What is price that prudent investor would be willing to pay

Assignment Help Finance Basics
Reference no: EM13280625

Valorous Corporation will pay a dividend of $1.80 per share at this year's end and a divdend of $2.40 per share at the end of next year. It is expected that the price of Valorous' stock will be $44 per share after two years. If valorous has an equity cost of capital of 8%, what is the maximum price that a prudent investor would be willing to pay for a share of Valorous stock today?

a) 41.45
b) 42.40
c) 39.27
d) 40.22

 

Reference no: EM13280625

Questions Cloud

What is the power delivered by a motor for this ascend : An elevator with a mass of 1000 kg, including passengers, is ascending at constant speed. What is the power delivered by a motor for this ascend
Probability that their first child will have a tail : What is the probability that their first child will have a tail and what proportion of their offspring is expected have achondroplasia?
What is the expected capital gain from the sale : Credenza Industries is expected to pay a dividend of $1.20 at the end of the coming year. It is expected to sell for $62.00 at the end of the year. If its equity cost of capital is 8%, what is the expected capital gain from the sale of this stock ..
Find the weight of the automobile : The four tires of an automobile are inflated to a gauge pressure of 1.9 multiply.gif 105 Pa. Determine the weight of the automobile
What is price that prudent investor would be willing to pay : If valorous has an equity cost of capital of 8%, what is the maximum price that a prudent investor would be willing to pay for a share of Valorous stock today?
Calculate the shear modulus of the wood : A plank 2.00 cm thick and 12.4 cm wide is firmly attached to the railing of a ship by clamps so that the rest of the board extends 2.00 m, find the shear modulus of the wood
What is the project net investment outlay in year 0 : The firm's tax rate is 40 percent and its approriate cost of capital is 10%. What is the project's net investment outlay in year 0?
Find the elongation of the cable : A high-speed lifting mechanism supports a 875-kg object with a steel cable that is 33.0 m long and 4.00 cm2 in cross-sectional area. Determine the elongation of the cable
How much profit is available for common stockholders : Suppose that it is financed by a combination of common stock and $1 million of debt. The interest rate on the debt is 10%, and the corporate tax rate is 35%. How much profit is available for common stockholders after payment of interest and corpor..

Reviews

Write a Review

Finance Basics Questions & Answers

  What is the current value of the swap

The 6-month LIBOR rate at the last payment date was 10.2% (with semiannual compounding). What is the current value of the swap?

  What is the forward price

An investor has just taken a long position in a 5-month forward contract on the stock. What is the forward price?

  Sensitivity analysis-contingency planning

How does sensitivity analysis relate to contingency planning? What are a couple risk mitigation strategies which you could execute to de-sensitize these variables?

  Calculate the expected rate of return for exxon

If the beta of Exxon Mobil is 0.65, risk-free rate is 4% and the market rate of return is 14%, calculate the expected rate of return for Exxon.

  Calculating present values of cash flows

You can purchase property today for $3.3 million and sell it in 5 years for $4.3 million. (You earn no rental income on the property.)

  Financial management theory

More of financial management theory is based on assumption that individuals act rationally in their decision making. text has noted several areas where conclusion is that individuals do not act rationally.

  Bonds nominal yield to maturity

What is the current yield on these bonds and  What is the bond's nominal yield to maturity.

  Computation of approximate cost of the cash float per day

Computation of approximate cost of the cash float per day and the interest rate that could be earned is .02% .0002 per day

  Better long term financial situation

After reviewing all cost cutting measures I anticipate I could cut back and save approximately $15000 a year if I put those measures into practice.

  Computation stock price and return by gordon growth model

Computation stock price and return by Gordon growth model and The dividend is expected to grow at a constant rate of 6 percent a year

  What is the required return on the companys stock

Keenan Co. is expected to maintain a constant 6.0 percent growth rate in its dividends indefinitely. If the company has a dividend yield of 7.8 percent, what is the required return on the company's stock?

  Use the npv technique and irr method to evaluate project

Net working capital will increase at a rate of $3,000,000 per year over the life of the project. Ridgewood has a 35 percent tax rate and a required rate of return of 9 percent. Use the NPV technique and IRR method to evaluate this project.

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