Oakwood University Integrative Risk and Valuation Managerial Finance Worksheet

Integrative-Riskand valuation Giant Enterprises’ stock has a required return of 14.8%. Thecompany, which plans to pay a dividend of $2.60 per share in the coming year,anticipates that its future dividends will increase at an annual rateconsistent with that experienced over 2013-2019 period, when the followingdividends were paid: E. a. If the risk-free rate is 4%, what is the risk premiumon Giant’s stock? b. Using the constant-growth model, estimate the value ofGiant’s stock. (Hint: Round the computed dividend growth rate to the nearestwhole percent.) c. Explain what effect, if any, a decrease in the risk premiumwould have on the value of Giant’s stock. a. If the risk-free rate is 4 %, therisk premium on Giant’s stock is %. (Round to one decimal place.) b. Using theconstant-growth model, the value of Giant’s stock is $ (Round to the nearestcent.) c. Explain what effect, if any, a decrease in the risk premium wouldhave on the value of Giant’s stock. (Select from the drop-down menus.) Adecrease in the risk premium would decrease the required rate of return, whichin turn would increase the price of the stock. Year Dividend per Share $2.45$2.28 $2.10 2019 2018 2017 $1.95 2016 2015 $1.82 $1.80 $1.73 2014 2013