Given the following securities, please estimate the required rate of return. a) Ebay b= +2.90 b)...

Transcribed Image Text:

Given the following securities, please estimate the required rate of return. a) Ebay b= +2.90 b) Oregon Electric b= +.32 c) Brinks Security b= -.65 The market rate = 10% and U.S. Treasury Bills are currently earning 6.5% 2) Warned Corp., which is a manufacturer of computer parts, has been in business only a few years. Its board of directors decided to pay a dividend next year to help boost the attractiveness of its stock: It will pay $.28 in dividends per share next year, after which its dividends are expected to grow at 5 percent per year. Given a stock beta of 2.1, a market rate of return of 9 percent and a 6 percent T-bill rate, should the company share be purchased if they are currently selling for $4.50? 3) What is the present value of the following stream of payments if the required rate of return is 10%? Year Payment 1 2 3 4 5 $200 $400 $350 $250 $440 Given the following securities, please estimate the required rate of return. a) Ebay b= +2.90 b) Oregon Electric b= +.32 c) Brinks Security b= -.65 The market rate = 10% and U.S. Treasury Bills are currently earning 6.5% 2) Warned Corp., which is a manufacturer of computer parts, has been in business only a few years. Its board of directors decided to pay a dividend next year to help boost the attractiveness of its stock: It will pay $.28 in dividends per share next year, after which its dividends are expected to grow at 5 percent per year. Given a stock beta of 2.1, a market rate of return of 9 percent and a 6 percent T-bill rate, should the company share be purchased if they are currently selling for $4.50? 3) What is the present value of the following stream of payments if the required rate of return is 10%? Year Payment 1 2 3 4 5 $200 $400 $350 $250 $440

Answer rating: 100% (QA)

1 The required rate of return for each security can be estimated using the Capital Asset Pricing Mod... View the full answer