Suppose the risk-free rate is 2.61% and an analyst assumes a market risk premium of 6.65%. Firm A just paid a dividend of $1.19 per share. The analyst estimates the ẞ of Firm A to be 1.31 and estimates the dividend growth rate to be 4.79% forever. Firm A has 288.00 million shares outstanding. Firm B just paid a dividend of $1.89 per share. The analyst estimates the ẞ of Firm B to be 0.87 and believes that dividends will grow at 2.28% forever. Firm B has 196.00 million shares outstanding. What is the value of Firm B? Submit Answer format: Currency: Round to: 2 decimal places. Show Hint

Suppose the risk-free rate is 2.61% and an analyst assumes a market risk premium of 6.65%. Firm A just paid a dividend of $1.19 per share. The analyst estimates the ẞ of Firm A to be 1.31 and estimates the dividend growth rate to be 4.79% forever. Firm A has 288.00 million shares outstanding. Firm B just paid a dividend of $1.89 per share. The analyst estimates the ẞ of Firm B to be 0.87 and believes that dividends will grow at 2.28% forever. Firm B has 196.00 million shares outstanding. What is the value of Firm B? Submit Answer format: Currency: Round to: 2 decimal places. Show Hint

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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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
A stock is expected to pay a $0.39 dividend in one period. Dividends are expected to grow at a rate of 0.4% for the foreseeable future. If the required return of the firm is 12.6%, what is the intrinsic value of this stock?
Company Q has earnings of $3.00 per share, a market price of $25, and a beta of 1.25. The risk-free rate is 3% and the risk premium for the market as a whole is 5%. What is the current rate of return for investing in company Q? What is the current "reward-to-risk ratio" for Company Q?
Schnusenberg Corporation just paid a dividend of DO $2.10 per share, and that dividend is expected to grow at a constant rate of 6.50% per year in the future. The company's beta is 2.00, the required return on the market is 14.50%, and the risk - free rate is 4.50%. What is the company's current stock price? Do not round intermediate calculations. a. $12.43 b. $11.67 c. $9.13 d. $27.96 e. $34.41 =
Tanrun Inc. is expected to pay an annual dividend of $0.45 per share in one year. Analysts expect the firm's dividends to grow by 6% forever. Its stock price is $38.7 and its beta is 1.7. The risk-free rate is 2% and the expected market risk premium is 4.5%. 2. What is the best guess for the cost of equity? (3+ Decimals) Pfizer is expected to pay an annual dividend of $1.85 one year from now. Dividends are expected to grow by 2.5% every year and the current stock price is $247.2. The company is in the process of issuing new common stock, with flotation costs of $1.7 per share. 3. What is the cost of new common stock? (3+ Decimals) Idaho Engineering Inc. has a target capital structure of 29% debt, 10% preferred stock and 61% common stock. The interest rate on new debt is 4.3% (before taxes), the yield on preferred stock is 8% and the cost of retained earnings is 13%. The firm will not be issuing any new stock, and the tax rate is 35%. 4. What is the company's weighted…
Runtan Inc. has just paid an annual dividend of $0.45 per share. Analysts expect the firm's dividends to grow by 6% forever. Its stock price is $34.8 and its beta is 1. The risk-free rate is 2% and the expected return on the market portfolio is 8%. What is the best guess for the cost of equity?
A company XYZ paid a dividend of Rs.12 per share yesterday and is expected to pay dividend once per year in the future (at same calendar date as this year) which will grow at a rate 5% to eternity. a)Draw the cash flow diagram. b)If the expected market return is 12%, the risk-free rate is 5%, and the CAPM beta of the company XYZ is 0.8, what is the expected return on equity of the company? c)What is the expected current share price of the company from the dividend growth model?
Suppose the risk-free rate is 3.91% and an analyst assumes a market risk premium of 6.52%. Firm A just paid a dividend of $1.11 per share. The analyst estimates the β of Firm A to be 1.20 and estimates the dividend growth rate to be 4.27% forever. Firm A has 264.00 million shares outstanding. Firm B just paid a dividend of $1.83 per share. The analyst estimates the β of Firm B to be 0.70 and believes that dividends will grow at 2.86% forever. Firm B has 197.00 million shares outstanding. What is the value of Firm B? Answer format: Currency: Round to: 2 decimal places.
The risk-free rate is 3% per annum with continuous compounding. The price of stock LUV is $85, and its stock-price volatility is 25% per annum. LUV currently does not pay a dividend. What is the price of a 3-month at-the-money American call on LUV? A.$2.94 B.$3.67 C.$5.06 D.$4.54
Meow.net recently paid a dividend of $2.05 per share, but analysts expect the dividend to increase by 8% per year. The risk- free rate is 1.5% and the market risk premium is 7%. If Meow's beta is 2.15 and the market is in equilibrium what is the value of the stock? O $25.89 O $7.68 O $13.38 O $23.98
A stock is selling for $80 in the market. The company’s beta is 1.5, the market risk premium (rM - rF) is 6%, and the risk-free rate is 2%. The most recent dividend paid is D0 = $2 and dividends are expected to grow at a constant rate g. What’s the dividend growth rate g for this stock? find the stock’s capital gain yield. 8.29% 4.19% 7.68% 7.81%
Assume that Company A is in stable growth. Its current earnings are expected to grow 6% a year in perpetuity, and its stock has a beta of 0.85. If the current Treasury bond rate is 4%, the current estimate of the market risk premium is 6%, and the stock is trading at a P/E ratio of 9.5, estimate Company A's return on equity. The return on equity is?

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