Estimate of the stocks required rate of return

Assignment Help Finance Basics

Reference no: EM13262477

Suppose that the consensus forecast of security analysts of your favorite company is that earnings next year will be E1 = $5:00 per share. Suppose that the company tends to plow back 50% of its earnings and pay the rest as dividends. If the Chief Financial Officer (CFO) estimates that the company's growth rate will be 8% from now onwards, answer the following questions.

Suppose you observe that the stock is selling for $50.00 per share, and that this is the best estimate of its equilibrium price. What would you conclude about either (i) your estimate of the stock's required rate of return; or (ii) the CFO's estimate of the company's future growth rate?

Reference no: EM13262477

Questions Cloud

At what distance from the job he must hold the lens : A person with normal eyesight uses a converging lens of focal length 10 cm. At what distance from the job he must hold the lens

Ind the angular displacement of the tub : During the spin cycle of your clothes washer, Find the angular displacement of the tub during a spin of 82.9 s

Find a minimal sum-of-products expression for each function : Given a sum-of-products expression, it is possible to write the 1s corresponding to each product term directly on the map without developing an explicit truth table of minterm list, and then proceed with map minimization procedure.

Define adiabatic expansion against a constant pressure : A sample of 2.50 mole N2 is originally confined to 20 L at 270 K and then undergoes adiabatic expansion against a constant pressure of 600 Torr until the volume has tripled. Calculate q, w, ?T, ?U, and ?H.

Estimate of the stocks required rate of return : Suppose you observe that the stock is selling for $50.00 per share, and that this is the best estimate of its equilibrium price. What would you conclude about either (i) your estimate of the stock's required rate of return; or (ii) the CFO's estim..

Find the peak value of the potential difference across coil : A 2.90 H coil with a resistance of 6.41×101 ? is in series with a 1.14×103 ? resistor. What is the peak value of the potential difference across the coil

Figure out how to plot the response of system given an input : figure out how to plot the response of a system given an input. transfer function for the system is: H(s) = 1000/(s^2 + 110s + 1000) input is periodic, and represented by: u(t) - u(t-pi/2)

Explain what is the final temperature of an ideal gas : What is the final temperature of 0.222 mole of an ideal gas that performs 125 kJ of work adiabatically if the initial temperature is 235°C

What is the equilibrium price of the stock : If your estimate of the company's required rate of return on its stock is 10%, what is the equilibrium price of the stock?

User Account

All Pages