Solution-Higher stock expected return

Higher stock expected return

Assignment Help Finance Basics

Reference no: EM131402312

Jackson Corporation and Allied Industries, and would like to know which firm has higher stock's expected return to compare with its required return. Each of them is expected to pay the same $1.5 million dollar dividend every year in perpetuity. Jackson Corporation is riskier and has an equity cost of capital of 15%. Allied Industries is not as shaky as Jackson, so Allied has an equity cost of capital of only 10%. Assume that the market portfolio is not efficient. Both stocks have the same beta and an expected return of 12%.

Reference no: EM131402312

Questions Cloud

Estimate the total cost of carry from the commodity price : Estimate the total cost of carry from the commodity price using recent futures and spot prices. Finding individual components of the cost of carry can be difficult, so only find the total cost of carry

What type of data is produced by each of variables measured : Several variables were measured, including age, gender, level of education, income, job satisfaction score, and Machiavellian (‘‘Mach'') rating score. What type of data is produced by each of the variables measured?

Synergy between two firms : The shareholders of Northstar Corp. have voted in favour of a buyout offer from Allarco Inc. Information about each firm is given here:

Identify given variable as quantitative or qualitative : Identify each variable as quantitative or qualitative.- Town where sample was collected- Type of water supply (river intake, stream, or borehole).

Higher stock expected return : Jackson Corporation and Allied Industries, and would like to know which firm has higher stock's expected return to compare with its required return. Each of them is expected to pay the same $1.5 million dollar dividend every year in perpetuity.

What is the internal rate of return : A project has an initial outlay of $2,761. It has a single cash flow at the end of year 10 of $5,276. What is the internal rate of return (IRR) for the project?

Define the fallacy of composition : In which of the following three markets are there likely to be the greatest feedback effects: market for housing, market for wheat, market for manufactured goods?

What would you expect would happen to wheat prices : You're a commodity trader and you've just heard a report that the winter wheat harvest will be 2 billion bushels, a 40 percent jump, rather than an expected 30 percent jump.

Find the slope of line containing the given pair of points : Graph the function f(x) = (x - 1)2, and use this plot to graph the function g(x) = (2x - 1)2. Find the slope of the line containing the following pair of points: P(1, -1), Q(3, -3).

User Account

All Pages

Higher stock expected return

Reference no: EM131402312

Reference no: EM131402312

Questions Cloud

Reviews

Write a Review

Finance Basics Questions & Answers

Financial reporting and analysis

A report on financial accounting

Describe the types of financial ratios

Differences between sole proprietorship and corporation

Prepare a cash budget statement

What are the implied interest rates

State pricing theory and no-arbitrage pricing theory

Small business administration

Effect of financial leverage

Evaluate the basis for the payment to the lender

Importance of opps, ipps, mpfs and dmepos

Time value of money

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT