What is the maximum price you should pay for this stock

Assignment Help Financial Management
Reference no: EM131045064

The Auto Company just paid a dividend of $3.00 and analysts expect the dividend to grow at its compound average growth rate of 10.72% forever. You plan to purchase the stock then hold it for 10 years. Your expected rate of return is 12%, and the next owner expects to earn 12% on their investment.

What is the maximum price you should pay for this stock? Show work.

Reference no: EM131045064

Questions Cloud

Probability of choosing a random sample : A population has a mean score of 75 and a standard deviation of 13. What is the probability of choosing a random sample of 100 people from this population with a mean of 78 or higher? Show work.
Question regarding the poportion of ratios : The price-earnings ratios of a sample of stocks have a mean value of 13.5 and a standard deviation of 2. if the ratios have a bell-shaped distribution, what can we say about the poportion of ratios that fall between 9.5 and 17.5?
What is default risk premium on the corporate bond : A Treasury bond that matures in 10 years has a yield of 4.58%. A 10-year corporate bond has a yield of 6.63%. Assume that the liquidity premium on the corporate bond is 0.51%. What is the default risk premium on the corporate bond?
Confidence level for the mean vitamin : A study of the quality of the production process at a factory measured vitamin C in specimens of corn-soy blend. For a random sample size of 9 the mean vitamin C is 25.5 miligrams. The sample standard deviation (s) is 8.21, and we want to find a 9..
What is the maximum price you should pay for this stock : The Auto Company just paid a dividend of $3.00 and analysts expect the dividend to grow at its compound average growth rate of 10.72% forever. You plan to purchase the stock then hold it for 10 years. Your expected rate of return is 12%, and the next..
Confidence interval to estimate the proportion of fans : Problem: A university would like to estimate the proportion of fans that purchase concessions at the first basketball game of the season. The basketball facility has a capacity of 3,600 and is routinely sold out.
How else could one ensure that the penalty was finite : How else could one ensure that the penalty was finite?
Share at least one personal example in current employment : Share at least one personal example, in current employment or past employment, of a Knowledge Management System that you have used. Share briefly if they were successful or not and why.
Write application that uses interactive gui based on jframe : Write a Java Application that uses an interactive Graphical User Interface (GUI) based on the JFrame class using SWING GUI components

Reviews

Write a Review

Financial Management Questions & Answers

  Financial statement compliant with gaap

Explain whether users of financial statements should exercise caution when interpreting financial statement compliant with GAAP.

  Pay for the parking deck and lot at the present time

You are considering the purchase of a parking deck close to your office building. The parking deck is a 15-year old structure with an estimated remaining service life of 25 years. If you had the opportunity to invest your money elsewhere and thereby ..

  Cash inflow-which project should you accept if discount rate

Project A has an initial cost of $80,000 and provides cash inflows of $34,000 a year for three years. Project B has an initial cost of $80,000 and produces a cash inflow of $114,000 in year three. The projects are martially exclusive. Which project(s..

  What is the indirect rate of the euro

Indirect exchange rate. If the direct exchange rate of the euro is worth £0.685, what is the indirect rate of the euro? Note that the pound is the home currency.

  What is current price of bond-zero-coupon bonds with value

Dark night inc just issued zero-coupon bonds with a par value of $1000. The bond has a maturity of 11 years and a yield to maturity of 9.64% compounded semi annually. What is the current price of the bond.

  Created a probability distribution for the future spot rate

Novena Limited is a US firm and expects to receive 5$800, 000 in one year. The existing spot rate of the Singapore dollar is US60. 74. The one-year forward rate of the Singapore dollar is US$0.76. Novena Limited created a probability distribution for..

  What is the annual interest rate when calculating part

Samantha has come to you for advice on her retirement planning. She is currently 55 years old and intends to turn her $675,000 current savings into an immediate annuity. Assume the annuity has a 5.00 percent annual interest rate, and is distributed a..

  Acquisitions have on future financial performance

What effect do mergers and acquisitions have on future financial performance? Is there a balance sheet and income statement effect; if so what is/are they

  Compute earnings per share for the levels

Southland industries has 60,000 0f 14.1% (annual interest) bonds outstanding, 1,800 shares of preferred stock paying annual dividend of $5 per share, and 7,000 shares of common stock outstanding. Assuming that the firm has a 40% tax rate, compute ear..

  Financial career options that an individual

Describe two (2) financial career options that an individual with a finance education might pursue and explain the value that such a position adds to a company. Explain the essential skills that would make a person successful in each of the described..

  Expected return on your investments over whole period

You are 30 years old today and planning to retire at age 62. You want to plan your finances for living 35 years past age 62 and die dead broke. You determine you will need $3000 per month from age 62 for the 35 years. Your plan is to go live in the t..

  What will be the firm cash cycle

Suppose that Ken-Z Art Gallery has annual sales of $872,000, cost of goods sold of $562,000, average inventories of $148,000, average accounts receivable of $117,000, and an average accounts payable balance of $80,000. Assuming that all of Ken-Z’s sa..

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