With the ddm formula calculated growth rate, Financial Accounting

Assignment Help:

Using CAPM's formula,

Return on equity = Risk-free rate + Beta*(Expected market return - risk-free rate)

With the given information,

Return on equity = 1% + 1.7*(9% - 1%) = 14.60%

Hence SuperSoft stock's expected return on the projected investment is 14.60%. With the DDM formula,

P0 = D1/(Ke - g)

With the given information and that calculated using CAPM,

$100 = $1/(14.60% - g)

14.60% - g = 1%

g = 14.60% - 1%

g = 13.60%

Thus the implied growth rate for this stock is 13.6%

 


Related Discussions:- With the ddm formula calculated growth rate

Format of the balance sheet, Format of the Balance Sheet It shows the f...

Format of the Balance Sheet It shows the financial position of the company as at the end of a given financial period. The standard requires that assets and liabilities should b

What is the impact on net income, The Budvar Company purchases parts from a...

The Budvar Company purchases parts from a foreign customer on December 1, Year 1, with payment of 20,000 crowns 20,000 crowns to be made on March 1, Year 2.  Budvar enters into a f

Investments carried as trading securities, Did ford realize any gain or los...

Did ford realize any gain or loss from securty sales during 2009?

Dividends-group accounts, DIVIDENDS The dividends that appear in the cons...

DIVIDENDS The dividends that appear in the consolidated statement of change in equity are for the holding company only. This is because the dividends of the subsidiary belong to

Managing organisations with multiple objectives, The difficulties associate...

The difficulties associated with managing organisations with multiple objectives To the level that an organisation faces a range of stakeholders then they also face multiple ob

Cost recovery deduction, On May 15, 2010, Your Corporation acquired an airp...

On May 15, 2010, Your Corporation acquired an airplane (5 year recovery period, 6 year class life) for $1,450,000. Its qualified business use is 54%. Determine the maximum cost rec

ACCOUTING, Ask questio. You have been appointed the accountant of a new org...

Ask questio. You have been appointed the accountant of a new organisation that is preparing its first set of financial statements. In determining the depreciation for the first yea

Explain your findings and conclusion, When the stock market is going up ove...

When the stock market is going up over a long period of time, investors can become complacent about the risks of being a stockholder. After the significant decline of the stock mar

Write Your Message!

Captcha
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