Answered step by step
Verified Expert Solution
Question
1 Approved Answer
The tisk-free rate of return is 7%, the expected rate of return on the market portfolio is 15%, and the stock of Xyrong Corporation has
The tisk-free rate of return is 7%, the expected rate of return on the market portfolio is 15%, and the stock of Xyrong Corporation has a beta coefficient of 16 . Xyrong pays out 30% of its earnings in dividends, and the latest earnings announced were $900 per share Dividends were just paid and are expected to be paid annually You expect that Xyrong will oarn an ROE of 20% per year on alt reirvested earnings forevet a. What is the intrinsic value of a share of Xyrong stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. If the rarket price of a share is currently $50, and you expect the market price to be equal to the intrinsic value one year from now. what is your expected 1 year holding period return on Xyrong stock? (Do not round intermediate calculations, Round your answer to 2 declmt places.)
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