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(Relative valuation of common stock). Using P/E ratio approach to valuation calculate the value of a share of stock under the following conditions. . The investor require rate of return is 13 percent, . the expected level of earnings at the end of this year( E1) is $ 4 . the firm follow a policy of retaining 40 percent of its earnings, .the return on equity ( ROE) is 14 percent and . similar shares of stock sell at multiple of 8.108 times earnings per share Now show that you get same answer using the discounted dividends model .
a) The stock price using the P/E ratio valuation method is…… ( around to nearest cent)
b) The stock price using the dividends discount model is ……… ( around to nearest cent)
Gugenheim, Inc. offers a 7.25 percent coupon bond with annual payments. The yield to maturity is 4.025 percent and the maturity date is 10 years. What is the market price of a $1,000 face value bond?
A stock has a beta of 1.2 and an expected return of 11.8 percent. A risk-free asset currently earns 3.8 percent. (SHOW YOUR WORK) What is the expected return on a portfolio that is equally invested in the two assets? If a portfolio of the two assets ..
You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $320,000. The truck falls into the MACRS 10-year class, and it will be sold after 10 years for $57,000. The firm's marginal t..
List the six best practices described in the Purchasing and Procedure Center’s online article. For each best practice, explain how it will achieve cost reductions and/or service level improvements.
You have accumulated some money for your retirement. You are going to withdraw $$99035 every year at the end of the year for the next 24 years. How much money have you accumulated for your retirement? Your account pays 10.87 percent per year, compoun..
Large Industries bonds sell for $1,022.38. The bond life is 12 years, and the yield to maturity is 8.2%. What must be the coupon rate on the bonds? Assume coupons are paid once a year and the face value is $1,000.
Which of the following statements about opportunity costs is incorrect?
You analyze the prospects of several companies and come to the following conclusions about the expected return on each: You decide to invest $4,000 in star bucks, $6,000 in Sears, $12,000 in Microsoft, and $3,000 in Limited Brands. What is the expect..
Interest Rate Swap. Reeber, a US based MNC, wishes to transform its liability from fixed to floating in order to exploit what it perceives as a market trend toward lower rates. Its investment banker locates a (USD) fixed to floating swap quoted at 5...
Suppose Klausenheimer, Inc. is considering a new project. The project alone will cost $50,000,000 and is expected to generate after-tax cash flows of $5,000,000, $6,000,000 and 7,000,000 during the first three years. Assuming Klausenheimer has a corp..
Suppose that the return on a risk-free security is 5 percent. The expected return on the market portfolio is 16 percent and the volatility of the market portfolio is 22 percent What is the volatility of the risk-free security? What is the correlation..
Determine Fisher's working capital investment. Determine Fisher's current ratio. Determine Fisher's return on stockholders' equity if its 2010 earnings after tax are $10,000(000).
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