What is your estimate of the stock current price

Assignment Help Financial Management
Reference no: EM131603093

A company, GameMore, has just paid a dividend of $4 per share, D0=$ 4. It is estimated that the company's dividend will grow at a rate of 14% percent per year for the next 2 years, then the dividend will grow at a constant rate of 7% thereafter. The company's stock has a beta equal to 1.4, the risk-free rate is 4.5 percent, and the market risk premium is 4 percent. What is your estimate of the stock's current price? Round your answer to two decimal places.

Reference no: EM131603093

Questions Cloud

The implications of overpaying for acquired company : Discuss some of the implications of overpaying for an acquired company?
Calculate variances-standard deviations for cherry and straw : Calculate the variances and the standard deviations for Cherry and Straw.
What is the value of your retirement plan : What is the value of your retirement plan after the 40 years?
Calculate after-tax cash flow at disposal : Reversing Rapids Co. purchases an asset for $121,450. This asset qualifies as a five-year recovery asset under MACRS. Calculate After-Tax Cash Flow at disposal.
What is your estimate of the stock current price : A company, GameMore, has just paid a dividend of $4 per share, D0=$ 4. What is your estimate of the stock's current price?
What is rollins cost of equity when using the capm approach : Rollins Corporation is estimating its WACC. Its target capital structure is 20 percent debt, What is Rollins cost of equity when using the CAPM approach?
What weighted average cost of capital : What weighted average cost of capital should you use to evaluate potential projects?
Capital budget and uses capm to compute its cost of equity : Suppose Grace-Sharon Company uses only debt and internal equity to finance its capital budget and uses CAPM to compute its cost of equity.
Two cheese spreads byblending mild cheddar cheese : The New England Cheese Company produces two cheese spreads byblending mild cheddar cheese with extra sharp cheddar cheese.

Reviews

Write a Review

Financial Management Questions & Answers

  Basic operations of and products and services offered by

Briefly describe (one paragraph each) the basic operations of— and the products and services offered by—each of the following financial institutions: (a) commercial bank, (b) savings and loan association, (c) savings bank, (d) credit union, (e) stock..

  Use at least two capital budgeting methods

Which should the company do and why? You must use at least two capital budgeting methods.

  What is the effective rate on a mortgage loan

What is the effective rate on a credit card that has a nominal interest rate of 17.99% compounded DAILY (365 days per year)? What is the effective rate on a mortgage loan assuming the following: The nominal rate is 4.75% -The loan is paid monthly.

  Considering splitting its stock

Elmofud, Inc. is considering splitting its stock. The stock is currently priced at $100 per share. You own 200 shares of the stock.

  Pre-tax cash flow-depreciation-tax savings from depreciation

Consider the purchase of a $10,000 capper, a three year asset, in year zero and its sale in year four for $2,000. Show in the table below, the pre-tax cash flow, depreciation, tax savings from depreciation, gains tax, and after tax cash flow with a t..

  What is the preferred stock required rate of return

The preferred stock sells for $ 41.22 a share. What is the preferred stock's required rate of return?

  What is the operating cash flow for the project in year two

You are evaluating a project for The Tiff-any golf club, guaranteed to correct that nasty slice. You estimate the sales price of The Tiff-any to be $450 per unit and sales volume to be 1,200 units in year 1; 1,325 units in year 2; and 1,000 units in ..

  The required return on avondale stock

You own 1,100 shares of stock in Avondale Corporation. You will receive a $1.80 per share dividend in one year. In two years, Avondale will pay a liquidating dividend of $45 per share. The required return on Avondale stock is 20 percent. Suppose you ..

  Receive a margin call from her broker

Robin wants to purchase 1000 shares of Anatop, INC., which is selling for $5 per share. Anatop does not pay dividends because all earnings are reinvested in the firm to maintain it's successful R&D department. How much of her own money must Robin pro..

  Conjunction with capital structure policy

Should dividend policy be established independently of or in conjunction with capital structure policy? If capital structure is then changed might this affect dividend policy?

  Compute and interpret precisely fixed asset turnover ratio

CC Corp. has a ratio of total debt to total assets of 0.45 and a current ratio of 1.25. CC (7%) Corp.’s current liabilities are $800, sales are $7,000, and total equity is $2,750. Compute and interpret precisely CC Corp.’s fixed asset turnover ratio.

  Calculate the aftertax cash flows for first year for bond

Suppose your company needs to raise $45 million and you want to issue 30-year bonds for this purpose. Assume the required return on your bond issue will be 6 percent, and you’re evaluating two issue alternatives: Calculate the aftertax cash flows for..

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