Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Sep 02, 2024

ABC Corp. has an ROE of 7% and reinvests 40% of its net income. ABC has just paid an annual dividend of $0.25. ABC stock

ABC Corp. has an ROE of 7% and reinvests 40% of its net income. ABC has just paid an annual dividend of $0.25.

ABC stock has a beta of 1.4. The risk-free rate is 3.4% and the expected return on the market portfolio is 7%.

1.What is the appropriate discount rate?

2.What is the expected growth rate of dividends?

3.What is the intrinsic value (fair price) of ABC stock?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

Step: 3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions

Question

Identify the methods Sandra Chapman used to encourage attendance, and explain why these methods might have been unsuccessful.

Answered: 1 week ago

Question

★★★★★

Hippolito Inc. manufactures industrial tools and has annual sales of approximately $3.5 million with no evidence of cyclical demand. R&D is very important to Hippolito because its market share...

Answered: 1 week ago

Question

★★★★★

Every attribute appears only once in an ER diagram True False

Answered: 1 week ago

Question

★★★★★

There is a 7 kW cooler, a mass flow of 0.3 kg/s, the ambient temperature is 30 degrees Celsius and the specific volume of air is 0.875 m^3/kg, what would be the approximate temperature achieved for a...

Answered: 1 week ago

Question

★★★★★

Problem 11. The shares of Microsoft were trading on Nasdaq on January 1 at $41. A Swedish investor purchased 100 shares of Microsoft at that price. The Swedish kroner to dollar exchange rate then was...

Answered: 1 week ago

Question

★★★★★

In the commercial section of the newspaper you come across an ad for a pizza delivery business for sale. upon inquiry, you discover that the owner , who wants to sell the business and then retire,...

Answered: 1 week ago

Question

★★★★★

An applied researcher is developing a new measure of organizational commitment for a study. In order to compare it to an existing measure of organizational commitment, the researcher would compute a...

Answered: 1 week ago

Question

★★★★★

7.5 A large lot of manufactured items contains 10% with exactly one defect, 5% with more than one defect, and the remainder with no defects. Ten items are randomly selected from this lot for sale. If...

Answered: 1 week ago

Question

★★★★★

A composite wall of a furnace has 3 layers of equal thickness having thermal conductivities in the ratio of 1:2:4. What will be the temperature drop ratio across the three respective layers? A. 12:4...

Answered: 1 week ago

Previous Question Next Question