### Determine the maximum price of stock

Assignment Help Finance Basics
##### Reference no: EM1350041

As an investor you have a required rate of return of 14 percent for investments in risky stocks. You have analyzed three risky firms and must decide which (if any) to purchase. Your information is

Firm A B C
Current Dividends \$1.00 \$3.00 \$7.50
Expected Annual growth 7% 2% (-1%)
Current Market Price \$23 \$47 \$60

a) What is the maximum price? Which (if any) should you buy?
b) If you bought stock A, what is your implied rate of return?
c) If your required rate of return were 10 percent, what should be the price necessary to induce you to buy Stock A?

#### Questions Cloud

 Description of operating cycle : Determine the length of the inventory conversion period. Determine the length of the receivables conversion period. Determine the length of the operating cycle. Determine the length of the payables deferral period. Conflict a healthy and important part of organisational life : Organisational Behaviour-Conflict is a healthy and important part of organisational life Create logic for program to enter each household size : Create logic for a program that allows a user to enter each household size and find out the mean and median household size in Marengo. Heuristic and anchoring heuristic : Briefly explain the representativeness heuristic and anchoring heuristic. Then describe one example from work, home, or a social setting when the heuristic can be useful and helpful, and one example of when it is not helpful, and why. Determine the maximum price of stock : As an shareholder you have a required rate of return of 14% for investments in risky stocks. You have analyzed three risky firms and must decide which to purchase. Explain must the risk to others be considered : Explain must the risk to others be considered in the decision whether to inform them against their will How can conflict cost an organization : How can conflict cost an organization and Money is one arena, but what other things can it cost? Cost function linear relationship : Need a cost function for this problem while assuming the relationship is linear. Illustrate the relative desirability of perfect competition : Illustrate what do your results tell you about the relative desirability of perfect competition versus monopoly in the presence of externalities.

### Write a Review

#### Explain determination of real rate of return

Explain Determination of real rate of return

#### How would investors and management view eva and fcf?

How would investors and management view EVA and FCF? Try one that you are familiar with-you shop at their store, eat at their restaurants, or wear their clothes. On their Web site, try to find their annual financial report.

#### Shaw for breaking of contract

On April 14, 1994, Bill Shaw, retired policeman, offered to sell Thurgood his 1965 Mustang convertible for= \$1,000.

#### Describe pricing decisions

Describe Pricing Decisions where a little reflection shows that this statement is off-target and provide an argument demonstrating why it is incorrect

#### International finance-exchange rate in forward market

In the spot market, 1 U.S. dollar equals 1.68 Canadian dollars. Six month Canadian securities have an annual return of 12%. Six month U.S. securities have an annualized return of 7.5%.

#### Computation of profit margin

Computation of profit margin and total asset turnover and return on total assets for two consecutive years and Comment on such results

#### Mcq question discounted cash flows model

Fixed costs that change for activity outside relevant range would include-When gross margin pricing is employed, the markup percentage includes

#### Computation of current price of the bond

Computation of current price of the bond and what price would you be willing to pay for the bond

#### Cost of common equity-dcf

Summerdahl Resorts common stock is currently trading at \$36 a share. The stock is expected to pay a dividend of \$3.00 a share at the end of the year (D1=\$3.00, and the dividend is expected to grow at a constant rate of 5% a year. What is the cost ..

#### Computation of multiple cash flows for a year

Computation of multiple cash flows for a year and Future value of a \$1 annuity when R= 8% compounded annually and t=200

#### Computation of required return of a portfolio

Computation of required return of a portfolio and risk factor analysis and Calculate the required return of a portfolio that has \$7500 invested in Stock X and \$2500 invested in Stock Y

#### Determining the deductible interest

Ted incurs \$2,100 interest on his automobile loan, \$120 interest on the loan to purchase the computer for personal use, \$630 interest on credit cards, and \$1,100 investment interest expense.