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

To make your work easier to grade

To make your work easier to grade, please make Julie the row player, Kristin the column player also Larissa the page player.

United states to raise its own interest rate

Compare the effects of the two policies, based on the models developed. Why might the United States have preferred one policy over another.

What are the cons of the strategy

The interest rate affects the investment patterns in the economy. A friend of yours suggests a get-rich-quick scheme: Borrow from the nation with the lower nominal interest ra

Unemployed but actively seeking work

Suppose an economy consists of 300,000 individuals 16 years and older, 160,000 are employed, and 18,000 are unemployed but actively seeking work. In this example the labor for

Customer service to differentiate your product-service

Assume that you are going to start a small business of your own. Further, imagine that you are able to adequately differentiate your product, or service so that you can establ

How does the market arrive at an equilibrium

What determines market prices, assuming a competitive market and there are no artificial restrictions in the market? How does the market arrive at an equilibrium?

Considering the costs of meeting various standards

Certain environmental laws prohibit EPA from considering the costs of meeting various standards when the levels of the standards are set. Is this a good example of “putting fi

Make the focus be on the ethics of the theory

Show an understanding of John Locke's economic theory and then provide an analysis of its ethical aspects. Make the focus be on the Ethics of the theory, and explain the reaso

Reviews

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