Reference no: EM132962467

Questions -

QUESTION 1 - It is expected that the dividend growth rate of Ryder Corporation will be 24% per year for 3 years. Ryder will maintain a constant dividend growth rate of 5.4% from year four on. Ryder paid a dividend of $6.4 per share last year. The company's cost of equity is 15%. What is the price of the stock today (round to nearest $)?

QUESTION 2 - Consider a portfolio comprising stock X and stock Y. The standard deviations of stock X and Y are 36% and 16%, respectively. The expected return of stock X is 30%. The expected return of stock Y is 11%. T-bill rate is 3%. If the correlation coefficient between the returns on X and Y is 0.25, what is the approximate proportion of the optimal risky portfolio that should be invested in stock Y?

QUESTION 3 - It is expected that the EPS of Sunshine Inc. in the next six years will be $3.2, $4.0, $4.9, $5.8, $6.7, and $7.2. The company maintains a dividend payout ratio of 65%. The average trailing industry P/E in year 5 is expected to be 16. The cost of equity is 11%. What is the terminal value at the end of year 5?