Variance of the net present worth from investing in stock

Assignment Help Financial Management
Reference no: EM131911641

"You are investing $6,000 immediately in a stock that you will keep for 15 years. At the end of 15 years, the stock will be worth $16,394 with a probability of 0.4 and worth $19,931 with a probability of 0.6. When you sell the stock, you will need to pay taxes on the profit earned from selling the stock (i.e., taxes on the difference between the selling and buying prices of the stock). The tax rate will be 14% with a probability of 0.82 or 28% with a probability of 0.18. Your MARR is 5.6% What is the variance of the net present worth from investing in the stock?"

Reference no: EM131911641

Questions Cloud

Recommendation as to whether the lease of the new machine : Provide a recommendation as to whether the lease of the new machine should be approved and show how you came to the conclusion.
What are new portfolio? weights : What is the new value of the? portfolio? If you? don't buy or sell any shares after the price? change, what are your new portfolio? weights?
How expensive of house is he planning to purchase : If sally mander can afford a $1000 monthly mortgage payment (30 years). how expensive of a house is he planning to purchase?
What is the lowest price rally can offer : What is the lowest price Rally can offer and have shareholders tender their? shares? What will be its stock price after the share repurchase in that? case?
Variance of the net present worth from investing in stock : What is the variance of the net present worth from investing in the stock?"
What would that account be worth : Suppose you start at 21 and continue saving $2,000 per year at 9% until age 65. What would that account be worth?
Concerned about short-term volatility : A gold-mining firm is concerned about short-term volatility in its revenues. The company will bring 1000 ounces to market in the next month.
Computing binomial tree for american call option : Write a Visual Basic function in Excel for computing a binomial tree for an American call option that matures in 1 month
What was the average nominal risk premium on the stock : What was the average real return on the stock? What was the average nominal risk premium on the stock?

Reviews

Write a Review

Financial Management Questions & Answers

  Working capital cash flow cycle

Working Capital Cash Flow Cycle Strickler Technology is considering changes in its working capital policies to improve its cash flow cycle.

  Based solely on the internal rate of return rule

A project has an initial cost of $68,300 and cash flows of $38,700, $102,300, and -$18,100 for Years 1 to 3, respectively. If the required rate of return for this investment is 8.7 percent, should you accept it based solely on the internal rate of re..

  Compute the value of this stock with a required return

A firm is expected to pay a dividend of $2.45 next year and $2.60 the following year. Financial analysts believe the stock will be at their price target of $95 in two years. Compute the value of this stock with a required return of 12.4 percent.

  Maximization of shareholder wealth

Maximization of shareholder wealth is

  Arithmetic average return on crash-n-burns stock

You’ve observed the following returns on Crash-n-Burn Computer’s stock over the past five years: 17 percent, –4 percent, 20 percent, 12 percent, and 10 percent. What was the arithmetic average return on Crash-n-Burn’s stock over this five-year period..

  What is the yield on day risk-free securities

Assume that interest rate parity holds. In the spot market 1 Japanese yen = $0.01, while in the 180-day forward market 1 Japanese yen = $0.0108. 180-day risk-free securities yield 1.1% in Japan. What is the yield on 180-day risk-free securities in th..

  Book value will equal the estimated salvage value

Repeat the calculation using a rate such that in 6 years the book value will equal the estimated Salvage value.

  Calculate present value of growth opportunities

The market consensus is that Analog Electronic Corporation has an ROE =9% and a beta of 1.80. It plans to maintain indefinitely its traditional plowback ratio of 2/4. This year's earnings were $3.2 per share. The annual divided was just paid. The con..

  Guidance over a foreign exchange transaction

Ashton Ltd, a client to whom you provide financial advice has come to you for guidance over a foreign exchange transaction.

  What is portfolios expected return and standard deviation

Irene Adler is considering investing in the common stock of Holmes and Watson. If she invests 60% of her funds in Holmes and 40% in Watson, and if the correlation of returns between these two securities is 0.45, what is the portfolio’s expected retur..

  Cost of existing and new preferred stock respectively

What would be the cost of existing and new preferred stock respectively? If preferred stock is selling for $27.00 a share. The firm nets $25.60 after issuance costs. And the stock pays an annual dividend of $3.00 a share.

  Find the net present value of this project

Assume $2,000 a year in Years 1 through 5, $3,000 a year in Years 6 through 8, and $4,000 in Year 9, with all cash flows to be received.

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!

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