What is required rate of return on your company stock

Assignment Help Financial Management
Reference no: EM131333524

Assume that the average firm in your company's industry is expected to grow at a constant rate of 4% and that its dividend yield is 8%. Your company is about as risky as the average firm in the industry and just paid a dividend (D0) of $1. You expect that the growth rate of dividends will be 50% during the first year(g0,1 = 50%) and 20% during the second year (g1,2 = 20%). After Year 2, dividend growth will be constant at 4%.

1) What is the required rate of return on your company's stock? Round your answer to two decimal places. %

2) What is the estimated value per share of your firm's stock? Round your answer to the nearest cent. Do not round your intermediate computations. $

Reference no: EM131333524

Questions Cloud

What must be expected return to stock : The returns on stocks A and B are perfectly negatively correlated (PAB = -1). Stock A has an expected return of 21 % and a standard deviation of return of 40%. Stock B has a standard deviation of return of 20%. The risk-free rate of interest is 11 %...
Write a response about the given discussion : Let's explore the virtual organizational form. Why would a firm decide to implement this approach to organizing? What are the benefits? What is the downside? Provide examples of organizations that have used a virtual organizational structure. ..
What are the purposes of interviews and interrogations : In a minimum of 250 words, post to the Discussion Area your answers to the following: What are the qualities of an effective interviewer and interrogator? What are the purposes of interviews and interrogations
Explain three effects that each victim may experience : Explain three effects that each victim may experience (one psychological, one social, and one emotional). Explain to what extent each effect might be short-term or long-term
What is required rate of return on your company stock : Assume that the average firm in your company's industry is expected to grow at a constant rate of 4% and that its dividend yield is 8%. Your company is about as risky as the average firm in the industry and just paid a dividend (D0) of $1. What is th..
Structure of american law enforcement : Many police departments are now requiring an Associate's Degree to be qualified for hiring. This is being followed by requiring an advanced degree for taking promotional tests. Do you think this is necessary and fair? Why or why not
Spontaneous liabilities and all assets except fixed asssets : The Booth Company's sales are forecasted to double from $1,000 in 2012 to $2,000 in 2013. Here is the December 31, 2012, balance sheet: Booth's fixed assets were used to only 50% of capacity during 2012, but its current assets were at their proper le..
What are break-even levels of ebit for each plan as compared : Haskell Corp. is comparing two different capital structures. Plan I would result in 12,000 shares of stock and $100,000 in debt. Plan II would result in 8,700 shares of stock and $155,000 in debt. Compare both of these plans to an all-equity plan ass..
Understanding of law enforcement in the united states : In chapter three it talks about the understanding of Law Enforcement in the United States. What do you think about when you hear the term Law Enforcement

Reviews

Write a Review

 

Financial Management Questions & Answers

  What is amount of the net deductible casualty gain or loss

Determine the net deductible casualty gain or loss for Jan Brady when her adjusted gross income was $43,000 in 2016 before the following occured: All casualties were nonbusiness, personal-use property and none occured in a federally declared disaster..

  Risk-free rate-two stocks to be correctly priced

Stock Y has a beta of 1.4 and an expected return of 17.0 percent. Stock Z has a beta of 0.7 and an expected return of 10.1 percent. What would the risk-free rate have to be for the two stocks to be correctly priced?

  Equity-shares of common stock outstanding

Great Corporation has the following capital situation. Debt: One thousand bonds were issued five years ago at a coupon rate of 11%. They had 20-year terms and $1,000 face values. They are now selling to yield 9%. Equity: Great Corp has 108,000 shares..

  What is the operating cash flow-cash flow from assets

Quarles Industries had the following operating results for 2015: sales = $27,960; cost of goods sold = $19,360; depreciation expense = $4,940; interest expense = $2,190; dividends paid = $1,050. What is the operating cash flow for 2015? What is the c..

  Dividend is expected to grow at some constant rate

You are considering an investment in Keller Corp's stock, which is expected to pay a dividend of $1.50 a share at the end of the year (D1 = $1.50) has a beta of 0.9. The risk-free rate is 3.6%, and the market risk premium is 4.0%. Keller currently se..

  Two parts and pertains to the yield curve

The following question has two parts and pertains to the yield curve. Suppose on February 6, 2007, the following information is available from the Treasury spot curve: What is the implied forward rate on a one-year zero coupon Treasury one year from ..

  Entrepreneurs expect pre-tax earnings to increase

Benson, Athavale & Kemper (BAK) started a manufacturing facility in the last century. This firm, profitable since inception produces steering units for the automotive industry. The 3 founders have been averse to debt.

  Considering two mutually exclusive investments

Equity as an Option and NPV: Suppose the firm in the previous problem is considering two mutually exclusive investments. Project A has an NPV of $1,900, and Project B has an NPV of $2,800.

  Cross rate of japanese yen to british pounds

Suppose the exchange rate between U.S. dollars and Japanese yen is $1 US=¥ 79.1 JPY, and the exchange rate between the U.S. dollar and the British pound is $1 US = £0.64 GBP. What is the cross rate of Japanese yen to British pounds? (In other words, ..

  What will yearly dividend per share be if dividend policy

Trevor Co.'s future earnings for the next four years are predicted below. Assuming there are 500,000 shares outstanding, what will the yearly dividend per share be if the dividend policy is Trevor & Co. 1 $ 900,000 2 1,200,000 3 850,000 4 1,350,000 a..

  Expected return-market risk premium-reward-to-risk ratios

Stock Y has a beta of 1.4 and an expected return of 15.1 percent. Stock Z has a beta of .7 and an expected return of 8.6 percent. If the risk-free rate is 5 percent and the market risk premium is 6.5 percent, the reward-to-risk ratios for stocks Y an..

  What is the confident of variation of an investment

Microsoft has a Beta of .32 and you are needing the required return. You know the risk free rate is 1.02%, and the return on the market is 6.44%. What is your required return in order to invest in this company? What is the Confident of Variation of a..

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