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Vadim26 [7]
3 years ago
14

Stock in Daenerys Industries has a beta of 1.1. The market risk premium is 7 percent, and T-bills are currently yielding 5 perce

nt. The company’s most recent dividend was $1.40 per share, and dividends are expected to grow at an annual rate of 7 percent indefinitely.
If the stock sells for $35 per share, what is your best estimate of the company’s cost of equity? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Business
1 answer:
Delicious77 [7]3 years ago
7 0

Answer:

The best estimate of the company’s cost of equity is 11.99%.

Explanation:

CAPM based required return = 5% + 1.1*7%

                                                 = 12.7%

Dividend model required return

35 = (1.40*1.07)/(r - 0.07)

r - 0.07 = 0.0428

          r = 11.28%

The best estimate of the company’s cost of equity is the mean of two = (12.7% + 11.28%)/2

= 11.99%

Therefore, The best estimate of the company’s cost of equity is 11.99%.

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Katrine doesn't understand all of the various aspects of automobile insurance and relies on her local independent State Farm Insurance agent to provide her with information. This agent acts as a(n) intermediary for State Farm.
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A low P/E for a stock indicates that:
pishuonlain [190]

Answer:

(A). People may expect earnings to fall in the future, perhaps because the firm will be faced with increased competition.

Explanation:

Price Earnings ratio of a company represents market price per share of a company's stock in relation to it's earnings per share.

Price Earnings ratio(PER) is given by the following formula:

PER = \frac{Market\ Price\ Per\ Share}{Earnings\ Per\ Share}

A lower P/E Ratio indicates that a company's market price of a share is lower relative to it's earnings. This means the company's stock is undervalued.

It can also mean that the company's earnings have increased which in turn has increased it's earnings per share.  

Investors in general expect lower earnings in future for the stock of a company with low P/E Ratio.

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3 years ago
Use the information below for Jensen Company to answer the question that follow. Direct materials used $345,000 Direct labor inc
AnnZ [28]

Answer:

b.$995,000

Explanation:

Jensen Company

Direct materials used $345,000

Direct labor incurred 250,000

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Product cost $995,000

Therefore Jensen Company's product costs is $995,000

Direct materials used $345,000 + Direct labor incurred 250,000 +Factory overhead incurred 400,000 =$995,000

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3 years ago
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Southwest U's campus book store sells course packs for $14 each. The variable cost per pack is $12, and at current annual sales
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Answer:

$23,000

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variable cost per pack = $12

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When you don't know a certain answer to a customer question be honest and tell them that you don't know the answer to this question however you will ask from your colleague about this question and will revert back to the customer.

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