4. Toyota Motor Corp's stock price is about $157. Consensus analysts' forecasts about Toyota'searnings in 2022 and 2023 are $16.21 and $17.95, respectively. The book value per share is $160.6.The company has a payout ratio about 25%. The risk free rate for Japan capital market is 0.24% andthe market risk premium is about 7.75%. Firm Beta is estimated to be about 0.64. <a. Forecast book value, return on common equity, and residual earnings for 2022 and 2023.<b. Provide a building block analysis about each company's stock price.<C. What are the implied market's expectation about growth rates of Toyota's long-term residualincome after 2024?<d. If you are a value investor, how would you evaluate Toyota price and make investment decisions?Also what additional factors you may need to find out more information about in making your finaldecision?<

The objective of the question is to analyze the financial performance of Toyota Motor Corp using…

Answered: 4. Toyota Motor Corp's stock price is…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

Section: Chapter Questions

Problem 22P

See similar textbooks

Similar questions

2. Suppose that the consensus forecast of security analysts of NoWork Inc. is that earnings next year will be E1 = $10.00 per share. The company tends to plow back 50% of its earnings and pay the rest as dividends. The CFO estimates that the company’s growth rate will be 8% from now on.(a) If your estimate of the company’s required rate of return is 12%, what is the equilibrium price of the stock?(b) You observe that the stock is selling for $120.00 per share. Suppose you believe that the market price is right. What must you conclude about either (i) your estimate of the stock’s required rate of return, (ii) the CFO’s estimate of the company’s future growth rate, or (iii) the forecast of earnings from the analysts?(c) Suppose there is uncertainty about the stock’s dividend growth rate. With probability 1/3 the growth rate will be 10%, with probability 2/3 it will be 7%. What are the respective market values under the two different growth rates?(d) What is the fair price of the stock…
Visa, Inc. (V) has a beta of 1.08, is selling for $56.72, and will pay a $2.35 dividend at the end of the year. If the stock is priced at $57.15 at year-end, it is __________, so __________ it. Assume the risk-free rate is 3.05%, and the expected market return is 3.92%. A. underpriced / sell B. underpriced / buy C. overpriced / sell D. fair-valued / hold
Currently, the nominal risk-free rate is 1.64 percent, the market risk premium is 8 percent, and the beta for Starbucks stock is 0.52. Inflation is expected to decrease by 0.3 percentage points and investors' risk aversion is expected to increase by 3.2 percentage points. If these changes happen, what would investors require as a return on Starbucks' stock?
A firm's common stock has just paid a $3.00 dividend (Do), which is expected to grow at a constant rate of 6.0 percent each year. The beta of this stock is 1.30, the risk-free rate is 4.0 percent, and the expected return on the market is 10.0 percent. Determine how much you should be willing to pay (the intrinsic value) for this stock today. Assume that CAPM is the correct model for required returns. 536.55 $54.83 $63.97 $73:10 545.69
The stock of Eaton Corporation (ticker: ETN) has an E(R) = 9.3% and a reward-to-risk ratio = 6.32%. If Eaton’s beta = .94, then the current return on U.S. T-Bills is: a. 3.23% b. 1.32% c. 3.10% d. 2.94% e. 3.36%
2. Acme Dynamite Company's common stock has a beta of 1.60. The expected return on the market is 9%, and the risk- free rate is 5%. What is the required return on Acme's common stock according to the (CAPM)? a) 11.4% b) 19.4% c) 17% d) 9%
According to the Bloomberg Network (a Financial TV channel), the current return on the U.S T-bill is 4.0% and the market risk premium is 8.5%. Given this news, in the table below, the only stock that is correctly priced is: See attached table a. Stock E b. Stock C c. Stock B d. Stock A e. Stock D
A firm recently paid a dividend of $2.05 per share, but analysts expect the dividend to decrease by 6% per year. The risk free rate is 1.5% and the market risk premium is 7%. If its beta is 2.25 and the market is in equilibrium what is the value of the stock? (explain your answer) $19.32 $8.82 $11.17 $8.29
You are considering an investment in Keller Corp's stock, which is expected to pay a dividend of $0.90 a share at the end of the year and has a beta of 0.40. The risk-free rate is 2.40%, and the market risk premium is 4.40%. Keller currently sells for $103.00 a share, and its dividend is expected to grow at some constant rate g. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 5 years? $115.55 $121.07 $125.05
The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 6% per year. Callahan's common stock currently sells for $22 per share; its last dividend was $2.00; and it will pay a $2.12 dividend at the end of the current year. 1. Using the DCF approach, what is its cost of common equity? 2. If the firm's beta is 1.2, the risk-free rate is 6%, and the average return on the market is 13%, what will be the firm's cost of common equity using the CAPM approach? Round your answer to two decimal places. 3. If the firm's bonds earn a return of 11%, based on the bond-yield-plus-risk-premium approach, what will be rs? Use the midpoint of the risk premium range discussed in Section 10-5 in your calculations.
Company Z is expected to pay a dividend of D1 = $2.20 per share at the end of the year, and that dividend is expected to grow at a constant rate of 4.00% per year in the future. The company's beta is 1.3, the Market Risk Premium is 6.00%, and the risk-free rate is 3.00%. What is the company's current stock price? Group of answer choices 32.35 35.59 27.50 36.67 55.00
2 (CAPM and expected returns) a. Given the following holding-period returns, compute the average returns and the standard deviations for the Zemin Corporation and for the market. b. If Zemin's beta is 0.83 and the risk-free rate is 9 percent, what would be an expected return for an investor owning Zemin? (Note: Because the preceding returns are based on monthly data, you will need to annualize the returns to make them comparable with the risk-free rate. For simplicity, you can convert from monthly to yearly returns by multiplying the average monthly returns by 12.) c. How does Zemin's historical average return compare with the return you believe you should expect based on the capital asset pricing model and the firm's systematic risk? a. Given the holding-period returns shown in the table, the average monthly return for the Zemin Corporation is %. (Round to two decimal places.) The standard deviation for the Zemin Corporation is %. (Round to two decimal places.) Given the…

SEE MORE QUESTIONS

Recommended textbooks for you

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

SEE MORE TEXTBOOKS