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CONSTANT GROWTH
You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend of $2.50 a share at the end of the year (D1 = $2.50) and has a beta of 0.9. The risk-free rate is 3.5%, and the market risk premium is 4.0%. Justus currently sells for $38.00 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.
$______
Discuss the different types of notes, bills, and bonds that are sold in the U.S. Treasury market. Discuss the different participants in the markets. Discuss how arbitrage opportunities affect the different market participants and the types of interes..
Investment Return MedTech Corp stock was $51.65 per share at the end of last year. Since then, it paid a $1.15 per share dividend. The stock price is currently $63.20. If you owned 100 shares of MedTech, what was your percent return?
Gustav believes that Anton B’s cash flows will grow by 2% per year in perpetuity. Anton B’s WACC is 9%. What is Anton B’s intrinsic value?
Two portfolio managers work for competing investment management houses. Each employs security analysts to prepare input data for the construction of the optimal portfolio.
A study compared the weight loss of people on a low -fat diet versus people on a low-carb diet. In a sample of 100 obese people on a low-fat diet the sample mean weight loss as 7.6 pounds with a standard deviation of 3.2 pounds.
A stock has an expected return of 15.8 percent, the risk-free rate is 6.3 percent, and the market risk premium is 7.5 percent. What must the beta of this stock be?
AIA Inc. is looking to manage its cash position using the EOQ model. What are the annual storage costs associated with the EOQ?
Your grandmother is gifting you $100 a month for four years while you attend college to earn your bachelor's degree. At a 5.2 percent discount rate, what are these payments worth to you on the day you enter college?
Choosing investments with different rise characteristics and exposures; reduces risk
Madeline Manufacturing Inc.’s current stock price is $40 per share. Call options for this stock exist that permit the holder to purchase one share at an exercise price of $30. After the payoffs have been equalized and the riskless hedged investment i..
Since its inception, Eco Plastics Company has been revolutionizing plastic and trying to do its part to save the environment. Eco's founder, Marion Cosby, developed a biodegradable plastic that her company is marketing to manufacturing companies thro..
If the weighted average cost of capital is 15%, what is the firm's value of operations, in millions?
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