Common stock is expected to pay a dividend

Assignment Help Financial Management

Reference no: EM131448504

1. Crisp Cookware's common stock is expected to pay a dividend of $2.25 a share at the end of this year (D1 = $2.25); its beta is 0.95; the risk-free rate is 3.4%; and the market risk premium is 4%. The dividend is expected to grow at some constant rate g, and the stock currently sells for $44 a share. Assuming the market is in equilibrium, what does the market believe will be the stock's price at the end of 3 years (i.e., what is )? Do not round intermediate steps. Round your answer to the nearest cent.

2. A stock is trading at $90 per share. The stock is expected to have a year-end dividend of $5 per share (D1 = $5), and it is expected to grow at some constant rate g throughout time. The stock's required rate of return is 14% (assume the market is in equilibrium with the required return equal to the expected return). What is your forecast of g? Round the answer to three decimal places.

Reference no: EM131448504

Questions Cloud

Relationship provides to upper-level executives : Some evidence suggests that there is a direct and positive relationship between a firm’s size and its top-level managers’ compensation. Explain what inducement you think that relationship provides to upper-level executives.

At what forward rate is this arbitrage eliminated : Assume that annual interest rates are 7 percent in the United States and 6 percent in Turkey. An FI can borrow (by issuing CDs) or lend (by purchasing CDs) at these rates. The spot rate is $0.6667/Turkish lira (TL). At what forward rate is this arbit..

Assume the current spot price for crude oil : Assume the current spot price for crude oil is $66.65 per barrel and the futures price for crude oil is $66.70 per barrel. A futures contract is for 1000 barrels. On Monday, Stacey buys one futures contract from Ben. How much does Stacey pay Ben for ..

What is the net interest income earned in dollars : Sun Bank USA has purchased a 8 million one-year Australian dollar loan that pays 15 percent interest annually The spot rate of U.S. dollars for Australian dollars is $0.6250/A$1. What is the net interest income earned in dollars on this one-year tran..

Common stock is expected to pay a dividend : risp Cookware's common stock is expected to pay a dividend of $2.25 a share at the end of this year (D1 = $2.25); its beta is 0.95; the risk-free rate is 3.4%; and the market risk premium is 4%. The dividend is expected to grow at some constant rate ..

What is chutes interest coverage ratio : Chutes & Co. has interest expense of $ 1.91 million and an operating margin of 11.4 % on total sales of $ 30.8 million. What is Chutes' interest coverage ratio?

Margin maintenance requirement : Assume the current spot price for crude oil is $66.65 per barrel and the futures price for crude oil is $66.70 per barrel. A futures contract is for 1000 barrels. On Monday, Stacey buys one futures contract from Ben. Both Stacey and Ben are speculato..

Describe key risk that could impact project : Describe a key risk (either one that is technical, external, or organizational) that could impact a project you are working on. Then, discuss if it has a High, Medium or Low probability of occurring and why. Next, determine if that risk happens what ..

Compute proceeds of both strategies : You want to invest $1,000,000,000 for one year. Assume the interest rate in the Australia is 6% and the interest rate in the United States is 1%. The current spot rate is AUD/$ 1.32 and the one-year forward rate is AUD/$ 1.3307. Would you prefer inve..

User Account

All Pages