Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Feb 26, 2024

You find a stock with a beta of 1.4 that is expected to pay a dividend of $3.20 and grow that dividend at 5% annually.

You find a stock with a beta of 1.4 that is expected to pay a dividend of $3.20 and grow that dividend at 5% annually. If the risk-free rate is 3% and the expected market return is 8%, what should be the price of this stock?

Step by Step Solution

★★★★★

3.53 Rating (150 Votes )

There are 3 Steps involved in it

Step: 1

To calculate the price of the stock we can use the dividend discount model DDM formula ... blur-text-image

Get Instant Access to Expert-Tailored 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

Recommended Textbook for

Financial Management Theory and Practice

Authors: Eugene Brigham, Michael Ehrhardt, Jerome Gessaroli, Richard Nason

2nd Canadian edition

176517308, 978-0176517304

More Books

Students also viewed these Finance questions

Question

★★★★★

13. What is a lower bound for the price of 3-month call option on a non- dividend-paying stock when the stock price is $50, the strike price is $45, and the 3-month risk-free interest rate is 8%?...

Answered: 1 week ago

Question

★★★★★

KYC's stock price can go up by 15 percent every year, or down by 10 percent. Both outcomes are equally likely. The risk free rate is 5 percent, and the current stock price of KYC is 100. (a) Price a...

Answered: 1 week ago

Question

★★★★★

What is the NPV for the following project cash flows at a discount rate of 15%? C0=-1,000, C1=700, C2=700 SOB Floor Company has a risk premium of 21% and a beta of 3. If the risk free rate is 3%,...

Answered: 1 week ago

Question

★★★★★

A three-phase line has an impedance of 1 + j3 per phase. The line feeds a balanced delta-connected load, which absorbs a total complex power of 12 + j5 k VA. If the line voltage at the load end has...

Answered: 1 week ago

Question

★★★★★

Behavioral interview questions are increasingly popular, and you will need a little practice before you can answer them easily. Use your favorite search tool to locate lists of behavioral questions...

Answered: 1 week ago

Question

★★★★★

An asset used in a four-year project falls in the five-year MACRS class for tax purposes. The asset has an acquisition cost of $5,100,000 and will be sold for $1,600,000 at the end of the project. If...

Answered: 1 week ago

Question

★★★★★

Describe and apply steps for the selection and development of data collection instruments, including sources of previously developed instruments and steps in the development of your own instrument.

Answered: 1 week ago

Question

★★★★★

1.What is the shortest amount of time for a customer to receive a pizza if there are no other products in the queue? 2. How many orders can you start and deliver in 1 hour if only one of you is...

Answered: 1 week ago

Question

★★★★★

Combine the following two sentences using a ; fatcat, ( conjunctive adverb ) Not all monsters are internal there are sometimes external enemies we must face. : however ; certainly, ; but, and

Answered: 1 week ago

Question

★★★★★

A two-dimensional diverging duct is being designed to diffuse the high-speed air exiting a wind tunnel. The x-axis is the centerline of the duct (it is symmetric about the x-axis), and the top and...

Answered: 1 week ago

Question

★★★★★

Derk owns 840 shares of stock in Rose Corporation. The remaining 1,960 shares of Rose are owned as follows: 280 by Derks daughter; 560 by Derks aunt; and 1,120 by a partnership in which Derk has an...

Answered: 1 week ago

Question

★★★★★

1. Five warehouses are supplied by four factories. The supply available from each factory, the demand at each warehouse and the cost per unit of transporting goods from the factories to the...

Answered: 1 week ago

Question

★★★★★

The data set shows the January 1 noon temperatures in degrees Fahrenheit for a particular city in each of the past 6 years. 28 34 27 42 52 15 (a) What is the five-number summary of the data set? (b)...

Answered: 1 week ago

Question

★★★★★

Alyeski Tours operates day tours of coastal glaciers in Alaska on its tour boat the Blue Glacier. Management identified two cost drivers for budgeting purposes-the number of cruises and the number of...

Answered: 1 week ago

Question

★★★★★

Ayayai Company prepares its statement of cash flows using the direct method for operating activities. For the year ended December 31, 2024, Ayayai Company reports the following: Sales on account...

Answered: 1 week ago

Question

★★★★★

Navajo Company's year-end financial statements show the following. The company recently discovered that in making physical counts of inventory, it had made the following errors: Year 1 ending...

Answered: 1 week ago

Question

★★★★★

Write a bash script that removes all white spaces or newline characters(like in the below example), and count the exact number of bases present. It's a large sequence and similar new line characters/...

Answered: 1 week ago

Question

★★★★★

You are thinking of investing in one of two companies. In one annual report, the auditors opinion states that the financial statements were prepared in accordance with generally accepted accounting...

Answered: 1 week ago

Question

★★★★★

Red Rock Lobster (RRL) is looking to expand its business. The new business would generate $2.5 million per year in sales over the next 5 years. Annual costs would increase by Analysis $2.1 million....

Answered: 1 week ago

Question

★★★★★

Air Kingston has just been incorporated, and its board of directors is currently grappling with the question of optimal capital structure. The company plans to offer commuter air services between...

Answered: 1 week ago

Question

★★★★★

Saint John River Shipyards is considering replacing an old riveting machine with a new one that will increase earnings before depreciation from $34,500 to $54,000 per year. The new machine will cost...

Answered: 1 week ago

Question

★★★★★

The United States wheat market is shown in Figure 17P-3. a. How many bushels of wheat should be allowed under an import quota in order to increase the world price from $4 to $5 per bushel? b. Graph...

Answered: 1 week ago

Question

★★★★★

State whether each of the following primarily causes an external cost or an external benefit. a. Fishing at a popular lakeside vacation spot. b. Buying a fax machine. c. Conducting research to find...

Answered: 1 week ago

Question

★★★★★

Suppose an environmental impact study shows that the coral reef near Port Douglas, Australia, can sustain 20 scuba diving tours per week. Discuss the pros and cons of setting a quota of 20 dive tours...

Answered: 1 week ago

Previous Question Next Question