What is your estimate of the stock current price

Assignment Help Financial Management
Reference no: EM131063249

A company currently pays a dividend of $1.5 per share (D0 = $1.5). It is estimated that the company's dividend will grow at a rate of 22% per year for the next 2 years, then at a constant rate of 7% thereafter. The company's stock has a beta of 1.3, the risk-free rate is 3.5%, and the market risk premium is 4%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer to the nearest cent.

Reference no: EM131063249

Questions Cloud

Estimated value of operations : EMC Corporation has never paid a dividend. Its current free cash flow of $510,000 is expected to grow at a constant rate of 4%. The weighted average cost of capital is WACC = 10%. Calculate EMC's estimated value of operations.
Before-tax component cost of debt : Oberon, Inc., has a $15 million (face value) 8-year bond issue selling for 95 percent of par that pays an annual coupon of 7.95 percent. What would be Oberon’s before-tax component cost of debt?
Show that there is an arbitrage opportunity : Suppose BJ's stock price is currently $50 and a dividend of $2 is expected in two months. A six-month European call option on the stock with exercise price of $48 is selling for $5. A six-month European put option on the stock with exercise price of ..
Competitive strategies organizations : Describe competitive advantage and the competitive strategies organizations use to get it. Please reference
What is your estimate of the stock current price : A company currently pays a dividend of $1.5 per share (D0 = $1.5). It is estimated that the company's dividend will grow at a rate of 22% per year for the next 2 years, then at a constant rate of 7% thereafter. What is your estimate of the stock's cu..
Problem regarding the social network analysis : Do you think the direct or indirect approach to doing a social network analysis is the most accurate?
Discuss the nature of active galaxies : Using information from the textbook and the internet, research the two theories about quasar redshift. Explain why, "Almost all astronomers now agree that quasar redshifts do indeed fit the Hubble law."
Risky on a stand-alone basis : A stock that is risky on a stand-alone basis: a. is just as risky in a portfolio. b. is one that just about never produces a return that's higher than expected. c.
Creates protective put position by buying one share of stock : An investor creates a protective put position by buying one share of a stock at $50 and buying a European put option on the stock with strike price $45 at $1.25. What is his profit if he holds his position until maturity of the option and the stock p..

Reviews

Write a Review

 

Financial Management Questions & Answers

  Coupon rate-what is the current bond price

Ninja Co. issued 12-year bonds a year ago at a coupon rate of 8.4 percent. The bonds make semi-annual payments. If the YTM on these bonds is 6.7 percent, what is the current bond price?

  Impression on investors and creditors

Prepare an income statement, balance sheet, and statement of cash flows under each of the two options and identify the option that results in financial statements that are more likely to leave a favorable impression on investors and creditors.

  What is its weighted average cost of capital

A company has 100 million shares outstanding trading for $8 per share. It also has $900 million in outstanding debt. If its equity cost of capital is 15%, and its debt cost of capital is 12%, and its effective corporate tax rate is 40%, what is its w..

  Net present value-internal rate of return-payback

Healthcare Administrator makes $100,000 per year, borrowed $25000 from lenders to pay for Master's Program at 5.84%. the payback time that the school is giving is 20years but I plan on pay the $25000 back within 6years. Determine how much compensatio..

  A treasury bill has a bid yield

A Treasury bill has a bid yield of 2.79% and an ask yield of 2.77%. The bill matures in 175 days. Assume a face value of $1,000. What is the least you could pay to acquire a bill? (Do not round intermediate calculations. Round your answer to 3 decima..

  What rate should firm use to discount projects cash flows

Titan Mining Corporation has 8.9 million shares of common stock outstanding and 330,000 5 percent semiannual bonds outstanding, par value $1,000 each. What is the firm's market value capital structure? If Titan Mining is evaluating a new investment p..

  The initial cost of federal highway project

The initial cost of a federal highway project is $4 million. The road will require maintained at a cost of $50,000 a year during its 20 year life. If benefits of $300,000 a year have been identified, the B/C value at an interest rate of 6% a year is?

  Preferred stock outstanding

A corporation has $5,000,000 of 10 percent bonds and $3,000,000 of 12 percent preferred stock outstanding. The firm’s financial breakeven (assuming a 40 percent tax rate) is

  Explain what is the ret or the return from holding the bond

You purchased one bond for $80. One year later you sold the bond for $83.25, and the coupon payment was $12. What is the RET, or the return from holding the bond over the one-year period?

  Measure for an asset held in a diversified portfolio

Which is the best measure of risk for a single asset held in isolation, and which is the best measure for an asset held in a diversified portfolio?

  Dollar annual cost of financing its receivables balance

Ocala Clinic's services result in $5,000 in daily billings to third-party payers. On average, it takes the clinic 50 days to collect its receivables. If the interest rate on loans needed to finance receivables (cost of carrying receivables) is 10 per..

  Options are used to insure an existing portfolio

Options are used to insure an existing portfolio. For example, buying a put on an asset (or portfolio) reduces the risk of loss in case of a drop in value of the asset. In order to hedge the currency risk, an investor can take a position with a forei..

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