Reference no: EM13789662
1. The risk-free rate of return, rRF , is 11%; the required rate of return on the market, rM, 16%; and Schuler Company's stock has a beta coefficient of 1.6.
a. If the dividend expected during the coming year, D1, is $3.00, and if g is a constant 2.75%, then at what price should Schuler's stock sell? Round your answer to the nearest cent.
b. Now, suppose the Federal Reserve Board increases the money supply, causing a fall in the risk-free rate to 4% and rM to 12%. How would this affect the price of the stock? Round your answer to the nearest cent.
c. In addition to the change in part b, suppose investors' risk aversion declines; this fact, combined with the decline in rRF, causes rM to fall to 10%. At what price would Schuler's stock sell? Round your answer to the nearest cent.
d. Suppose Schuler has a change in management. The new group institutes policies that increase the expected constant growth rate to 7%. Also, the new management stabilizes sales and profits, and thus causes the beta coefficient to decline from 1.6 to 0.6. Assume that rRF and rM are equal to the values in part c. After all these changes, what is Schuler's new equilibrium price? (Note: D1 goes to $3.12.) Round your answer to the nearest cent.
2. Investors require a 15% rate of return on Brooks Sisters' stock (rs = 15%).
What would the value of Brooks's stock be if the previous dividend was D0 = $3 and if investors expect dividends to grow at a constant compound annual rate of (1) - 6%, (2) 0%, (3) 2%, or (4) 14%? Round your answers to the nearest cent.
|
What are your thoughts about the interrogation methods
: It is understood that this article could be slanted one way or the other, but for the moment let's agree that the information is true, and if so, what are your thoughts about the interrogation methods and if they violate any ethical principles
|
|
Identifying the four beginning stages of critical thinking
: Identifying the four beginning stages of critical thinking - explanation of your current level of critical-thinking development.
|
|
Writge a summary of paper no child left behind race to top
: Writge a summary of the paper No Child Left Behind/Race to the Top.
|
|
High biometrics, low biometrics and esoteric biometrics
: Identify and discuss one high biometric and explain its application to criminal justice.
|
|
Constant compound annual rate
: What would the value of Brooks's stock be if the previous dividend was D0 = $3 and if investors expect dividends to grow at a constant compound annual rate of (1) - 6%, (2) 0%, (3) 2%, or (4) 14%? Round your answers to the nearest cent.
|
|
Estimate the value of a life saved
: Estimate the value of a life saved. Justify your position. Determine which policy is preferable, (a) the 55-mph speed limit or (b) the 65-mph limit. Justify your position.
|
|
Describe what would be the likely outcomes in the economy
: Describe what would be the likely outcomes in the economy. Use the appropriate tools of analysis, such as aggregate demand and aggregate supply where appropriate, to justify and explain your answer.
|
|
Psychology analyzing with anova
: PSYCHOLOGY Analyzing with ANOVA
|
|
Five forces of competition model
: From the e-Activity (Use the Internet to research the industry of your choice in light of the Five Forces of Competition Model), analyze the industry you selected using the Five Forces of Competition Model to determine the impact of each of the fi..
|