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Constant growth
You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend of $3.00 a share at the end of the year (D1 = $3.00) and has a beta of 0.9. The risk-free rate is 5.2%, and the market risk premium is 5.0%. Justus currently sells for $47.00 a share, and its dividend is expected to grow at some constant rate, g. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 3 years? (That is, what is ?) Round your answer to two decimal places. Do not round your intermediate calculations.
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In 2013, VF Corporation split its stock four to one. On the day prior to the split, the stock sold for $245.80. What is the anticipated price of the stock when the split is effective?
Operating leverage means financing a portion of a firm's earnings per share with debt. An increase in financial leverage will increase the absolute value of EPS, everything else equal. Break-even analysis ignores fixed costs because fixed costs do no..
You have been hired as a financial consultant to help improve the performance of Blue Star Inc., which is highly profitable but has been experiencing cash shortages due to its high growth rate. As one part of the analysis, you want to determine the f..
If your stock will yield negative 13?% in a recession and 23?% in a normal? year, what is the standard deviation of the? stock?
Kim Lee is trying to decide whether she can afford a loan she needs in order to go to chiropractic school. Right now Kim is living at home and works in a shoe store, earning a gross income of $1770 per month. Her employer deducts a total of $150 for ..
Suppose that Off-Star currently is selling at $60 per share. You buy 100 shares, borrowing the maximum amount of the purchase price from your broker. If the initial margin is 50% and the maintenance margin is 25%, how low can Off-Star's price fall be..
Benson, Athavale & Kemper (BAK) started a manufacturing facility in the last century. This firm, profitable since inception produces steering units for the automotive industry. The 3 founders have been averse to debt. The firm is in the 40% tax brack..
Suppose the price of a share XYZ is 100 at t=0. At t=1, the share-price either increases to 108 or decreases to 88. At t=2, the share-price will either be 120, or 96 (if the share goes up at t=1 and goes down at t=2 and if it goes down at t=1 and goe..
The Woods Co. and the McIlroy Co. have both announced IPOs at $59 per share. One of these is undervalued by $18.50, and the other is overvalued by $9.00, but you have no way of knowing which is which. You plan on buying 1,950 shares of each issue. If..
LKD Co. has 12 percent coupon bonds with a YTM of 8.5 percent. The current yield on these bonds is 9.4 percent. How many years do these bonds have left until they mature?
Halliford Corporation expects to have earnings this coming year of $ 3.28 per share. Halliford plans to retain all of its earnings for the next two years. For the subsequent two years, the firm will retain 50 % of its earnings. Assume Halliford's sha..
What is the "Cash is King" principle? What does it mean and why do entrepreneurs believe in this mantra? A Portfolio has a required return 12%, the risk-free rate is 5%, and the market required rate of return is 14%. what is the portfolio's beta? Ann..
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