CAPM Illustration 3


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The Beta coefficient of Target Ltd is 1.4. The company is maintaining 8% rate of growth rate in dividend and earnings. The last dividend was 4 per share. The return on Govt. securities is 10% while the return on the market portfolio is 15%. The current market price of one share of Target Ltd is  36.

(a)    What will be the equilibrium price per share of Target Ltd.

(b)   Would you advise in purchasing share.

 


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