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The common stock for the hetterbrand corporation sells for $60.33 and the last dividend paid was $2.18.Five years ago the firm paid $1.89 per share and dividends are expected to grow at the same annual rate in future as they did over the past five years.
A. what is the estimated cost of common equity to the firm using the dividend growth model?
b. Hetterbrand’s CFO has asked his financial analyst to estimate the firm’s equity using the CAPM as way of validating the earlier calculations. The risk free rate of interest is currently 4.5 percent, the market risk premium is estimated to be 52 percent and Hetterbrands’s beta is 0.72. What is the estimate of the firm’s cost of common equity using this model?
Continuing from question 6, the standard deviation of stock A is 15%, while the standard deviation of stock B is 12%. If the two stocks have a correlation of -0.5, what is the standard deviation of the portfolio? How does this portfolio standard devi..
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Stock A has an expected return of 10% and a standard deviation of 5%. Stock B has an excpted return of 15% and a standard deviation of 10%. The risk free rate is 11.67%. E(r) of the equally weighted portfolio is 12.22%, standard devaition of the equa..
A stock is worth $10 today and will pay either $16 with probability 0.4, or $8 with probability 0.6. The risk free rate is 0% and the expected return on the market is 10%. What must be the stock’s beta?
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Digital Organics (DO) has the opportunity to invest $0.98 million now (t = 0) and expects after-tax returns of $580,000 in t = 1 and $680,000 in t = 2. The project will last for two years only. The appropriate cost of capital is 14% with all-equity f..
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A 30-year maturity bond making annual coupon payments with a coupon rate of 12% has duration of 11.54 years and convexity of 192.4. The bond currently sells at a yield to maturity of 8%. What is the price of the bond if its yield to maturity increase..
An investor has two investments A and B. The investor believes that investment A is equally likely to increase by $1,000 or to decrease by $1,000 by the end of the year.
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