Stock''s expected constant growth rate, Financial Accounting

The beta coefficient for Stock C is bC = 0.2, and that for Stock D is bD = - 0.8. (Stock D's beta is negative, showing that its rate of return rises whenever returns on most other stocks fall. There are very few negative-beta stocks, though collection agency and gold mining stocks are sometimes cited as examples.)

a. If the risk-free rate is 9%and the expected rate of return on an average stock is 10%, what are the required rates of return on Stocks C and D?

b. For Stock C, assume the present price, P0, is $25; the next expected dividend, D1, is $1.50; and the stock's expected constant growth rate is 4%. Is the stock in equilibrium? Describe, and explain what would happen if the stock is not in equilibrium.

Posted Date: 3/30/2013 1:38:12 AM | Location : United States







Related Discussions:- Stock''s expected constant growth rate, Assignment Help, Ask Question on Stock''s expected constant growth rate, Get Answer, Expert's Help, Stock''s expected constant growth rate Discussions

Write discussion on Stock''s expected constant growth rate
Your posts are moderated
Related Questions
How do you show bond amortization on a spreadsheet and then in journal entries and compute interest payments?

An investment project requires a net investment of $100,000. The project is expected to generate annual net cash inflows of $28,000 for the next 5 years. The firm's cost of capital

Assume Mr. Ram deposits Rs. 10,000 annually in a bank for 5 years, at 10 percent compound interest rate. Compute the value of this series of deposits on the end of five years by as

Joe has two children, Sydney age 5 and William age 2, that he wants to provide for their education funding.  Currently, tuition is $10,000 per year and tuition inflation is 6%.  Jo

Closing Entries: Expenses Below is a list of accounts with corresponding ending balances. Account: Account Balance a.Insurance Expense: $1,300 b.Cash: 750 c.Accounts Receivable: 4,


Interstate Manufacturing produces brass fasteners and incurred the following costs for the year just ended: Materials and supplies used Brass

Tim purchased a used office building on May 15, 2001, for $2,000,000. $500,000 of the purchase price was allocated to the land. On November 1, 2010 the building was sold. What is t

You were recently hired by E&T Boats, Inc. to assist the company with its financial planning and to evaluate the company's performance.  E&T Boats, Inc. builds and sells boats to o

According to the Solow model, how would each of the following affect consumption per worker in the long run (i.e. in the steady state)? Draw a figure and explain. a. The destruc