Business finance-calculate current price of the stock

Assignment Help Financial Management

Reference no: EM13919329

Business Finance - Calculate Current Price of the Stock

Company X is expected to pay a year-end dividend of $8 per share of its common stock. After the dividend payment, the stock is expected to sell at $100 per share. The required rate of return on the common stock is 20%. Calculate the current price of the stock.

(Please show how to do this, in formulas or on the calculator or both)

Reference no: EM13919329

Questions Cloud

Prospective buyer has estimated the expected cash flows : Suppose an investor is interested in purchasing the following income producing property at a current market price of $450,000. The prospective buyer has estimated the expected cash flows over the next four years to be as follows:

Forced to buy the underlying stock-lower volatility results : If you __________, then you may be forced to buy the underlying stock. Lower volatility results in __________ Put Option prices and ______ Call Option Prices.

Portfolio composed of position in gold-cash borrowing : Consider a one year American call option on 100 ounces of gold with a strike of $1200 per ounce. The spot price per ounce of gold is $1210 and the annual financing rate is 4% on a continuously compounded basis. How would you hedge a short position in..

What is the risk neutral probability of up movement : A binomial tree with three-month time steps is used to value a currency option. The domestic and foreign risk-free rates are 2% and 5% respectively. The volatility of the exchange rate is 20%. What is the risk neutral probability of an up movement?

Business finance-calculate current price of the stock : Company X is expected to pay a year-end dividend of $8 per share of its common stock. After the dividend payment, the stock is expected to sell at $100 per share. The required rate of return on the common stock is 20%. Calculate the current price of ..

Option price be without there being arbitrage opportunity : For a European call option on a currency, the exchange rate is $2.0000, the strike price is $1.900, the time to maturity is one year, the domestic (U.S. Dollar) risk-free rate is 5% per annum, and the foreign risk-free rate is 3% per annum. How low c..

Sanction of their banishment from the healthcare field : Michael Friedman, Paul goldenheim, and Howard Udell were in executives at Purdue Frederick Company when it misbranded the drug OxyContin. The three were convicted of felony charges for misbranding the drug as a responsible corporate officers at a com..

Estimate of the volatility per annum derived from this data : A stock price is 20, 21, 18, 22, 24, and 23 on six successive Fridays. Provide an estimate of the volatility per annum derived from this data?

What is modified duration-maturity and current price : What is the Macaulay duration of a 5.6 percent coupon bond with ten years to maturity and a current price of $1,057.70? What is the modified duration? (Do not round intermediate calculations. Round your answers to 3 decimal places.)

User Account

All Pages