has been impressed with the company's computer products and believes Hi-Tech is an innovative market player. However, Mike realizes that any time you consider a technolo major concern. The rule he follows is to include only securities with a coefficient of variation of returns below 1.00. Mike has obtained the following price information for the period 2015 through 2018:Hi-Tech stock, being growth-oriented, did not pay any dividends during these 4 years a. Calculate the rate of return for each year, 2015 through 2018, for Hi-Tech stock. b. Assume that each year's return is equally probable and calculate the average return over this time period. c. Calculate the standard deviation of returns over the past 4 years. (Hint: Treat this data as a sample.) d. Based on b and c determine the coefficient of variation of returns for the security. e. Given the calculation in d what should be Mike's decision regarding the inclusion of Hi-Tech stock in his portfolio? a. The rate of return for year 2015 is %. (Round to two decimal places.) Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Stock price

has been impressed with the company's computer products and believes Hi-Tech is an innovative market player. However, Mike realizes that any time you consider a technolo major concern. The rule he follows is to include only securities with a coefficient of variation of returns below 1.00. Mike has obtained the following price information for the period 2015 through 2018:Hi-Tech stock, being growth-oriented, did not pay any dividends during these 4 years a. Calculate the rate of return for each year, 2015 through 2018, for Hi-Tech stock. b. Assume that each year's return is equally probable and calculate the average return over this time period. c. Calculate the standard deviation of returns over the past 4 years. (Hint: Treat this data as a sample.) d. Based on b and c determine the coefficient of variation of returns for the security. e. Given the calculation in d what should be Mike's decision regarding the inclusion of Hi-Tech stock in his portfolio? a. The rate of return for year 2015 is %. (Round to two decimal places.) Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Stock price

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

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Similar questions

Blaxo Balloons manufactures and distributes birthday balloons. At the beginning of the year Blaxo's common stock was selling for $21.32 but by year end it was only $20.17. If the firm paid a total cash dividend of $2.49 during the year, what rate of return would you have earned if you had purchased the stock exactly one year ago? What would your rate of return have been if the firm had paid no cash dividend? Question content area bottom Part 1 The rate of return you would have earned is enter your response here%. (Round to two decimal places.) Part 2 The rate of return you would have earned if the firm paid no cash dividend is enter your response here%. (Round to two decimal places.)
Massy Ltd on the other hand is a matured company so their dividend has not changed in years. Their last dividends paid was $2.00. Massy Ltd. stock is currently being sold at $30. Calculate the value of the securities, recommend to Rose Gardens if the investment will make the sense if they have $50,000 to invest and the expected rate of return for all securities mentioned above is 7%
Burnham Brothers Inc. has no retained earnings since it has always paid out all of its earnings as dividends. This same situation is expected to persist in the future. The company uses the CAPM to calculate its cost of equity, and its target capital structure consists of common stock, preferred stock, and debt. Which of the following events would REDUCE its WACC? The market risk premium declines. The flotation costs associated with issuing new common stock increase. The company's beta increases. Expected inflation increases. The flotation costs associated with issuing preferred stock increase.
None
The Foreman Company’s earnings and common stock dividends have been growing at an annual rate of 5 percent over the past 10 years and are expected to continue growing at this rate for the foreseeable future. The firm currently (that is, as of year 0) pays an annual dividend of $5 per share. Determine the current value of a share of Foreman common stock to investors with each of the following required rates of return. Use a minus sign to indicate negative answers and NA to indicate undefined answers. Round your answers to the nearest cent. 14 percent$ 15 percent$ 16 percent$ 5 percent$ 3 percent$
Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
Urban Utilities, Inc. has an outstanding common stock that is not growing. The firm has been paying an annual $4 dividend each year. No growth in this dividend payment is expected for the foreseeable future. Investors require an annual 8% rate of return on this stock, due to its risk level. Given this information, calculate the market value per share of this firm’s outstanding common stock. Now, assume that a large competitor enters the market, taking 20% of Urban Utilities’ market share. With this increase in risk, investors now require a 10% annual rate of return on Urban Utilities common stock. Given this information, calculate the market value per share of Urban Utilities’ common stock.
The common stock of Leaning Tower of Pita, Inc., a restaurant chain, will generate the following payoffs to investors next year: Probability 0.3 0.6 0.1 Boom Normal economy Recession Dividend Stock Price $6 4 0 $190 106 0 The company goes out of business if a recession hits. Calculate the expected rate of return and standard deviation of return to Leaning Tower of Pita share-holders. The stock is selling today for $96. (Round your answers to 2 decimal places.) Expected rate of return Standard deviation
Mark Washington, CFA, is an analyst with BIC. One year ago, BIC analysts predicted that the U.S. equity market would most likely experience a slight downturn and suggested delta-hedging the BIC portfolio. As predicted, the U.S. equity markets did indeed experience a downturn of approximately 4% over a 12-month period. However, portfolio performance for BIC was disappointing, lagging its peer group by nearly 10%. Washington has been told to review the options strategy to determine why the hedged portfolio did not perform as expected. 13. BIC owns 51,750 shares of Smith & Oates. The shares are currently priced at $69. A call option on Smith & Oates with a strike price of $70 is selling at $3.50 and has a delta of 0.69. What is the number of call options necessary to create a delta-neutral hedge? 14. Return to the previous problem. Will the number of call options written for a delta-neutral hedge increase or decrease if the stock price falls? 15. Which of the following…
The price of the stock of Clarkson Corporation went from P50 to P56 last year. In the following year, the dividend was raised to P2.25. However, a bear market developed toward the end of the year, and the stock price declined from P56.00 at the beginning of the year to P48.00 at the end of the year. What is the rate of return (loss) to stockholders?
This is a more difficult but informative problem. James Brodrick & Sons, Incorporated, is growing rapidly and, if at all possible, would like to finance its growth without selling new equity. Selected information from the company's five-year financial forecast follows. Year Earnings after tax ($ millions) Capital investment ($ millions) Target book value debt-to-equity ratio (%) Dividend payout ratio (%) Marketable securities ($ millions) (Year O marketable securities = $230 million) 1 100 180 120 ? 230 2 112 300 120 ? 230 3 152 300 120 ? 230 4 203 354 120 ? 230 5 300 460 120 ? 230 a. According to this forecast, what dividends will the company be able to distribute annually without raising new equity and while maintaining a balance of $230 million in marketable securities? What will the annual dividend payout ratio be? (Hint: Remember sources of cash must equal uses at all times.) Note: Round dividends to the nearest million dollars and the payout ratio % to the nearest ones place.
suggests that an increase in the dividend growth rate will increase the value of a stock. However, an increase in the growth may require an increase in retained earnings and a reduction in the current dividend. Thus, management may be faced with a dilemma: current dividends versus future growth. As of now, investors’ required return is 9 percent. The current dividend is $1.3 a share and is expected to grow annually by 4 percent, so the current market price of the stock is $27.04. Management may make an investment that will increase the firm’s growth rate to 5 percent, but the investment will require an increase in retained earnings, so the firm’s dividend must be cut to $0.9 a share. Should management make the investment and reduce the dividend? Round your answer to the nearest cent. The value of the stock to $ , so the management make the investment and decrease the dividend.

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