Computation of value of the stock or market had no knowledge

Assignment Help Finance Basics

Reference no: EM1311594

Computation of value of the stock

Apple Computer, Inc. announced the new iPod Touch after the market close on September 12, which the market had no knowledge of prior to the announcement. Apple stock was closed at $195.50 per share at the close on the 12th. The sales of the new iPod Touch will increase the company's net cash flow by $1.6 per share per year (or $0.40 per quarter) for the next 2 years, and zero after that. Apple stock has a beta of 1.5. Assume the current market risk premium is 8% (on a quarterly basis) and the risk-free rate is 4% (also on a quarterly basis). What would be Apple's price at 9:30 on the 13th when the market opened, if this was an efficient market?

Reference no: EM1311594

Questions Cloud

Analyzing impact of fiscal policies on economy : Discuss the use of Gross Domestic Policy (GDP) to measure the business cycle. Discuss the roles of government bodies which determine national fiscal policies.

Evaluate the maximum purchase price per unit : Evaluate the maximum purchase price per unit that Redi-Watt should be willing to pay to the outside contractor? Should the proposal be accepted for a price of $4,250 per unit to the contractor?

Formulating the null and alternative hypotheses : Formulate the null and alternative hypotheses for this application.

Decision on proposal where contract price : Decision on proposal where contract price is lesser than variable cost - What in house costs should be used to compare with the proposal received from the contractor?

Computation of value of the stock or market had no knowledge : Computation of value of the stock and which the market had no knowledge of prior to the announcement

Computing probability to receive email during same period : What is the probability she received 5 or more email during the same period?

Developing appropriate hypotheses : Develop appropriate hypotheses such that rejection of H0 will support the researcher's contention.

Evaluate minimum price that would be acceptable : On overseas distributor has expressed an interest in these units if the price is substantially reduced. Evaluate the minimum price that would be acceptable to Redi-Watt in selling these units.

Analyzing the impact of fiscal policies : Find the velocity given that the market is in equilibrium. MD1 is the relevant curve and it is given that the real GDP is 30,000.

User Account

All Pages