What is the intrinsic value of Torque's stock?
Torque Corporation is expected to pay a dividend of $1.00 in the upcoming year. Dividends are expected to grow at the rate of 6% per year. The risk-free rate of return is 5%, and the expected return on the market portfolio is 13%. The stock of Torque Corporation has a beta of 1.2.
A. $14.29
B. $14.60
C. $12.33
D. $11.62
D. $11.62
k = 5% + 1.2(13% 5%) = 14.6%; P = 1/(.146 .06) = $11.62.
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