Calculate the price of common stock

Assignment Help Financial Management

Reference no: EM131914338

Muscle motors, a car company specializing in vintage, retro cars just paid a dividend on its common stock of $1.65/share. The required return of the company’s common stock can be calculated using the Capital Asset Pricing Model and the following information: market risk premium: 6%, beta = 1.35, risk free rate 5.4% a. What is Muscle motor’s cost of equity capital? b. Calculate the price of its common stock if dividends grow at 0% per year. c. Calculate the price of its common stock if dividends grow at an annual rate of 4.5% d. Calculate the price of its common stock if dividends grow at an annual rate of 6.5% for the first three years, followed by 3.5% annual growth thereafter.

Reference no: EM131914338

Questions Cloud

Explain the cyclical impact of the consequences of poverty : Describe the economic situation of some of the world's most impoverished areas where sex trafficking occurs (like in the article).

Create a very simple four function integer calculator : Create a very simple four function integer calculator with buttons for Add, Subtract, Multiply, and Divide, and with two text-type input fields.

Define the yield concepts - Redemption yield and Par yield : Define the following yield concepts: Redemption yield, Par yield, Yield to put and Yield to worst. Calculate the discount yield of the preceding 3M T-bill

What is the total contribution margin at break-even point : What is the company's CM ratio? Without resorting to computations, what is the total contribution margin at the break-even point?

Calculate the price of common stock : Calculate the price of its common stock if dividends grow at an annual rate of 6.5% for the first three years, followed by 3.5% annual growth thereafter.

Appropriate probability models : Please answer the following questions using the appropriate probability models:

How many shares will green repurchase : What will the stock price be immediately after Green announces its plan to issue bonds and repurchase equity? How many shares will Green repurchase?

Program that will predict the size of a population : Program that will predict the size of a population of organisms. The program should ask the user for the starting number of organisms, their average population

Discuss the limits on teen tanning : The American Academy of Dermatology Association (AADA) has urged the FDA to ban the sale and use of indoor tanning equipment for non-medical purposes.

User Account

All Pages