What is the intrinsic value of a share of xyrong stock

Assignment Help Financial Management

Reference no: EM131447704

The risk-free rate of return is 4.0%, the expected rate of return on the market portfolio is 14%, and the stock of Xyrong Corporation has a beta coefficient of 2.5. Xyrong pays out 50% of its earnings in dividends, and the latest earnings announced were $7.00 per share. Dividends were just paid and are expected to be paid annually. You expect that Xyrong will earn an ROE of 15% per year on all reinvested earnings forever.

a. What is the intrinsic value of a share of Xyrong stock? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Intrinsic value $

b. If the market price of a share is currently $10.00, and you expect the market price to be equal to the intrinsic value 1 year from now, what is your expected 1-year holding-period return on Xyrong stock? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "%" sign in your response.)

Expected one-year holding-period return %

Reference no: EM131447704

Questions Cloud

Carlsbad corporations sales are expected to increase : Carlsbad Corporation's sales are expected to increase from $5 million in 2016 to $6 million in 2017, or by 20%. Its assets totaled $5 million at the end of 2016. Carlsbad is at full capacity, so its assets must grow in proportion to projected sales.

Evaluate the arguments of the owner and ceo : Evaluate the arguments of the owner and CEO. Provide a recommendation as to whether Auto Parts, Inc. should shut down its factory in Buffalo.

A brief description-what this job entails with enough detail : Career Planning: Researching Career Opportunities, Knowing the jargon and "hot button" issues in a particular profession or industry can give you a big advantage when it comes to writing your résumé and participating in job interviews.

Percentage would the second poorest have to receive : If everyone in the United States were to consume an equal quantity of goods and services, what percentage of total income would the poorest 20 percent of households have to receive from higher-income groups? What percentage would the second poores..

What is the intrinsic value of a share of xyrong stock : The risk-free rate of return is 4.0%, the expected rate of return on the market portfolio is 14%, and the stock of Xyrong Corporation has a beta coefficient of 2.5. Xyrong pays out 50% of its earnings in dividends, and the latest earnings announced w..

Give examples of companies from two different countries : Give examples of companies from two different countries that use licensing as a global marketing strategy.Provide background on a successful joint venture.Your analysis must be substantiated by research from articles in the library's full-text data..

What factors make up a persons culture : What factors make up a person's culture and how does culture influence infant and toddler development?

What is the total value of icarus : Icarus Airlines is proposing to go public, and you have been given the task of estimating the value of its equity. Management plans to maintain debt at 22% of the company’s present value, and you believe that at this capital structure the company’s d..

Report analyzing the two problems below : Managerial economics class In this assignment, you are to prepare a report analyzing the two problems below. Be sure to include your own interpretation and opinion as you prepare this report.

User Account

All Pages