What would capital gains and dividend yield be for year

Assignment Help Financial Management

Reference no: EM131022529

You have been asked to value a stock that will not pay a dividend until three years from now. At that time you estimate the dividend will be $1.40. You estimate that it will grow by 10% for the two following years and at 5% thereafter. What is the value of the stock if its beta is 1.2, the risk-free rate is 2% and the risk premium on the market is 5%? What would the value of the stock be at the end of the first year if rates had not changed? What would the capital gains and the dividend yield be for the year?

Reference no: EM131022529

Questions Cloud

What is the current yield on bond-value or cost of the bond : A bond has a coupon rate of 5.375%, pays coupons semiannually, and has a maturity of 5 years. If the yield to maturity is 5.80%, calculate the current cost of a bond with a par value of $1000. What is the current yield on the bond? Assume that one ye..

What is the beta of your portfolio : You own 500 shares of Stock A at a price of $70 per share, 485 shares of Stock B at $90 per share, and 850 shares of Stock C at $43 per share. The betas for the stocks are .6, 1.4, and .8, respectively. What is the beta of your portfolio?

Characteristics of both assets and risk-aversion of investor : Suppose there are two assets available to an investor. One is risk-free and has a return of 3 percent. The other is risky and has an expected return of 8 percent and a variance of 0.05. The investor’s utility is given by U(r) = (2/3) E(r) − (1/2) AV ..

Explain the evolution of corporate governance : Explain the evolution of corporate governance. What problems developed? What are the current trends? What are the major criticisms of boards of directors? Which single criticism do you find to be the most important? Why?

What would capital gains and dividend yield be for year : You have been asked to value a stock that will not pay a dividend until three years from now. At that time you estimate the dividend will be $1.40. You estimate that it will grow by 10% for the two following years and at 5% thereafter. What would the..

How much implicit interest would be earned on this bond : Assume a 20-year $1,000 par value zero-coupon bond with an annual YTM of 4% and semiannual compounding. How much implicit interest would be earned on this bond in year 1? How much in year 12?

Calculate the price of firm using free cash flow evaluation : You have been asked to calculate the price of a firm using free cash flow evaluation. Last year XYX Company has Free Cash Flow of $12 million. You expect the cash flows to grow at 10% for the next two years, then at 9% for the following two years and..

Yield to maturity and call with semiannual payments : Thatcher Corporation's bonds will mature in 12 years. The bonds have a face value of $1,000 and an 11.5% coupon rate, paid semiannually. The price of the bonds is $1,050. The bonds are callable in 5 years at a call price of $1,050. What is their yiel..

Yield to call-yield to maturity and market rates : Absalom Motors's 9% coupon rate, semiannual payment, $1,000 par value bonds that mature in 15 years are callable 9 years from now at a price of $1,100. The bonds sell at a price of $1,520, and the yield curve is flat.

User Account

All Pages