Round Barn stock has a required return of 12.20% and is expected to pay a dividend of $4.30 next year. Investors expect a growth rate of 4.80% on the dividends for the foreseeable future. Required: a. What is the current fair price for the stock? Note: Round your answer to 2 decimal places. Current fair price b. Suppose the stock is selling at this price, but then investors revise their expectations. The new expectation for the growth rate is 4.00%. If investors are rational, what will be the new price for Round Barn stock? Note: Round your answer to 2 decimal places. New price

Round Barn stock has a required return of 12.20% and is expected to pay a dividend of $4.30 next year. Investors expect a growth rate of 4.80% on the dividends for the foreseeable future. Required: a. What is the current fair price for the stock? Note: Round your answer to 2 decimal places. Current fair price b. Suppose the stock is selling at this price, but then investors revise their expectations. The new expectation for the growth rate is 4.00%. If investors are rational, what will be the new price for Round Barn stock? Note: Round your answer to 2 decimal places. New price

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter8: Basic Stock Valuation

Section: Chapter Questions

Problem 8P: A stock is trading at $80 per share. The stock is expected to have a yearend dividend of $4 per...

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Please answer both questions attached below in the image.
A share of stock with a beta of 0.76 now sells for $51. Investors expect the stock to pay a year-end dividend of $2. The T-bill rate is 3%, and the market risk premium is 7%. a. Suppose investors believe the stock will sell for $53 at year-end. Calculate the opportunity cost of capital. Is the stock a good or bad buy? What will investors do? (Do not round intermediate calculations. Round your opportunity cost of capital calculation as a percentage rounded to 2 decimal places.) b. At what price will the stock reach an “equilibrium” at which it is perceived as fairly priced today? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Investors expect the market rate of return this year to be 16.50%. The expected rate of return on a stock with a beta of 1.5 is currently 24.75%. If the market return this year turns out to be 14.50%, how would you revise your expectation of the rate of return on the stock? (Do not round intermediate calculations. Round your answer to 1 decimal place.)
Please answer both A stock is currently selling for $90.83 and is expected to sell for $102.27 in 1 year. If the company pays a dividend of $2.63 what is the stock's HPR? QUESTION 2 A stock has a beta of 1.18. The risk free rate is 0.974% and the market risk premium is 5%. What is the fair return on the stock?
PeteCorp's stock has a Beta of 1.29. Its dividend is expected to be $3.17 next year, and will grow by 5% per year after that indefinitely. Assume the risk-free rate is 5%, and the Market Risk Premium is 6%. The stock price would currently be estimated to be $ ____________ Margin of error for correct responses: +/- .05 Rounding and Formatting instructions: Do not enter dollar signs, percent signs, commas, X, or any words in your response. Do not round any intermediate work, but round your *final* response to 2 decimal places (example: if your answer is 12.3456, 12.3456%, or $12.3456, you should enter 12.35).
A share of stock with a beta of 0.71 now sells for $61. Investors expect the stock to pay a year-end dividend of $3. The T-bill rate is 4%, and the market risk premium is 7%. Suppose investors believe the stock will sell for $63 at year-end. Calculate the opportunity cost of capital. Is the stock a good or bad buy? What will investors do? At what price will the stock reach an “equilibrium” at which it is perceived as fairly priced today?
A share of stock with a beta of 0.75 now sells for $50. Investors expect the stock to pay a year-end dividend of $2. The T-bill rate is 4%, and the market risk premium is 7%. Suppose investors believe the stock will sell for $52 at year-end. Calculate the opportunity cost of capital. Is the stock a good or bad buy? What will investors do? At what price will the stock reach an “equilibrium” at which it is perceived as fairly priced today? Please type answer no write by hend.
A share of stock with a beta of 0.78 now sells for $58. Investors expect the stock to pay a year-end dividend of $2. The T-bill rate is 5%, and the market risk premium is 8%. a. Suppose investors believe the stock will sell for $60 at year-end. Calculate the opportunity cost of capital. Is the stock a good or bad buy? What will investors do? b. At what price will the stock reach an "equilibrium" at which it is perceived as fairly priced today? Complete this question by entering your answers in the tabs below. Required A Required B Suppose investors believe the stock will sell for $60 at year-end. Calculate the opportunity cost of capital. Is the stock a good or bad buy? What will investors do? Note: Do not round intermediate calculations. Round your opportunity cost of capital calculation as a percentage rounded to 2 decimal places. Opportunity cost of capital The stock is a bad buy and the investors will t invest %