Contemporary Engineering Economics (6th Edition)
Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Chapter 13, Problem 4P
To determine

Calculate the stock price.

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A firm is evaluating an investment proposal which has an initial investment of $8,000 and discounted cash flows valued at $6,000 The net present value of the investment is?
Assume that the risk-free rate of interest is 4% and the expected rate of return on the market is 16%. A share of stock sells for $63 today. It will pay a dividend of $3 per share at the end of the year. Its beta is 1.1. What do investors expect the stock to sell for at the end of the year? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Donna is looking into investing a portion of her recent bonus into the stock market. While researching different companies, she discovers the following standard deviations of one year of daily stock closing prices. Handy Prosthetics: Standard deviation of stock prices = $1.12 El Lobo Malo Incorporated: Standard deviation of stock prices = = $9.63 Based on the data and assuming these trends continue, which company would give Donna a stable long-term investment?
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