Reference no: EM131218729
Financial Management Assignment-
Q1. You buy a stock that will pay a cash dividend of $1.00 next year. The company does not currently pay a dividend. The company is a growth company and you expect that, after next year, the cash dividend will grow by 4% per year in perpetuity. The discount rate is 10%. What is the present value of this stream of payments today?
Q2. Assume the same facts as above, except that you expect this company's growth period to last only a few years, after which competitors will catch up, the market will mature and become saturated with the company's product, and profits will decline to more normal levels, prohibiting the company from raising its dividend after 2019. What is the present value of this stream of payments today? Show computations to the nearest 4 decimal places.
Q3. You want to calculate the expected return on a share of stock. The beta is 1.87. The risk-free rate is 2%, and the expected return on the market is 9.5%. Use the CAPM to find the expected return for the stock.
Q4. You are using the APM to estimate the expected return on Bethlehem Steel and have derived the following estimates of the factor betas and risk premiums.
Factor
|
Beta
|
Risk Premium
|
1
|
1.2
|
2.5%
|
2
|
0.6
|
1.5%
|
3
|
1.5
|
1.0%
|
4
|
2.2
|
0.8%
|
5
|
0.5
|
1.2%
|
a. Which risk factor is the firm most exposed to? Is there any way, within the APM, to identify the risk factor?
b. If the risk-free rate is 5%, estimate the expected return on Bethlehem Steel.
c. Assume now that the beta in the CAPM for Bethlehem Steel is 1.1 and the risk premium for the market portfolio is 5%. Estimate the expected return using the CAPM.
d. Why are the expected returns different using the two models?
How does the short term time frame impact long term profit
: How does this short term time frame impact long term profit maximization? Should the SEC change their regulations of public corporations to require only annual reporting of operations?
|
Design a function that will take a race result
: Design a function that will take a race result and a current world record time and determine if the world record was beaten.
|
Discuss trends significant to the industry and company
: Create a PowerPoint Presentation. The final product will be no longer than 20 slides including the title page and reference page. Students will use the note section of the PowerPoint to discuss, explain and support the reasoning for information..
|
Some of the olympic sports
: The 2016 Olympics were held in Brazil. Some of the Olympic sports contain only team events.
|
What is the present value of this stream of payments today
: Fin 345: Financial Management Assignment. You buy a stock that will pay a cash dividend of $1.00 next year. The company does not currently pay a dividend. The company is a growth company and you expect that, after next year, What is the present va..
|
What if the mortgage market did not grow as expected
: Other managers worried about the assumptions in the analysis that support the investment-an increase in the number of mortgages processed and a reduction in processing costs. What if the mortgage market did not grow as expected?
|
Accompanying summary security guide handout
: You have been asked by the CIO to create a Microsoft® PowerPoint® training presentation along with an accompanying summary security guide handout for new employees in the IT, Accounting/Finance, and Engineering departments, explaining how they can..
|
Write an summary and analysis about short videos
: Write an summary and analysis about short videos on YouTube related with the PowerPoint. - describe how the video relates and compare to one topic in the professor's Power Point presentation "What is marketing".
|
What is the relationship of this procedure
: Figure 3.10 illustrates the derivation of an industry supply curve under competitive conditions where each firm receives the same price for its output. What is the relationship of this procedure to the equimarginal principle discussed earlier in t..
|