What is probability that bostonmarkets stock is overvalued

Assignment Help Financial Management
Reference no: EM13928351

Bostonmarket.com stock has an estimated beta of 1.5. The stock pays no dividend and is not expected to pay one for the foreseeable future. The current price of the stock is $50. You expect this price to rise to $60 by the end of the coming year. You believe that the distribution of possible year-end prices is approximately normal with a standard deviation of $2.50. The risk-free rate of return is currently 4 percent and the market risk premium is 8.8 percent. What is the probability that bostonmarket.com's stock is currently overvalued?

Reference no: EM13928351

Questions Cloud

How much would rely on outsourcing to fill the employee gap : Problems may also occur with outsourcing if the vendor that was hired decides to change their management team or even adopt a strategic direction. By changing directions, the vendor might become a bad fit for the company. And, this could end up co..
What amount would be reported on the company : Under U.S. accounting rules, what amount would be reported on the company's 2013 and 2014 balance sheets for the land and for the building? Show any necessary computations.
From the presidential race debates : From the Presidential race debates, discussions, news, articles, etc, what do you is the value of financial statements on a company, investors, general public, press, internet, etc? Where would you go to find the public financial statements of a comp..
Describe the significance of ''encourage the heart'' : Describe with some detail an experience where you "encouraged the heart" of a colleague or follower in a manner described by this week''s reading.
What is probability that bostonmarkets stock is overvalued : The risk-free rate of return is currently 4 percent and the market risk premium is 8.8 percent. What is the probability that bostonmarket.com's stock is currently overvalued?
Summarize the theories - toyota production system : Summarize the following theories: Just in time (JIT), Toyota Production System (TPS), and Lean. How are these concepts related
Redraw the sml based on the new expected inflation premium : Write an equation for the SML given the increase in the expected inflation premium, assuming that all other factors remain constant. Redraw the SML based on the new expected inflation premium.
Construction of new building : In each of these cases, determine the amount of cost to be capitalized in the asset accounts.
Transaction have on net income and total assets : Chen, Inc. purchases 1,000 shares of its own previously issued $5 per common stock for $12,000. Assuming the shares are held in the treasury, what effect does this transaction have on (a) net income, (b) total assets, (c) total paid-in capital, an..

Reviews

Write a Review

Financial Management Questions & Answers

  What will be the market price of these bonds

What is the par value today and what will it be three years from today -  Write down the current prime rate, 15-year mortgage rate, the 3 month T-Bill rate and the 5-year T-Bond rate (for the USA). Are you surprised?

  Knowledge of managerial finance

What industry is your company part of? Who are some of the company's primary competitors? What doe the future look like for this industry - The current ratio indicates the extent to which current liabilities are covered by those assets that are exp..

  Savings account paying interest at the rate

The Pirerras are planning to go to Europe 4 years from now and have agreed to set aside $140/month for their trip. If they deposit this money at the end of each month into a savings account paying interest at the rate of 4%/year compounded monthly, h..

  Capital budgeting-what is the payback period of the project

Conch Republic Electronics is a midsized electronics manufacturer located in Key West, Florida. The company president is Shelly Couts, who inherited the company. The company originally repaired radios and other household appliances when it was founde..

  How much would you pay today for an investment

How much would you pay today for an investment that provides you $100 each year for the next five years and $1,100 six years from now if the interest rate is 4.6%? Calculate your answer to the nearest penny.

  Consider in determining target debt to equity ratio

What three factors are important to consider in determining a target debt to equity ratio?

  When an annuitant receives liquidation payments

When an annuitant receives liquidation payments, part of the payment is a return of principal and is thus exempt from Federal Income tax. The tax-exempt portion of the payment is calculated using the

  What is the equipments after-tax net salvage value

Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost $13 million, of which 85% has been depreciated. The used equipment can be sold today for $4.55 million, and its tax rate is 40%. What is the equipment..

  Considering a project with the cash flows

Southeast Compositions, Inc. is considering a project with the following cash flows: Compute the net present value of this project if the company's discount rate is 14%. Sentry Manufacturing paid a dividend yesterday of $5 per share. The dividend is ..

  Negotiated sales price

She has negotiated a sales price of $35,000 and she has a $5,000 down payment. She is eligible for the full $8,000 cash rebate. Her bank has pre-approved her for a 5 year car loan at 8%. Assuming Alejandra wants the cheapest overall price, which opti..

  Which investment would investors prefer

Investments B and C both have the same standard deviation of 20% and have the same correlation to the market portfolio. If the expected return on B is 15% and the expected return on C is 18%, which investment would investors prefer? The market return..

  The risk-free rate and market risk premium

Stock Y has a beta of 1.3 and an expected return of 15 percent. Stock Z has a beta of 0.75 and an expected return of 11.4 percent. Required: If the risk-free rate is 5.25 percent and the market risk premium is 7.75 percent, are these stocks correctly..

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