High-paying job as security analyst for hedge fund

Assignment Help Financial Management

Reference no: EM131078065

You got a high-paying job as a security analyst for a hedge fund. Your employer wants your opinion about XWZ common stock which currently sells for $92.50 per share and which recently paid a dividend of $3.95 per share. In ten years dividends per share have grown steadily from $2.4 to $3.95. You believe that dividends will continue to grow at the same rate for the indefinite future. He only tells you that he requires a rate of return of 12.5%. You opine that,

the stock is overpriced, and that he should not pay more than $69.76

the stock is overpriced, and that he should not pay more than $89.76

the stock is underpriced, and that it should be selling for $99.76

the stock is underpriced, and that it should be selling for $95.76

the stock is overpriced, and that he should not pay more than $56.18.

Reference no: EM131078065

Questions Cloud

What is the value of the stock : A firm just paid a dividend of $3.00 and the dividend will grow at a constant rate of 10% forever and the required rate of return is 16%. What is the value of the stock?

Project under consideration has the cash flows : A firm evaluates all of its projects by applying the NPV decision rule. A project under consideration has the following cash flows: Year Cash Flow 0 –$ 27,000 1 11,000 2 14,000 3 10,000 What is the NPV for the project if the required return is 10 per..

Cash flow by hedging sales with the futures contracts : A farmer sells futures contracts at a price of $2.75 per bushel. The spot price of corn is $2.55 at contract expiration. The farmer harvested 12,500 bushels of corn and sold futures contracts on 10,000 bushels of corn. Ignoring the transaction costs,..

The liquidity premium theory holds : The current rate on a five-year Treasury is 6.44%. The current rate on a six-year Treasury is 7.01%. The liquidity premium in year 5 (L5) is 0.15% and the liquidity premium in year 6 (L6) is 0.25%. If the liquidity premium theory holds, what does the..

High-paying job as security analyst for hedge fund : You got a high-paying job as a security analyst for a hedge fund. Your employer wants your opinion about XWZ common stock which currently sells for $92.50 per share and which recently paid a dividend of $3.95 per share. In ten years dividends per sha..

Salvage value and maintenance cost : Your firm's discount rate is 8%. Your are considering the purchase of truck A or truck B. Truck A cost $120, has a usefullife of three years, no salvage value and maintenance cost of $10.00 per year. Truck B cost $80.00 has a useful life of 2 years n..

Two firms have the same asset beta and tax rate : Two firms have the same asset beta (Ba) and a tax rate but different equity Betas. The firm with the higher equity beta must employ more financial leverage.

What percentage of company capital structure consist of debt : Miller Von Enterprises' capital structure consists solely of debt and common equity. It can issue debt at rd = 10.6%, and its common stock currently pays a $1.91 dividend (D0= $1.91). What percentage of the company's capital structure consists of deb..

Uses the information to adjust their bank product-pricing : As presented in class, write the formula for a bank’s net liquidity position ( + sources for liquidity) (- demands for liquidity). Explain what each category means and how bank management uses the information to adjust their bank’s product/pricing st..

User Account

All Pages