Find the intrinsic value of the stock of company abc using

Assignment Help Finance Basics
Reference no: EM13567819

Find the intrinsic value of the stock of company ABC using the following data:

risk free rate = 5%

market risk premium = 8%

Expected market return = risk free rate + market risk premium

beta = 0.9

ROE = 12.5%

dividend payout ratio = 0.22

Dividends for the next 4 years are expected to be .59, .67, .76, .85. Subsequent growth will be at the computed growth rate, g.

Suggestion:

1. Find g from ROE and payout ratio

2. Find k from CAPM

3. Find price of ABC 4 years out using the constant growth DDM

4. Find intrinsic value by discounting each annual dividend by (1+k)^n where n=number of years, summing them and adding the price in step 3 discounted by (1+k)^4

Reference no: EM13567819

Questions Cloud

Suppose a stock had an initial price of 56 per share paid : suppose a stock had an initial price of 56 per share paid a dividend of 1.60 per share during the year and had an
Suppose that jb cos has a capital structure of 66 equity 34 : suppose that jb cos. has a capital structure of 66 equity 34 debt and that its before-tax cost of debt is 13 while its
Tidewater fishing has a current beta of 121 the market risk : tidewater fishing has a current beta of 1.21. the market risk premium is 8.9 percent and the risk-free rate of return
Which of the following statements is true the fair value : which of the following statements is true? the fair value option allows but does not require that some types of
Find the intrinsic value of the stock of company abc using : find the intrinsic value of the stock of company abc using the following datarisk free rate 5market risk premium
Exercise 11-9 dividends on common and cumulative preferred : exercise 11-9 dividends on common and cumulative preferred stock l.o. c2 wades outstanding stock consists of 46000
Find the intrinsic value of the stock of company abc using : find the intrinsic value of the stock of company abc using the following datarisk free rate 5market risk premium
The law of demand states that there is a negative : the law of demand states that there is a negative relationship between price and quantity demanded as price rises
The jackson-timberlake wardrobe co just paid a dividend of : the jackson-timberlake wardrobe co. just paid a dividend of 1.34 per share on its stock. the dividends are expected to

Reviews

Write a Review

Finance Basics Questions & Answers

  Why did the company pick that initial target market

Identify the total addressable market and the initial target market of the Raspberrry Pi Foundation. Why did the company pick that initial target market?

  Compute dirty price of this transaction

Compute accumulated interest due to seller from buyer at settlement. Compute dirty price of this transaction.

  Which is the most recent example of legislation passed

Of the following, which is the most recent example of legislation passed by the federal government to deal with a major economic or highly visible corporate event?

  Using the internet and strayer university databases

using the internet and strayer university databases research starbucksrsquo organizational culture and the key

  Which court has jurisdiction

Therefore, the company attempted to move the suit from the federal court to a state court, arguing that the federal court had absolutely no jurisdiction over the case.

  What is intc''s cost of equity

If the beta of INTC stock equals 1.6, the risk-free rate equals 6 percent, and the expected return on the market portfolio equals 11 percent, what is INTC's cost of equity?

  What are annual credit sales

Vang, Inc., has an average collection period of 27 days. It's average daily investment in receivables is $86,000. What is the receivables turnover? What are annual credit sales?

  What is the bonds yield to maturity

You just purchased a bond that matures in 4 years. The bond has a face value of $1,000 and has an 9% annual coupon. The bond has a current yield of 7.63%. What is the bond's yield to maturity? Round your answer to two decimal places.

  Local and capital structure

Why might a firm use a "local" capital structure at the particular subsidiary which differs substantially from its "global" capital structure?

  Determine the price of stock

A common stock is held for two years, during which time it receives an annual dividend of $10. The stock was trade for $100 and generated an average annual return of 16 percent.

  Which of the following presents a summary of the changes in

1.which of the following is considered a hybrid organizational form?2.which of the following is a principal within the

  Determine annual payments of the loan

You have been approved for a $70,000 loan toward the buy of a new home at 10 percent interest. The mortgage is for thirty years.

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