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a. Equity Risk Premium – the return that investors expect to receive above the return of the risk-free asset for investing into a risky asset. What does this mean?
b. How do we use the Expected Rate of Return from our investment to discount the expected cash flows from our investment to determine the present value (intrinsic value)? Please calculate the fair value of an investment with a dividend payout ratio of 40%, Next year’s dividend expectations of $2.40, growth rate of 3.0%, Risk-free rate is 2.4%, beta is 0.9 and ERP is 5.0%.
c. What is the difference between an Arithmetic Mean (Average) and a Geometric Mean (Average)? a. Why should investors know the difference?
d. Describe why a person must take risk to gain the potential for a higher return than they would receive for investing into the risk-free asset?
e. Be prepared to discuss which investment a reasonable person would choose to invest into over the next 5 years and why? a. Investment A has a mean return of 6% and a standard deviation of 12%. b. Investment B has a mean return of 5% and a standard deviation of 9%.
The last dividend paid by New Technologies was an annual dividend of $1.40 a share. Dividends for the next 3 years will be increased at an annual rate of 8 percent. After that, dividends are expected to increase by 3 percent each year. The discount r..
bonds issued elsewhere often have annual coupon payments.
Which of the following statements concerning pension portfolio investments is (are) correct?
How much will the lender actually disburse?- What is the effective interest rate for the borrower, assuming that the mortgage is paid off after 30 years (full term)?
A hedge fund manager has a negative view of retail stocks right now based on the belief that Amazon will drive many retailers into bankruptcy.
Titan Football Manufacturing had the following operating results for 2016: sales = $19,950; cost of goods sold = $13,810; depreciation expense = $2,200;
This year, Hamilton, a local manufacturer of off-shore drilling platforms, entered into a contract to construct a drilling platform that will be placed in the North Atlantic Ocean. The total contract price is $5,000,000, and Hamilton estimates the to..
What is the price of each bond?
Does joint tenancy eliminate the need for a will? Identify some of the problems that arise when property is titled in joint tenancy
Calculate the difference in NPVs between the Make and Buy options. Express all costs as positive values in your calculations.
Find the present value for a payment of $10; 000 to be received in 3,5 years, if the annual interest rate is 4% that: (i) compounded monthly; (ii) compounded continuously. What is the annual rate of interest with continuous compounding is equal to 10..
What warranties has the restaurant potentially violated?
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