19 Jeanette's Medical Supply has a beta of 1.47 and its RWACC is 11.8 percent. The market risk premium is 7.4 percent, and the risk-free rate is 3.6 percent. The firm's cash flow at Time 3 is $73,900 with a growth rate of 2.2 percent. What is the terminal value of the firm at Time 3?

19 Jeanette's Medical Supply has a beta of 1.47 and its RWACC is 11.8 percent. The market risk premium is 7.4 percent, and the risk-free rate is 3.6 percent. The firm's cash flow at Time 3 is $73,900 with a growth rate of 2.2 percent. What is the terminal value of the firm at Time 3?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

You have the following cash flows for the firm; What is NPV, if discount rate is 10% ? CF0 = -477 (CF0 is always negative. It is your initial investment) CF1 = 710 CF2 = 699 CF3 = 752 CF4 = 734 CF5 = 937
Jersey Jewel Mining has a beta coefficient of 1.5. Currently the risk-free rate is 4 percent and the anticipated return on the market is 6 percent. JJM pays a $5.00 dividend that is growing at 3 percent annually. Do not round intermediate calculations. What is the required return for JJM? Round your answer to two decimal places. % Given the required return, what is the value of the stock? Round your answer to the nearest cent. $ If the stock is selling for $159, what should you do? The stock overvalued and be purchased. If the beta coefficient declines to 1.2, what is the new value of the stock? Round your answer to the nearest cent. $ If the price remains $159, what course of action should you take given the valuation in d? The stock is and be purchased.
Nikul
7. The firm expects earnings and dividends to grow at a rate of 25% for the next 4 years, after the growth rate in earnings and dividends will fall to zero, i.e., g = 0. The company's last dividend, Do, was P 1.25, its beta is 1.20, the market risk premium is 5.50%, and the risk-free rate is 3.00%. What is the current price of the common stock? a. P 26.77 c. P 27.89 f. P42.35 b. P 29.05 d. P 30.21 8. The firm's last dividend was P 1.75. Its dividend growth rate is expected to be constant at 25% for 2 years, after which dividends are expected to grow at a rate of 6% forever. Its required return (r.) is 12%. What is the best estimate of the current stock price? e. P31.42
You are a consultant to a firm evaluating an expansion of its current business. The cash-flow forecasts (in millions of dollars) for the project are as follows: Years Cash Flow 0 – 100 1-10 + 17 On the basis of the behavior of the firm’s stock, you believe that the beta of the firm is 1.44. Assuming that the rate of return available on risk-free investments is 5% and that the expected rate of return on the market portfolio is 11%, what is the net present value of the project?
1. Suppose your expectations regarding the stock market are as follows: State of the Probability HPR Economy Boom 0.3 33% Normal growth 0.3 19 Recession 0.4 -15 a. What is the expected return, variance and standard deviation? 2. Assume that you manage a risky portfolio with an expected rate of return of 13% and a standard deviation of 29%. The T-bill rate is 5%. Your client chooses to invest 75% of a portfolio in your fund and 25% in a T-bill money market fund. a. What is the expected return and standard deviation of your client's portfolio? b. What is the reward-to-volatility ratio (S) of your risky portfolio and your client's overall portfolio? Explain the sharp ratio.
Suppose that the rate of return on the market portfolio is 8% and the risk-free rate is 1%. Con- sider a stock with B = 1.3. The firm is expected to have no earnings in the first year (E1 = 0), and then $10 earnings-per-share in the second year (E2 = 10). After that, earnings are expected to grow at a constant annual rate of 8%. The retention ratio is 80% in all periods. Round-up all your answers to 2 decimal places. А. Find the fundamental value of the stock today (t = 0). В. Suppose the company decided to pay out 40% of its earnings as dividends. What would be the fundamental value of the stock today (t = 0)?
You have the following cash flows for the firm; What is NPV, if discount rate is 10% ? CF0 = -433 (CF0 is always negative. It is your initial investment) CF1 = 969 CF2 = 697 CF3 = 824 CF4 = 727 CF5 = 922
A manager believes his firm will earn a return of 12.50 percent next year. His firm has a beta of 1.40, the expected return on the market is 10.50 percent, and the risk-free rate is 3.50 percent. Compute the return the firm should earn given its level of risk. (Round your answer to 2 decimal places.) Required return % Determine whether the manager is saying the firm is undervalued or overvalued. O overvalued O undervalued
ces A manager believes his firm will earn a return of 23.80 percent next year. His firm has a beta of 1.69, the expected return on the market is 16.30 percent, and the risk-free rate is 6.30 percent. Compute the return the firm should earn given its level of risk. (Round your answer to 2 decimal places.) Required return Determine whether the manager is saying the firm is undervalued or overvalued.. undervalued % overvalued
31. CAPM and Valuation. You are a consultant to a firm evaluating an expansion of its current business. The cash-flow forecasts (in millions of dollars) for the project are as follows: Years Cash Flow -100 1-10 +15 On the basis of the behavior of the firm's stock, you believe that the beta of the firm is 1.4. Assuming that the rate of return available on risk-free investments is 4% and that the expected rate of return on the market portfolio is 12%, what is the net present value of the project? (LO12-3)
10) Hoping-To-Meme (HTM), a movie theater chain, just paid a dividend of $5. Dividends are expected to grow at a constant rate of 4% per year from this point onward. HTM's stock has a beta of 0.9. The risk-free rate is 5%, and the expected return on the market portfolio is 12%. a. What is the market capitalization rate for HTM? b. Compute the intrinsic value of HTM's stock. Foc MacBook Pro A

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS