### Current market price of stock reflects its intrinsic value

Assignment Help Financial Management
##### Reference no: EM131524937

The stock of Nogro Corporation is currently selling for \$13 per share. Earnings per share in the coming year are expected to be \$2.30. The company has a policy of paying out 25% of its earnings each year in dividends. The rest is retained and invested in projects that earn a 17% rate of return per year. This situation is expected to continue indefinitely.

a. Assuming the current market price of the stock reflects its intrinsic value as computed using the constant-growth DDM, what rate of return do Nogro’s investors require? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "%" sign in your response.)

Rate of return %

b. By how much does its value exceed what it would be if all earnings were paid as dividends and nothing were reinvested? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places. Omit the "\$" sign in your response.)

PVGO \$

#### Questions Cloud

 Calculate the exact payback period : A company's 'bottom line' or net income increases. A project will cost \$15,000 in total investment. Calculate the exact payback period. What is the history of government involvement : In recent years, a number of coal-miners have suffered severe accidents at the hands of their employers. What is the history of government involvement What is the intrinsic value of a share of xyrong stock : What is the intrinsic value of a share of Xyrong stock? what is your expected 1-year holding-period return on Xyrong stock? What is the expected return on the portfolio : Your portfolio is diversified. It has an expected return of 10.0% and a beta of .95. You want to add 500 shares of Company D's at \$40 a share to your portfolio. Current market price of stock reflects its intrinsic value : Assuming the current market price of the stock reflects its intrinsic value as computed using the constant-growth DDM, Implied value of the roe on future investment opportunities : If the expected earnings per share are \$8.00, what is the implied value of the ROE on future investment opportunities? What is your estimate of chiptech intrinsic value per share : What is the market price of Chiptech stock? What is your estimate of Chiptech’s intrinsic value per share. Analyze the major professional roles that physicians play : Analyze the major professional roles that physicians and nurses play, as they apply to following the requirement for obtaining patient consent Develop working or friendly relationships with members : Is there a possibility of corruption when officers develop working or friendly relationships with members of the public as part of a community policing strategy

### Write a Review

#### How do they work in the international business environment

What is an NGO, how do they work in the International business environment.

#### Which of the statements below is

1 which of the statements below is false?a the purpose of studying financial statements is to understand those portions

#### What is expected year-end dividend

A stock with a required rate of return of 10 percent sells for \$30 per share. The stocks dividend is expected to grow at a constant rate of 7 percent per year. What is the expected year-end dividend , D1 on the stock?

#### Considering two new investments-earthmoving equipment

Keller Construction is considering two new investments. Project E calls for the purchase of earthmoving equipment.

#### What is the savings percentage from the original price

What is the markdown percentage and what is the savings percentage from the original price?

#### Considering leasing arrangement to finance

NetFive Inc. is considering a leasing arrangement to finance some manufacturing equipment’s that is need for the next 3 years. The equipment’s will be obsolete and worthless after3 years. The firm will depreciate the cost of the equipment’s on the st..

#### Assuming the dividends and capital gains

Find your holding period return, assuming the dividends and capital gains are paid to you rather than reinvested.

#### Cash budget-target cash balance

Cash budget; target cash balance. Transactions balances; compensating balances; precautionary balances. Trade discounts

#### What is present value of the savings

If the appropiate interest rate is 7.8 percent, what is the present value of the savings?

#### Regress the stocks past returns against the risk-free rate

One way to calculate a stock's beta is to- calculate the stock's coefficient of variation. calculate both the stock's mean return and the std.dev. of the returns. regress the stock's past returns against the risk-free rate.

#### What are the balances in the three stockholders equity

On October 1st Martin Corp have the following balance in stockholders’ equity. What are the balances in the three stockholders equity accounts after the new shares have been distributed? What, if any, is the new par value?

#### Return on investment and weighted average cost of capital

Discussion of capital structure of Ford Motor Company, Inc. as well as the calculation of the debt/equity ratio, earnings per share, return on investment and the weighted average cost of capital.