Estimate its risk-adjusted rate of return

Assignment Help Financial Management

Reference no: EM131461213

The Abacus Computer Computer has decided to use the Capital Asset Pricing Model (CAPM) to estimate its risk-adjusted rate of return (k) in order to determine the price of its common stock. The firm's beta is 2. The S&P 500 has returned 9% to investors over a long period of time, and Abacus has decided to use this value as its expected market return. Treasury bills are currently providing investors with a risk-free return of 0.5%. Abacus next expected dividend is $3.25, and its growth rate of dividends is estimated at 10%. What is its risk-adjusted rate of return and its stock price?

Reference no: EM131461213

Questions Cloud

Value bonds outstanding-what is current price of the bond : The Nick Company has a series of $1,000 par value bonds outstanding. what is the current price of the bond?

Discuss hashing in the context of securing passwords : Encryption in Business Use- Discuss Hashing in the context of securing passwords in a company database for login credentials to standalone applications.

Stock market when the cycle-trend is trending up : As investors, we want to invest in the stock market when the "cycle/trend" is trending up.

What examples or learnings surprised you and why : This week's prompt is designed to be more general than the prompts in the first 2 weeks because I want you to be able to explore a broader perspective.

Estimate its risk-adjusted rate of return : estimate its risk-adjusted rate of return. What is its risk-adjusted rate of return and its stock price?

Define the principles of one of the quality programs : Apply the principles of one of the quality programs you have researched from your readings to a Middle Eastern organization of your choice.

What does getting the up hand mean : How do they relate to the class lectures? What are some cross-cultural differences in non-verbal communication seen in the video?

Means to change or is destined to fail : Apply the truth of Burke's statement to three of the following states in the 19th century: Britain, France, Germany, Russia, Austria-Hungary.

Identify critical implicational for supply chains operations : Develop a good understanding of the critical implications for supply chain operations in the Canada and implications of some recent developments

User Account

All Pages