A share of stock with a beta of 0.65 now sells for $40. Investors expect the...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
A share of stock with a beta of 0.65 now sells for $40. Investors expect the stock to pay a year-end dividend of $2. The T-bill rate is 6%, and the market risk premium is 9%. If the stock is perceived to be fairly priced today, what must be investors' expectation of the price of the stock at the end of the year? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Stock price A share of stock with a beta of 0.65 now sells for $40. Investors expect the stock to pay a year-end dividend of $2. The T-bill rate is 6%, and the market risk premium is 9%. If the stock is perceived to be fairly priced today, what must be investors' expectation of the price of the stock at the end of the year? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Stock price
Expert Answer:
Answer rating: 100% (QA)
To calculate the expected stock price at the end of the year we can use ... View the full answer
Related Book For
Fundamentals of Corporate Finance
ISBN: 978-0077861629
8th edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus
Posted Date:
Students also viewed these finance questions
-
The treasurer of Kelly Bottling Company (a corporation) currently has $200,000 invested in preferred stock yielding 10 percent. He appreciates the tax advantages of preferred stock and is considering...
-
Stocks A and B have the following probability distributions of expected future returns: Probability A B 0.4 (12%) (25%) 0.2 2 0 0.2 12 19 0.1 22 28 0.1 30 50 Calculate the expected rate of return, ,...
-
The value of a share of common stock depends on the cash flows it is expected to provide, and those flows consist of the dividends the investor receives each year while holding the stock and the...
-
The table represents values of differentiable functions f and g and their first derivatives. Use the table of values to answer the questions that follow. Work all of the parts below the line. X f g...
-
Sales for the year were $1,000,000, half of which were on credit. The average gross profit rate was 50 percent on sales. Account balances follow: Beginning Ending Accounts receivable (net) $45,000...
-
Explain the differences and similarities between fringe benefits and salary as forms of compensation.
-
For a constant pressure process (a) \(d H=C_{V} d T\) (b) \(d H=\int C_{V} d T\) (c) \(d H=C_{P} d T\) (d) \(d H=d Q_{P}\).
-
Hovak Company has credit sales of $ 4.5 million for year 2013. At December 31, 2013, the companys Allowance for Doubtful Accounts has an unadjusted debit balance of $ 3,400. Hovak prepares a schedule...
-
"Better blow the whistle," says Roy, your friend and project teammate at Final Four Industries. "The project is out of control, and you know it!" "Maybe so," you respond, "But that's not my call I'm...
-
What is meant by the term decision analysis?
-
Matching the Parts of the Lichen A V [ Choose ] plant roots fungal hyphae algae water molecule
-
The members of a hiking club voted on which trail to go on for their next hike. The choices were Eagle Trail, Willow Walk, Raven Pass, and Sugar Boulder. Each member cast one ballot. On each ballot,...
-
Make a scatter diagram for the data. Use the scatter diagram to describe how, if at all, the variables are related. DE F GO 3 8 8 6 7 5 14 15 6 15 Subject Time watching TV, x Time on Internet, y A B...
-
Define an empty list named values (please note that in rest of the questions if you see this name of list then it means this same list created here). Run your cell so that this list gets defined by...
-
Write a program to get a DNA sequence from the user (as a function called get_user_input()) and count the number of occurrences of A, T, C and G (as a function called count_bases()). If there is an A...
-
Cam is keen to expand their business to allow photographers in regional areas access to their products and expertise. An old photography store is up for sale that Cam has had independently valued and...
-
Instructions for students: 1. This assessment will be conducted in a TAS College classroom in a simulated work environment with access to the resources listed above. 2. You are to arrange a time to...
-
What is an insurable interest? Why is it important?
-
A firm's income statement included the following data. The firm's average tax rate was 20%. Cost of goods sold ................................... $8,000 Income taxes paid...
-
Torrid Romance Publishers has total receivables of $3,000, which represents 20 days' sales. Total assets are $75,000. The firm's operating profit margin is 5%. Find the firm's ROA and asset turnover...
-
You borrow $1,000 from the bank and agree to repay the loan over the next year in 12 equal monthly payments of $90. However, the bank also charges you a loan initiation fee of $20, which is taken out...
-
Determine the displacement at pulley \(B\). The A992 steel shaft has a diameter of \(30 \mathrm{~mm}\). 4 kN B 3 kN 0.4 m 0.4 m 0.3 m 1 kN 1 kN 0.3 m C
-
The beam is made of Douglas fir. Determine the slope at \(C\). 8 kN BO -1.5m 1.5m- -1.5 m- 180 mm H 120 mm
-
Determine the slope at \(A\). The A992 steel beam has a moment of inertia of \(I=125\left(10^{6} ight) \mathrm{mm}^{4}\). 18 kNm A -4 m- D B3m 3m 4m m- 18 kNm
Study smarter with the SolutionInn App