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The risk-free rate of return is 7.0%, the expected rate of return on the market portfolio is 15%, and the stock of Xyrong Corporation has a beta coefficient of 1.6. Xyrong pays out 30% of its earnings in dividends, and the latest earnings announced were $9.00 per share. Dividends were just paid and are expected to be paid annually. You expect that Xyrong will earn an ROE of 20% per year on all reinvested earnings forever.
a. What is the intrinsic value of a share of Xyrong stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.
b. If the market price of a share is currently $50.00, and you expect the market price to be equal to the intrinsic value 1 year from now, what is your expected 1-year holding-period return on Xyrong stock? Do not round intermediate calculations. Round your answer to 2 decimal places.
Pied Piper Inc. has just issued some new preferred stock. The issue will pay an annual dividend of $10 in perpetuity, beginning five years from now. If the market requires a return of 8.4 percent on this investment, how much does a share of preferred..
You open a brokerage account and purchase 200 shares of Google at $443.05 per share. You borrow 40% from your broker to help pay for the purchase. The interest rate on the loan is 8%. One year after purchase, Google’s price is $320. What is your new ..
You own a bond with the following features: 7 years to maturity, face value of $1000, coupon rate of 3% (annual coupons) and yield to maturity of 7.8%. If you expect the yield to maturity to remain at 7.8%, what do you expect the price of the bond to..
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A U.S. bank has made £50 million in Britain and has £40 in deposits. The bank's currency trading desk has also contracted to buy £20 million and has short positions of £15 million. What is the bank's net exposure? If the bank has exposures in euros a..
a project has an initial cost of 40000 expected net cash inflows of 9000 per year for 7 years and a cost of capital of
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