User Account

All Pages

Is this evidence against market efficiency

Assignment Help Finance Basics
Reference no: EM132758051

You have the following information for Alpha plc:

Equity: 500,000 shares. The company just paid a dividend of £2 and the dividends are expected to grow by 3% per year indefinitely. The current share price is £20. The return of Alpha's equity has a standard deviation of 24% per annum and a correlation with the market of 0.9.

Debt: 10,000 bonds outstanding, with 20 years to maturity, a coupon rate of 7% and a face value of £1,000. The price of the bonds is £901.036 and they pay coupons semiannually.

The market risk premium is 6% and the standard deviation of the returns of the market is 15%. Treasury bills are yielding 4% and the corporate tax rate is 20%.

Delta plc announced this morning that its profit from last quarter has dropped 15% compared to the previous quarter. The closing price of the company at the end of the day is up 5% from yesterday. Is this evidence against market efficiency? Explain.

Reference no: EM132758051

Questions Cloud

Calculate holding period return : Assuming yields to maturity on comparable bonds remain at 7%, calculate your holding period return if you sell the bond after two years
Calculate the return on average investment : Calculate the following for the special-purpose eye-testing machine: Net present value. Payback period. Return on average investment
What is the projects internal rate of return irr : A project that costs $2,900 to install will provide annual cash flows of $790 for each of the next 6 years. Calculate the NPV if the opportunity cost of capital
Compute the price-earnings ratio and dividend yield : Compute the price-earnings ratio and dividend yield for the three companies. Round ratios and percentages to one decimal place as appropriate
Is this evidence against market efficiency : The closing price of the company at the end of the day is up 5% from yesterday. Is this evidence against market efficiency? Explain.
Culture is powerful component of organization success : Culture is a powerful component of an organization's success. Culture differs across organizations.
What the accounting rate of return of the equipment is : Cash expenses are expected to be $58,800 and depreciation expense is $17,600. The accounting rate of return of the equipment is
What is fixed overhead that was applied to carla actual : Carla Company's standard fixed overhead rate is based on budgeted fixed, What is the fixed overhead that was applied to Carla's actual production units?
What is the difference between basic eps and diluted eps : What is the difference between basic EPS and diluted EPS? How does the denominator in the EPS equation (shares outstanding) differ from basic to dilutive?

Reviews

Write a Review

Finance Basics Questions & Answers

  What is the bank cost of preferred stock

Sixth Fourth Bank has an issue of preferred stock with a $7.10 stated dividend that just sold for $76 per share.

  How much interest will you earn in the first year

Old Time Savings Bank pays 5% interest on its savings accounts. If you deposit $2,600 in the bank and leave it there:

  Calculate a reasonable price that should be willing to pay

Analyst expect the firm to grow at an annual rate of 3.5% into the indefinite future. Calculate a reasonable price that investors should be willing to pay for Whole Foods stock.

  Calculate the standard deviation of the returns

(a) Compute the time -weighted return of all the stocks and the S&P 500. (b) Calculate the standard deviation of the returns of all the stocks and the S&P 500.

  Avoid saturated fat and cholesterol

Why is it important to avoid saturated fat and cholesterol? What can you do to minimize your saturated fat and cholesterol intake?

  What is the pretax operating cash flow break-even

IronVerks Ribshack has total fixed costs of $8,500 per month. It sells rib plates for $15 each, and the variable cost of providing each plate is $10. What is the pretax operating cash flow break-even point for IronVerks?

  Describe the types of assets intel owns

(a) Describe the types of assets Intel owns. Which assets are most significant to the company? Using the notes to the financial statements, discuss the accounting methods used to value assets. What other information can be learned about the asset ..

  Compare a Purely Secular and the Biblical approach

What should be the biblical approach to the administration of financial resources?Compare and contrast a purely secular and the biblical approach

  Compute the npv of the project

MRE Sales is looking to acquire an ERP and has asked for your assistance. The company can purchase the system outright for $120,000 plus 5% sales tax, and delivery and install charges of $2,000.

  What are the portfolio weights

Considering the effects of diversification, how should Sarah respond to the suggestion that you invest 100 percent of your 401(k) account in East Coast Yachts stock?

  Develop a joint probability table

A travel agency is offering a special promotion for a 6-day holiday in Costa Rica. They decided to do direct selling via phone to 400 families.

  Greater centralization in some organizations

Why does the application of advance IT typically lead to great decentralization? Could it also be used for greater centralization in some organizations? Explain

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd