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1-) You expect the IBM to hit $120 per share with expected dividends of $2.50 in one year.Its current price is $105 and your research estimates the beta at 1.15 . Market risk premium is .07 and the U.S T-bill is expected to yield .05 .Is the IBM a good investment? Conduct security analysis using the CAPM. Explain your answer.
2-) What would be the intrinsic value of X stock if :
The stock just paid a dividend of $3 and it will grow 5% annually for the next 2 years and will grow 3% thereafter. Assume 8% required rate of return for the stock.
3-)An investor can choose to invest in T-bills paying 5% or a risky portfolio with end-of-year cash flow of$132,000 . If the investor requires a risk premium of 5%, what would she be willing to pay for the risky portfolio?
4-) Discuss concepts covariance and correlation. How do these concepts differ in terms of calculation and interpretation?
5-) Discuss the differences between investors who are risk averse,risk neutral and risk loving.
Describe why financial decisions are based on incremental benefits and explain why the notes to a firm's financial statements are an integral part of the financial statements.
Estimate that you can save $3,800 by selling your own home rather than using a real estate agent. What would be the future value of that amount if invested for five years at 7 percent?
Given below determine production and sales data for Herrestad corporation and use same company for all the SLPs in this course. Make a contribution margin income statement for Herrestad corporation.
The standard deviation of the market index portfolio is 20 percent. Stock A has a beta 1.5 and residual standard deviation of 30 percent.
Assume that Shepard uses a 10% discount rate and is in the 34% tax bracket for all years. What type of reorganization is this contemplated transaction?
Analysis on whether to go for investment in Fixed Assets or borrow funds - what conclusion can you draw from it
Write a short paper advising Bill and Darlene what business form you would recommend for them as they start up their business. State any assumptions you make.
Evaluate how much will the father have to save each year before the time his daughter starts college in order to put her through school?
Rising jet fuel rates recently led most major United State airlines to raise fares by approximately fifteen percent.
Determine the earnings after taxed and compute the percentage increase in these earnings from the answers you derived in part b.
Calculate the firms expected rate of return using the capital asset pricing model. You will first need to calculate your company's beta and then use that in the CAPM formula to get the expected rate of return.
How large of a sales increase can the company achieve without having to raise funds externally? Write out your answer completely.
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