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The risk-free rate of return is 6.0%, the expected rate of return on the market portfolio is 18%, and the stock of Xyrong Corporation has a beta coefficient of 1.7. Xyrong pays out 50% of its earnings in dividends, and the latest earnings announced were $18 per share. Dividends were just paid and are expected to be paid annually. You expect that Xyrong will earn an ROE of 24% 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.) Intrinsic value $ b-1. If the market price of a share is currently $69, and you expect the market price to be equal to the intrinsic value one year from now, calculate the price of the share after one year from now. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price $ b-2. What is your expected one-year holding-period return on Xyrong stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Expected one-year holding-period return %
When preparing capital budgeting analysis for a new project, Chris Johnson, a chief financial officer at BT Industries, faced a dilemma. The project involved a production of new type of shipping containers, What is the Present Value of this project?
Find the finance charges on an 8 percent, 18-month, single-payment loan when interest is computed using the simple interest method. Find the finance charges on the same loan when interest is computed using the discount method. Determine the APR in ea..
A stock has a beta of .65, the expected return on the market is 15 percent, and the risk-free rate is 3.40 percent. What must the expected return on this stock be?
Changes in Growth and Stock Valuation Consider a firm that had been priced using a 14.00 percent growth rate and a 18.00 percent required rate. The firm recently paid a $2.60 dividend. The firm has just announced that because of a new joint venture, ..
A stock is expected to pay a dividend of $1 per share in three months and another dividend of $1 per share in nine months. The stock price is $50 today, and the risk-free rate of interest is 5% per annum with continuous compounding for all maturities..
The interest rates in Canada and the United States are 6% and 5% per annum, respectively, with continuous compounding. The spot price of the Canadian dollar is $0.8000.
From the Federal Reserve Bank of St Louis you collect the following data: In real terms, in what year was crude oil was more expensive? Show your calculations and provide a brief explanation.
The Granite Paving Company is all-equity financed and has the following free cash flows in years 1-4: $3 million ($3M); $3.7M; $4M; $4.2M. After year 4, the firm is expected to grow at a sustainable rate of 3% per annum. With a WACC of 12%, what is t..
Your hospital has been approached by a major HMO to perform all their MS-DRG 470 cases (major joint procedures). They have offered a flat price of $10,000 per case. You have reviewed your charges for MS-DRG 470 during the last year and found the foll..
On July 1 of the current year, Melissa Co. acquired 25% of the outstanding shares of common stock of International Co. at a total cost of $700,000. The underlying equity (net assets) of the stock acquired by Melissa was only $600,000. Compute the tot..
Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost $15 million, of which 80% has been depreciated. The used equipment can be sold today for $3.75 million, and its tax rate is 30%. What is the equipment..
Your portfolio consists of $50,000 invested in stock x and $50,000 invested in stock y. both stock s have an expected return of 20%, betas of 1.6, and standard deviations of 30%. The returns of the two socks are independent, so the correlation coeffi..
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