1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
sesenic [268]
1 year ago
6

A share of stock with a beta of 0. 75 currently sells for $50. Investors expect the stock to pay a year-end dividend of $2. The

1 year t-bill currently sells for $961. 54, and the historic return on the market is 11%, the historic risk free rate is 4%. 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?.
Business
1 answer:
Rama09 [41]1 year ago
3 0

Expected price next year = $62.58

Beta is 0.75, PO is $50, D1 is $2, RF is 11%, and RM is 4%.

Where,

Expected Dividend = D

Po = Price as of today.

Risk-free Rate is Rf.

Market risk premium is Rm.

g = rate of growth

Equity cost is Rf plus beta minus Rm.

Equity cost is 11% plus 0.75 and 4%.

Equity cost = 3.33%

Making use of the Dividend Discount Model to Estimate Growth Rate

(D1/P0) + g = ke

(2/50) + g = 3.33%

0.04 + g= 3.33%

g = 3%

Expected price for the following year = $2*1.033/ (0.03-0.033)

Expected price next year = $62.58

What is Expected price?

As its name suggests, predicted price level is a forecast that takes into account accurate evaluation of pertinent economic data to foretell what will happen with those goods and services in the future. Making changes to this level when new information becomes available is essential because unknowable factors may become real over time.

To learn more about Expected price visit:brainly.com/question/19169084

#SPJ4

You might be interested in
Assume that you have the following decision-making options: (1) make the decision on your own with available information, (2) co
raketka [301]

Answer:

(2) consult others before making a decision.

Before I make a recommendation, I will consult my team members.  Individually, some may have new ideas and modifications which we can incorporate into the project to even beat the competition and cause management to continue supporting the project.

Explanation:

Even though our competitor's "product appears to utilize radical new design principles that expand the functionality of the product," we can still modify our product.  This will not only incorporate the features of our competitor's product, but also further introduce new features that will emanate from the challenge from competition.

This is where the SCRUM framework becomes important.  This framework for project management emphasizes teamwork, accountability, and iterative progress toward a well-defined goal, while allowing for tweaks.

Developing this project based on this framework must have made it possible for us to receive the report from the marketing department in the first place.  The principles of Scrum are Openness, Respect, Courage, Commitment, and Focus.  So, the best we can do will be to prioritize, come up with new improvement ideas, and convince top management not to cancel the project.

3 0
3 years ago
You make $45,000 per year at your current job with Whiz Kids Consultants. You are considering a job offer from Brainiacs, Inc.,
DIA [1.3K]

Answer:

(a) Yes. It is an opportunity cost of new job because the additional time he spent commuting is a cost, as he can utilize that time in doing something else.

(b) Yes. It is also an opportunity cost because if a person wants to join a new job then he have to give up his current job. So, the earning of $45,000 from his current job is the opportunity cost of accepting the new job.

(c) No. It is not an opportunity cost but it is an additional benefit from the new job because he is not sacrificing anything to obtain this benefit.

5 0
3 years ago
The Jameson Company just paid a dividend of $0.75 per share, and that dividend is expected to grow at a constant rate of 5.50% p
belka [17]

Answer:

Jameson's current stock price, P0 is  $18.62

Explanation:

Required rate of return = Risk free rate + Beta*Market risk premium.

                                       = 4.00% + 1.15*5.00 %

                                       = 9.75 %

Current stock price, P0

= Expected dividend per share/(Required rate of return - Growth in dividends)

= (0.75 + 5.50%*0.75)/(0.0975 - 0.055)

= $18.62

Therefore, Jameson's current stock price, P0 is  $18.62

5 0
3 years ago
A three-month HP put option with an exercise price of $60 sells for a premium of $8. The put is in the money only if the price o
Mkey [24]

Answer:

less than $60 per share

Explanation:

A put option is the money when the exercise price is greater than the asset price, thus the put has to be less than $60

3 0
3 years ago
Read 2 more answers
Alex has a new idea for a way to cut costs in his department, but he is not willing to share his idea with his boss because the
marshall27 [118]
Reward both successes and failures
7 0
3 years ago
Other questions:
  • If you lose your ATM card and the person who finds it withdraws money from your account, you will lose no more than $50 from you
    5·1 answer
  • Describe some techniques that sellers use to differentiate their products.​
    13·1 answer
  • Dole, the sole owner of Enson Corp., transferred a building to Enson. The building had an adjusted tax basis of $35,000 and a fa
    15·1 answer
  • Market offerings are some combination of products, services, information, or experiences offered to a market to satisfy a need o
    11·1 answer
  • Maidenform Brands is a global intimate apparel company that designs, sources, and markets intimate apparel products under the Ma
    8·1 answer
  • Starbucks Corporation is the premier​ roaster, marketer, and retailer of specialty coffee in the​ world, operating in 68 countri
    10·1 answer
  • The unadjusted trial balance of Sketch Star Makers Inc., prepared as of December 31, 2018, includes the following account balanc
    7·1 answer
  • Latasha and Jake need to decide which one of them will take time off from work to complete the rather urgent task of shearing th
    9·1 answer
  • Business ethics: Results in a set of correct decisions made by a company Refers to a standard of business conduct Can improve bu
    11·1 answer
  • Airborne Airlines Inc. has a $1,000 par value bond outstanding with 20 years to maturity. The bond carries an annual interest pa
    6·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!