What is the value of a stock

Assignment Help Finance Basics
Reference no: EM132200038

What is the value of a stock that just paid $2 dividend and expected to increase dividends by 3% per year since next year? The required return is 15%.

Assume the company's 15% required return resulted from a risk-free rate of 9%, a market return of 13%, and a beta of 1.50. Now imagine that the financial manager makes a decision that, without changing expected dividends, causes the firm's beta to increase to 1.75. Assume the risk free rate and market return remain the same. Based on CAPM model, how would the change in beta affect the stock value? By how much?

Reference no: EM132200038

Questions Cloud

Healthcare administrative improvement : Please list outline of your healthcare administrative improvement..
What is its required return : Since analysts estimate Paccar will have an 13.5 percent growth rate, what is its required return
Write a function that accepts a sentence containing blanks : Write a function isPrime(), that accepts a positive integer and returns true if it is a prime, false otherwise. You should use factorsOfN() in this function.
Some practical applications of statistical process control : Provide examples of some practical applications of Statistical Process Control (SPC) and control charts that you could use to monitor your health,
What is the value of a stock : What is the value of a stock that just paid $2 dividend and expected to increase dividends by 3% per year since next year? The required return is 15%.
Outline the kind of approach you believe human resource : Outline the kind of approach you believe human resource director Andy Miller should be advising the employment manager to follow.
Bigmas weighted average cost of capital : If the company's marginal tax rate is 40 percent, what is BigMa's weighted average cost of capital?
Specify the output that you will get when you run program : In the main method and after calling the function, print the variable num. Specify the output that you will get when you run the program.
Publicly-traded competitor : An analyst gathered the following information about a private company and its publicly-traded competitor:

Reviews

Write a Review

Finance Basics Questions & Answers

  Describe the volatility of currency

List the foreign currencies that the company AIRBUS has exposure and describe the volatility of each currency.

  Calculate the firm earning per share

a. Calculate the firm's earning per share (EPS). b. Calculate the firm's price-earnings ratio (P/E) if the market price of the stock is $36.

  Case study-google ipo

Case Study: Google IPO, by Matthias Hild for University of Virginia, No. UV3867

  What is economic valued added for the current fiscal year

A firm is financed with $350,000 of equity and $650,000 of long-term debt, as of the beginning of the current fiscal year. During the same fiscal year.

  Compare and contrast economic market and relevancy value

Explain the folIowing statement: "The methodology is systems analysis and the theoretical framework is the systems concept."

  Compute the project’s internal rate of return (irr)

Rascal Clothing is evaluating a new weaving machine that costs $90,000. It is expected that the machine will generate after-tax cash flows equal to $54,000 per year for two years. Rascal's required rate of return is 9 percent.

  How does change in leverage affect the firm return on equity

In an M&M world, how will this change affect the firm's WACC, the expected return on the firm's new assets? How does the change in leverage affect the firm's.

  Fundamentals of effective communication in the workplace

Effective communication skills are essential in the workplace. Some businesses invest in training their employees on how to effectively communicate, because effective communication skills go beyond conversations. Employees must know how to express..

  What overall percent did the price increase

Suppose a certain item increased in price by 19% a total of 4 times and then decreased in price by 7% a total of 2 times. By what overall percent did the price

  Observe a spot exchange rate

Suppose you observe a spot exchange rate of $1.50/€. If interest rates are 5% APR in the U.S. and 3% APR in the euro zone, what is the no-arbitrage 1-year forward rate?

  What is the catheterization labs profit

Name two financial measures used to judge the performance of investment centers that are not used to measure the financial performance of profit centers.

  Estimate the effective cost of the credit line

You decide to establish the line of credit for $40 million. Currently, your company does not hold balances in their accounts at the bank and pays fees for all cash management services.

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