Determine whether it is undervalued or overvalued

Assignment Help Financial Management
Reference no: EM13932634

A manager believes his firm will earn an 18% return next year. His firm has a beta of 1.75, the expected return on the market is 13% and the risk free rate is 5%. Compute the return the firm should earn and determine whether it is undervalued or overvalued.

Reference no: EM13932634

Previous Q& A

  Dedicated to circuit board design and fabrication

Nordique Fab is an Arizona company dedicated to circuit board design and fabrication. It has acquired new stations and software for its three facilities at a cost of $450,000 per site. The estimated MV for each system the fourth year is expected to b..

  Discussions of genetics and human behavior

Until recently, the "nature vs. nurture" argument has dominated social work discussions of genetics, human behavior, and development. For this week's discussion: Discuss why this argument is too simplistic and reductionistic to reflect current knowl..

  Firm been decreased by the expected bankruptcy costs

Custer's has bonds outstanding with a face value of $162,000 that are selling at par. It also has 10,000 shares of stock outstanding that are selling for $32.30 a share. The all-equity value of the firm is $455,000. The tax rate is 35 percent. By wha..

  What is the market value of the firm

Bart's Mart will have a value of $41,000 if the economy does well this next year and a value of $32,000 if the economy does poorly. The probability of a good economy is 65 percent. The firm owes its bondholders $12,000. What is the market value of th..

  Presence of marketing synergies will produce

Nora Fashion Corp. is thinking to acquire Sally Shoes Corp. The presence of marketing synergies will produce an estimated additional value of $9,259,259. The gain from the synergies will be shared equally between the shareholders of two companies. Ho..

  What is media fragmentation

What is Media fragmentation? Describe a common theme of "Media Fragmentation." Media fragmentation describes a trend to increasing choice and consumption of a range of media for consumers

  What is the bond current yield and bonds total yield

Suppose that a bond pays an 11% annual coupon, has a par value of 1000, has a current market price of $978, and was originally bought for $989. What is the bond's current yield? What is the bond's total yield?

  Time value of money-correct calculation

Suppose you have a semi-annual coupon paying bond that has 10 years of maturity left, has a par value of $65,100, has a coupon rate of 7.23%, and has just paid its most recent coupon payment 10 days ago. What is this bond's annual yield based on a Ti..

  What is the effective yield of a T-Bill selling

What is the effective (annual) yield of a T-Bill selling at $97,645 with par value $100,000 and time to maturity of

  Analyze the responses to the questionnaire

Analyze the responses to the questionnaire. For each question that you asked, you should compile the answers that were provided and evaluate the answers for that question. Report the results for each question


Write a Review


Similar Q& A

  Complete vertical analysis on the balance sheet

Complete a vertical analysis on the balance sheet for Mullen's Hardware for December 31 of last year. The company assets are cash $11,000, accounts receivable $40,000, and merchandise inventory $96,000. The liabilities are accounts payable $19,000 an..

  Quality of the work and pointed out numerous defects

Don Gray, who ran an aircraft paint shop, was hired to repaint an airplane owned by Bob Moreland. When Moreland left the plane for the paint job, a bailment was created. The price agreed on was $9,470.00. When Moreland picked up the airplane, he was ..

  Retained earnings using the percent of sales method

Ribbon Industries reported sales of $3 million and net income of $400,000 for 2010. The retained earnings balance at the end of 2012 is $7 million. Ribbon Industries has a dividend payout ratio of 30%. If sales are expected to increase by 25% next ye..

  Expected annual rate of dividend growth

REH Corporation's most recent dividend was $3 per share, its expected annual rate of dividend growth is 5%, and the required return is now 15%. A variety of proposals are being considered by management to redirect the firm's activities. Determine the..

  Determine the effective rate of interest

Suppose that John Doe wants to borrow $250,000 to buy a home but has a poor credit history. A bank seeking to earn a risk-free return on its loan requires the return equal to 3%. How would you structure the loan for John? Suppose that the loan is und..

  Preferred stocks if comparable securities yield

What should be the prices of the following preferred stocks if comparable securities yield 6.5%?

  Loan amortization-how big will the annual payments

(loan amortization) On December 31 Beth bought a yacht for $50,000. She paid $14,000 down and agreed to pay the balance in 13 equal annual installments that include both the principal and 15 percent interest on the declining balance. How big will the..

  Compute the percentage total return

Suppose a stock had an initial price of $60 per share, paid a dividend of $0.60 per share during the year, and had an ending share price of $72. Compute the percentage total return.

  What is the present value of a five period annuity

What is the present value of a five period annuity of $1,000 if the interest rate is 10% and the first payment is made today?

  Balance sheet equity-what is target stock price in one year

Plush Pilots, Inc. has balance sheet equity of $5.2 million. At the same time, the income statement shows net income of $743,600. The company paid dividends of $423,852 and has 130,000 shares of stock outstanding. If the benchmark PE ratio is 21, wha..

  What is the irr of the better project?

What is the IRR of the better project?

  Assume we make a valuation of the same bond

Assume we make a valuation of the same bond 5 years from now. Required rate of return did not change. Find the present value of all future payments, including par value, that will be paid to the investor 15 years from now. How the value of the bond w..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd