Find the required rate of return of a stock if the dividend is $4.45 per share, dividend growth rate of 6.5 % and the price of stock is $101 per share. Thanks!
Consider the following information and then calculate the required rate of return for the Scientific Investment Fund, which holds 4 stocks. The market's required rate of return is 15.0%, the risk-free rate is 7.0%, and the Fund's assets are as follows: Stock Stock Investment Beta A
You are holding a stock with a beta of 2.0 that is currently in equilibrium. The required rate of return on the stock is 15% versus a required return on an average stock of 10%. Now the required return on an average stock increases by 30.0% (not percentage points). The risk-free rate is unchanged. By what percentage (not percent
Bill Gates Corporation is a holding company with four main subsidiaries. The percentage of its business coming from each of the subsidiaries, and their respective betas, are as follows: SUBSIDIARY PERCENTAGE OF BUSINESS BETA Software 45% 1.50 Hardware 25
Historically high return stocks have exhibited lower risk than low return stocks--just the opposite what the SML (Security Market Line) predicts. Wall Street (and unsuspecting financial planners) has been very successful in selling main street the story that higher risk = higher reward, while the smart money knows this and is ab
See the attached files. a) Following the instructions in the Appendix, obtain monthly returns for these stocks from January 2006 to December 2010. Also, obtain monthly returns for the S&P 500 index over the same period. You do not need to report the monthly returns. Your answers to the remaining questions in this part will r
1. What are the three factors that influence the required rate of return by investors? What two components make up the required rate of return on common stock? 2. What is risk premium and what were the risk premium on stocks and the maturity premium on treasury bonds for the ten year period? How is this determined? 3. Wha
See attached file for proper format. Please show all the work. Questions: 1) What types of risk are measured by standard deviation and beta? Which type of risk is more important? Where does correlation fit in? Assume the market risk premium is 5%. Research a current stock and determine its required rate of return usin
1) A stock you are evaluating just paid an annual dividend of $2.50. Dividends have grown at a constant rate of 1.5% over the last 15 years and you expect this to continue. a. If the required rate of return on the stock is 12% what is its fair present market value? b. If the requested rate of return on the stock is 15% what is
1) (Beta and required return) The riskless return is currently 6%, and Chicago Gear has estimated the contingent returns given here. a. Calculate the expected returns on the stock market and on Chicago Gear stock. b. What is Chicago Gear's beta? c. What is Chicago Gear's required return according to the CAPM? REALIZED
Please show work you can use either calculator. Other things being equal, an increase in a firm's expected growth rate would cause its required rate of return to a. fluctuate more than before. b. fluctuate less than before. c. decrease. d. increase. e. possibly increase, possibly decrease, or possibly remain constan
Problem 13. Security A offers an expected return of 15 percent with a standard deviation of 7 percent. Security B offers an expected return of 9 percent with a standard deviation of 4 percent. The correlation between the returns of A and B is +0.6. If an investor puts one-fourth of his wealth in A and three-fourths in B, what
C1. (Beta and required return) The riskless return is currently 6%, and Chicago Gear has estimated the contingent returns given here.
C1. (Beta and required return) The riskless return is currently 6%, and Chicago Gear has estimated the contingent returns given here. a. Calculate the expected returns on the stock market and on Chicago Gear stock. b. What is Chicago Gear's beta? c. What is Chicago Gear's required return according to the CAPM?
1. With a beta equal to .95 and a risk-free rate of 5%, if the required return on Carbo Certamics, Inc. is equal to 9%, what is the required return on the market, rm, assuming the maket is in equilibrium? 2. PowerShares Global Agricultural Investment Fund is holding a stock with a beta of 2.0 that is currently in equilibriu
Do you think that the actual return on each stock for this period will be the same as the expected return (calculated as risk-free rate + market risk premium x beta)? Why or why not?
Calculation of shareholders' required rate of return and dividend grwoth rate using the dividend discount model.
A relatively new firm has the dividend payment history shown in Table 9-10. Suppose this stock sells for $8 per share. Estimate the shareholders' required rate of return using the dividend discount model with the following: a. The dividend growth rate calculated over the firm's entire history. b. The growth rate calculated
Molen Inc. has an outstanding issue of perpetual preferred stock with an annual dividend of $7.50 per share. If the required return on this preferred stock is 6.5%, at what price should the stock sell? a. $104.27 b. $106.95 c. $109.69 d. $112.50 e. $115.38.
Alpha Corporation is considering buying Beta Corporation for $2,400,000 cash. Beta Corporation has a $600,000 tax loss carryforward that could be used immediately by Alpha Corporation. Alpha Corporation pays tax at the rate of 35%. Beta Corporation will provide $300,000 per year in cash flow (in after tax income plus depreciatio
Suppose rRF=9%, rM=14%, and bi=1.3. a) What is ri, the required rate of return on Stock i ? b) Now suppose that rRF (1) increases to 10% or (2) decreases to 8%. The slope of the SML remains constant. How would this affect rM and ri ? c) Now assume that rRF remains at 9% but rM (1) increases to 16% or (2) falls to 13%. T
Panhandle Faucets (PF) plans to maintain its optimal capital structure of 30% debt, 20% preferred stock, and 50% common stock far into the future. The required return on each component is: debt-10%; preferred stock-11%; and common stock-18%. Assuming a 40% marginal tax rate, what after-tax rate of return must PF earn on its inve
Little Rock stock is currently selling for $42.86. It is expected to pay a dividend of $3.00 at the end of the year. Dividends are expected to grow at a constant rate of 3% indefinitely. Compute the required rate of return on LR stock.
Business Policy and Strategy: Performance measures, return on sales & equity, and negative returns to shareholders.
1. Which two of the six performance measures do you think are the most useful indicators of how well a company is being managed? 2. Is return on sales or return on equity a better basis on which to compare the performance of the companies listed? 3. Several companies are highly profitable, yet have delivered negative ret
Siblings inc. is expected to maintain a constant 5.8 percent growth rate in its dividends, indefinitely. If the company has a dividend yield of 4.7 percent, what is the required return on the company's stock? Please show work.
Your portfolio is diversified. It has an expected return of 10.0% and a beta of 1.10. You want to add 200 shares of Tundra Corporation at $30 a share to your portfolio. Tundra has an expected return of 14.0% and a beta of 1.50. The total value of the investor's current portfolio is $18,000. a. Calculate the expected retur
What required return is implied by the constant growth model for a stock that is selling for $25.00 per share and is expected to pay a single cash dividend next year of $1.80, and whose growth in dividend payments is expected to be 2% per year forever?
1. Magee Company's stock has a beta of 1.20, the risk-free rate is 4.50%, and the market risk premium is 5.00%. What is Magee's required return? 10.25% 10.50% 10.75% 11.00% 11.25% 2. Parr Paper's stock has a beta of 1.40, and its required return is 13.00%. Clover Dairy's s
An analyst has modeled the stock of a company using the Fama-French three-factor model. The risk-free rate is 5%, the required market return is 10%, the risk premium for small stocks (rSMB) is 3.2%, and the risk premium for value stock (rHML) is 4.8%. If ai = 0, bi = 1.2, ci = -0.4, and di = 1.3, what is the stock's required return.
An analyst has modeled the stock of a company using the Fama-French three-factor model. The risk-free rate is 5%, the required market return is 10%, the risk premium for small stocks (rSMB) is 3.2%, and the risk premium for value stock (rHML) is 4.8%. If ai = 0, bi = 1.2, ci = -0.4, and di = 1.3, what is the stock's required r
Calculate the value or the missing component for each of the following securities: Preferred Stock A: Dividend = $3.875, Required Rate of Return = 17%, Value = ? Preferred Stock B: Value = $78, Required Rate of Return = 24%, Dividend = ? Preferred Stock C: Value = $38.75, Dividend = $3, Required Rate of Return = ?
1) .. Which stock is riskier in a portfolio context? Which stock is riskier if you are not considering them in a portfolio? Explain. (5) 2) Compute the expected return on the portfolio. (5) 3) Compute the beta for the portfolio. (5) 4) Given the following information, Compute is the expected return on General Motors. (5)
You have the following information on the two securities in which you have invested Expected Standard Security Amount Return Probability Deviation Beta Invested Kodak 15% .35 4.5% 1.20 $45,000 Xerox 12% .65 3.8% 0.98 $55,000 1) .. Which stock is riskier in a po
1. The stock of Eastman Kodak has an estimated beta of 1.6. How would you interpret this beta value? How would you evaluate the firm's systematic risk. 2. The stock of Apple, Inc, has an estimated beta of 1.5. The current risk free rate is 5% and the market return is 7.4%. What is the required rate of return on he stock?