Explain the market risk premium

Assignment Help Finance Basics
Reference no: EM133121973

You are trying to value WOW share today (End of 2021). Assume the current price of the share in the stock market is $39.06. Assume that the total dividend paid by WOW in the 2021 year were paid as a lump sum (at once) today. You also estimate that for the next two years dividends will grow respectively at 5% and 3% per year. After this (starting in time 3) you estimate dividends will grow at a constant rate of 1% forever. Assume that today the Australian 10Y Government bond has a yield of 1.27%, the market risk premium is 4.08% and the beta of WOW is 0.53. Based on this price would you purchase the share? Why or why not?

Reference no: EM133121973

Questions Cloud

How many cups of coffee the van sold last month : A mobile coffee van charges $1.80 for a cup of coffee, Last month, the sales revenue of the coffee van was E9.000 and the total variable costs were E4,000. Calc
Failure of financial institutions and financial crises : "Caribbean financial institutions are weak and poorly regulated when compared to North American financial institutions. Additionally, because the financial mark
Present value of acme future cash flows : Acme Medical Corp. is expecting the cash flows from 2018-2022 in the table below. After 2022 it is expecting growth in cash flow at an annual rate of 3%.
Write a Java program with a GUI : Write a program that demonstrates how various exceptions are caught with catch - Define classes ExceptionA and ExceptionB - In your program, create try blocks
Explain the market risk premium : You are trying to value WOW share today (End of 2021). Assume the current price of the share in the stock market is $39.06. Assume that the total dividend paid
Find lowest possible ratings : Just before the collapse of of the subprime mortgage market in 2007, the most important credit-rating agencies rated mortgage-backed securities with Aaa and AAA
How much is the total final and capital gains tax for year : Gain on sale of shares of stock subject to CGT 100,000. How much is the total final and capital gains tax for year 2018
What is the capital gains tax on the sale : Kaye sold his residential house and lot located in Manila on January 5, 2018 for 8,000,000. What is the capital gains tax on the sale
Develop the monthly financial monitoring report : Analyse and use financial information and accounting software for a case study business, resolve discrepancies and interpret and report on operational activity

Reviews

Write a Review

Finance Basics Questions & Answers

  Prepare a personal income statement

Prepare a personal income statement for the past year, using the same format as Alice's income statement in this chapter. Include all relevant categories of inc

  Tangible assets that the household owns are

1. Tangible assets that the household owns are: Multiple Choice

  Describe the constant dividend growth model

A particular stock is currently selling for $30.00 per share. An annual dividend of $2.00 per share was paid only moments ago, and it is expected that dividend.

  Effect on npv of changing multiple project

What is the exploration of the effect on NPV of changing multiple project parameters called?

  What is was the phillips curve

What is was the Phillips Curve? If the Fed seeks to exploit the Phillips Curve to stimulate the economy, what difference does it make whether the public forms.

  What is the operating cash flow for the year

No new funds were borrowed. The depreciation expense is $420. What is the operating cash flow for the year?

  Flat basis and monthly repayment

Suppose you go to a bank for a one year loan to pay taxes. The bank staff offers you one year loan with 5% annual rate, flat basis and monthly repayment.

  What is your definition of risk management

What is your definition of risk management? Do you know what the risk policy, or risk statement or risk appetite of your organization is?

  Capital structure and eps

How can a corporation adjust their capital structure to enhance their EPS (Earnings per share)? Find out an example of a corporation that recently reproted their EPS.

  What can we say about relative prices of out-of-the-money

Suppose an asset follows Brownian motion and there are no interest rates. What can we say about the relative prices of out-of-the-money American and European digital calls?

  Is you current operation a cost or profit centre and why

Is you current operation a cost or profit centre & why? Produce a critical review of financial results for 3 companies in a sector

  Tapley inc recently hired you as a consultant to estimate

tapley inc. recently hired you as a consultant to estimate the companys wacc. you have obtained the following

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