Higher stock expected return to compare with required return

Assignment Help Financial Management

Reference no: EM131450419

Suppose you are collecting information about these two firms: Marrymons and Bathon Industries, and would like to know which firm has higher stock’s expected return to compare with it's required return. Each of them is expected to pay the same $1.5 million dollar dividend every year in perpetuity. Marrymons is riskier and has an equity cost of capital of 15%. Bathon Industries is not as shaky as Marrymons, so Bathon has an equity cost of capital of only 10%. Assume that the market portfolio is not efficient. Both stocks have the same beta and an expected return of 12%.

Reference no: EM131450419

Questions Cloud

Customer integration and satisfaction : When it comes to Business Logistics why is it important to take into consideration customer integration and satisfaction?

Create a decision-tree : Events Plus Inc. is a company that organizes seminars. Each year, it holds some 120 seminars dealing with business management and public sector management theme

Uses straight-line depreciation to a zero book value : he company requires a rate of return of 14 percent and uses straight-line depreciation to a zero book value.

Select a global brand that has localized country websites : Observe and compare-What are the similarities & differences in products, visuals, appeals, target consumers, and what elements (logo, packaging, slogan, etc)

Higher stock expected return to compare with required return : Marrymons and Bathon Industries, and would like to know which firm has higher stock’s expected return to compare with it's required return.

Prepare a research paper on culture : Choose a culture to research. State the country or countries of origin of your chosen culture and your reason for selecting it. Include sociocultural influences on learning

What is the point estimate of the population mean : The 2014 Public Health Survey sampled 2,035 people and found an average systolic blood pressure reading of 134.65,What is the point estimate of the mean

Results of financial capital budgeting analysis : Is there ever a valid reason for ignoring the results of financial capital budgeting analysis?

What are the terminal cash flows from the sale of the asset : The Cosmo K Manufacturing Group currently has sales of $1,400,000 per year. What are the terminal cash flows from the sale of the asset at the end of 5 years?

User Account

All Pages