Calculate the stock actual rate of return

Assignment Help Financial Management
Reference no: EM131868140

You are interested in investing in the stock of ABC company. The stock is expected to pay a yearly dividend of $1.60 per share next year, with dividends increasing 3% per year after that. The market rate of return on similar stock is 8%. What is the current value per share of the stock? What would the value be if the market rate of return went up to 11%?

Suppose the actual price of ABC stock from the previous question is $40 per share. Assuming that the market rate of return on similar stock is still 8%, would you want to buy it at this price? Why or why not? Calculate the stock’s actual rate of return as part of your answer. I only need the answer to the second part please.

Reference no: EM131868140

Questions Cloud

What will be the price of these bonds : What will be the price of these bonds if they receive either an A or a AA rating?
Interested in investing in the stock of company : You are interested in investing in the stock of a company whose current P/E ratio is 18. If the current price of the stock is $81 per share,
What is your total profit or loss on the option investment : Suppose you purchase a call option on 100 shares of XYZ stock for $6 per share. What is your total profit or loss on the option investment?
How long will it take you to fully repay the loan : how long (i.e., number of months rounded to one decimal place) will it take you to fully repay the loan?
Calculate the stock actual rate of return : Suppose the actual price of ABC stock from the previous question is $40 per share. Calculate the stock’s actual rate of return as part of your answer.
Amount of money earned during the mid-career employment : Determine the total amount of money earned during the mid-career employment years of 21 through 30.
Identify the fixed and variable costs : Identify the fixed and variable costs. What would be the unit price building in a 15% contingency rate?
What is interest rate risk of lower-coupon bonds : Bond J is a 4 percent coupon bond. Bond K is a 10 percent coupon bond. what is percentage price change of these bonds? interest rate risk of lower-coupon bonds?
What is the excel function for time series analysis : What is the excel function for TIME SERIES analysis? Basically, how do you preform time series analysis in excel?

Reviews

Write a Review

Financial Management Questions & Answers

  Bonds should have the highest market value

Which of the following bonds should have the highest market value?

  Question 1 capital expenditure decisions and investment

question 1 capital expenditure decisions and investment criteriabodmin plcbodmin plc is a highly profitable electronics

  Evaluate the behavior of the value of stock market

Prepare a graph in excel where present the movement of the value of each action to the period. Indicate therein the areas where change is more drastic and that happened that day that could cause this change.

  Describe the cash conversion cycle

Describe the cash conversion cycle. how can a financial manager use knowledge of the cash conversion cycle to better manage the working capital of a firm?

  What is the cost of preferred stock-including flotation

Trivoli Industries plans to issue perpetual preferred stock with an $11.00 dividend. The stock is currently selling for $110.50; but flotation costs will be 6% of the market price, so the net price will be $103.87 per share. What is the cost of the p..

  The cost of equity and flotation costs

Suppose a company will issue new 25-year debt with a par value of $1,000 and a coupon rate of 10%, paid annually. The tax rate is 35%. If the flotation cost is 5% of the issue proceeds, then what is the after-tax cost of debt? Disregard the tax shiel..

  Compare pros and cons of each capital budgeting technique

Compare the pros and cons of each capital budgeting technique, in evaluating capital projects for a company?

  Cash conversion cycle by reducing or increasing

Would Wal-Mart improve its cash conversion Cycle by reducing or increasing it?

  What is the practical limit based on liquidity

Planetary Travel Co. has $165,000,000 in stockholders’ equity. Common stock is $60,000,000 and the balance is retained earnings. The firm has $255,000,000 in total assets and 5 percent of this value is in cash. What is the legal limit on current divi..

  What must be initial margin requirement to nearest dollar

You post the required initial margin and buy one coffee futures contract for 37, 500 pounds of coffee at a futures price of $1.811 per pound. At the close of the trading day the futures price is $1.787 per pound and your account balance is $4086. You..

  Comment on the effect of more frequent compounding

You have $25,000 in an investment account today. How much will be in the account in 30 years if the account earns (a) 8% per year, (b) 8% compounded semiannually, (c) 8% compounded quarterly, (d) 8% compounded monthly, and (e) 8% compounded daily? Co..

  Prospectus quotes the instrument at a true yield

The treasurer of a large corporation wants to invest $14 million in excess short-term cash in a particular money market investment. The prospectus quotes the instrument at a true yield of 6.46 percent; that is, the EAR for this investment is 6.46 per..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd