk-free rate is 4.00%. What is Dyer's current stock price? Select the correct answer. a. $13.66 b. $12.32 c. $11.65 d. $12.99 e. $14.33

1 answer

###### Question:

Dyer Furniture is expected to pay a dividend of D1 = $1.25 per share at the end of the year, and that dividend is expected to grow at a constant rate of 6.00% per year in the future. The company's beta is 1.95, the market risk premium is 5.50%, and the risk-free rate is 4.00%. What is Dyer's current stock price? Select the correct answer. a. $13.66 b. $12.32 c. $11.65 d. $12.99 e. $14.33

## Answers

Answer:$11.65Explanation:The first step is to calculate the return= 4/100 + 1.95(5.50/100)= 0.04 + 1.95(0.055)= 0.04 + 0.10725= 0.14725The stock price can be calculated as follows= 1.25/0.14725-0.04= 1.25/0.10725= $11.65Hence the stock price is $11.65

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