Calculate the opportunity cost of capital

Assignment Help Business Economics
Reference no: EM132281246

A share of stock with a beta of 0.66 now sells for $48. Investors expect the stock to pay a year-end dividend of $2. The T-bill rate is 5%, and the market risk premium is 8%.

a.  Suppose investors believe the stock will sell for $50 at year-end. Calculate the opportunity cost of capital. Is the stock a good or bad buy? What will investors do? (Do not round intermediate calculations. Round your opportunity cost of capital calculation as a whole percentage rounded to 2 decimal places.)

b. At what price will the stock reach an "equilibrium" at which it is perceived as fairly priced today? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Reference no: EM132281246

Consider the information for a simultaneous move game

Consider the following information for a simultaneous move game: If you advertise and your rival advertises, you each will earn $5 million in profits. If neither of you advert

Solve equilibrium interest rate-equilibrium for real output

Derive the IS relation. Solve the equilibrium for real output. Solve the equilibrium interest rate. Now suppose that the money supply increases to M/P = 1840. Solve for Y, i,

Evalute any one economic model of such imperfect competition

Evalute any one economic model of such imperfect competition, and assess how well it explains the behaviour of real firms, and the results such behaviour might have upon the

How can we reconcile these two statistics

Discuss the merits and disadvantages of GDP as a measure of a nation's standard of living. Think of a country that has a lower GDP but perhaps a higher standard of living th

Highest possible utility and the consumption bundle

Assume that the consumer has I=$100 to spend on goods X and Y. The price of goodX is Px=$7 per unit, and the price of good Y is Py=$4 per unit. Calculate the consumer's high

Money will bob need during retirement based on calculations

Bob is a 37 year old and is an account manager with a large telecom company. He's been dragging his feet with his retirement plan, opting instead for expensive trips to vegas

Accurately predicts the resulting increase in price

Suppose the demand curve for a product is represented by a typical downward-sloping curve. Now suppose that the demand for this product increases. Which of the following state

About international strategies-diversification strategies

Are international strategies always just a special case of diversification strategies that a firm might pursue? What, if anything, is different about international strategies


Write a Review

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