How can such a large discrepancy in the two dollar values

Assignment Help Finance Basics
Reference no: EM13297369

Using the constant growth rate model (and data from Bloomberg) shows that the present value of expected dividends for the next five years for McDonald's is only about $1.98. Thus, over a forward-looking five-year horizon the value of the stock is $1.98. Yet on this same date McDonald's stock is selling among investors in the secondary market for $24.83 per share. How can such a large discrepancy in the two dollar values on the same date be explained?

Reference no: EM13297369

Questions Cloud

The structure resulting from a reaction of osmium tetroxide : Draw the structure resulting from a reaction of osmium tetroxide (OsO4) and hydrogen peroxide (H2O2) with the following alkene. If one stereogenic center is formed, draw a single specific enantiomer. If more than one stereogenic center is formed, ..
Explain two reasons why the free cash flow model : List and briefly explain two reasons why the free cash flow model of stock price determination is superior to conventional dividend discount models of stock price determination.
What will be the magnitude of the induced emf in the coil : A circular loop of wire has radius R = 5 cm and sits in a uniform magnetic field B = 0.2 Tesla pointing along the axis of the loop. what will be the magnitude of the induced emf in the coil
What is the ultimate bod of the completely mixed wastewater : You add 100 mg/L of glucose to pure water, then decide that this was a mistake and decide to remove it biochemically before you serve the water to your friends at a cocktail party. To remove the glucose, you seed the water with a harmless bacteria..
How can such a large discrepancy in the two dollar values : How can such a large discrepancy in the two dollar values on the same date be explained?
Find the latent heat of fusion of the unknown material : An unknown material has a normal melting/freezing point of -20.6 °C, and the liquid phase has a specific heat capacity of 143 J/(kg C°). What is the latent heat of fusion of the unknown material
Determine the peak voltage across the capacitor : An AC generator supplies an rms voltage of 230 V at 50.0 Hz. It is connected in series with a 0.650 H inductor, a 6.00 ?F capacitor, What is the peak voltage across the capacitor
How to calculate the lattice energy of potassium chloride : Given that the ionization energy of gaseous potassium is 419 kJ mol -1, calculate the lattice energy of potassium chloride.
Determine economical number of trucks and direct cost : A project involves transporting iron pipe to a jobsite that is 43 miles from the supplier. The pipe will be hauled in trucks that can carry 16 pipes per load. Each pipe is 20 ft in length. The average haul speed of a truck will be 50 mi./hr and re..

Reviews

Write a Review

Finance Basics Questions & Answers

  What is the bonds current value

Power of Tower Inc. has bonds that mature in 6½ years with a par value of $1,000. They pay a coupon rate of 9% with semiannual payments. If the required rate of return on these bonds is 11% what is the bond's current value?

  What will the stock price be in three years

The Jackson-Timberlake Wardrobe Co. just paid a dividend of $1.55 per share on its stock. The dividends are expected to grow at a constant rate of 6 percent per year indefinitely. Investors require a return of 14 percent on the company's stock.

  What is the maximum exchange ratio

What is the maximum exchange ratio would the A Corporation shareholder accept in taking over X Corporation and remain whole in terms of earnings per share? (note you will need to use the formulas in the book to solve this)

  Compute break-even volumes for 6-day and 7-day operation

Total fixed costs per week would increase by $420 (or $29,820) if the mill were to operate on Sunday. a) Using the information provided above, compute the break-even volumes for 6-day and 7-day operation.

  What is the correlation coefficient between the returns

The covariance of the returns between Willow Stock and Sky Diamond Stock is 0.0840. The variance of Willow is 0.1300, and the variance of Sky Diamond is 0.1190. What is the correlation coefficient between the returns of the two stocks?

  Present and defend the budget

Given a description of a new business, new product, service or project develop, present and defend the budget.

  What is the expected rate of return for stock c

The expected return for stock A is 18.7 percent, and for stock B it is 11.2 percent. What is the expected rate of return for stock C?

  Compute the current value of the stock

Sam's Corporation expects to pay a dividend of $6 per share at the end of year one, $9 per share at the end of year two, and then be sold for $136 per share at the end of year two.

  Annuity payments and pension plans

Hunter retired last year and will receive annuity payments for life from his employer's qualified pension plan of $30,000 per year starting this year.

  Components of capital structure

Critically discuss and describe the three major components of the capital structure of enterprise.

  Compute the net present value and profitability index

Compute the net present value and profitability index of a project and with a net investment of $20,000 and expected net cash flows of $3,000

  What is the return variance

The alternative expectation is that there is a 70% chance that the stock will sell for $10.00 at the end of one year. What is the expected percentage return on this stock, and what is the return variance?

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