Question: Hi could you answer each question with steps showing how to solve please? 4. Caufield Inc. has never paid a dividend. However, they just announced

Hi could you answer each question with steps showing how to solve please?

Hi could you answer each question with steps showing how to solve

4. Caufield Inc. has never paid a dividend. However, they just announced that they will pay their first dividend of $2.50 per share in four years. After that, dividends will grow by 7% each year for the following three years. Then, dividend growth rate will stabilize at a constant rate of 3% each year. The risk-free rate is currently 3%. a) Assuming a risk premium associated to Caufield Inc. of 5%, what should the share price be today? 5. Julie has a portfolio consisting of $200 in Stock A (which has a beta of 0.70), $900 in Stock B (which has a beta of 1.55), and $435 in the risk-free asset. She has an additional $500 to invest, and she wishes to invest them in a way that the beta of her new portfolio will be a fourth as risky as the market. a) What is the average beta of the securities she will add to build her new portfolio? 6. Goodies's Inc. stock has a historical return of 8.5% and a standard deviation of 12%. It has a correlation with the market of 0.79 . The market's expected return is 9.5% and its standard deviation is 13%. a) Is Goodies' Inc. stock fairly priced, overvalued, or undervalued? Assume a risk-free rate of 3%. 7. Teddy is considering investing in two stocks: Stock A, which has an expected return of 4% and a beta of 1.4; and Stock B, which has an expected return of 5% and a beta of 1.78 . a) Given this information, what is the return on the market? 4. Caufield Inc. has never paid a dividend. However, they just announced that they will pay their first dividend of $2.50 per share in four years. After that, dividends will grow by 7% each year for the following three years. Then, dividend growth rate will stabilize at a constant rate of 3% each year. The risk-free rate is currently 3%. a) Assuming a risk premium associated to Caufield Inc. of 5%, what should the share price be today? 5. Julie has a portfolio consisting of $200 in Stock A (which has a beta of 0.70), $900 in Stock B (which has a beta of 1.55), and $435 in the risk-free asset. She has an additional $500 to invest, and she wishes to invest them in a way that the beta of her new portfolio will be a fourth as risky as the market. a) What is the average beta of the securities she will add to build her new portfolio? 6. Goodies's Inc. stock has a historical return of 8.5% and a standard deviation of 12%. It has a correlation with the market of 0.79 . The market's expected return is 9.5% and its standard deviation is 13%. a) Is Goodies' Inc. stock fairly priced, overvalued, or undervalued? Assume a risk-free rate of 3%. 7. Teddy is considering investing in two stocks: Stock A, which has an expected return of 4% and a beta of 1.4; and Stock B, which has an expected return of 5% and a beta of 1.78 . a) Given this information, what is the return on the market

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