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
Aneli [31]
3 years ago
10

You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend of $1.50 a share at the end

of the year (D1 = $1.50) and has a beta of 0.9. The risk-free rate is 3.2%, and the market risk premium is 4.5%. Justus currently sells for $40.00 a share, and its dividend is expected to grow at some constant rate, g. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 3 years? (That is, what is ?) Round your answer to two decimal places. Do not round your intermediate calculation
Business
1 answer:
kkurt [141]3 years ago
5 0

Answer:

44.35

Explanation:

The stock will increase the grow rate of the company. We need to solve this.

The grow rate will be determinate using the Gordon dividend grow model

\frac{divends}{return-growth} = Intrinsic \: Value

we clear for g

return - \frac{divends}{stock} = grow

to find the return we use CAPM

Ke= r_f + \beta (r_m-r_f)  

risk free 0.032

market rate

premium market = (market rate - risk free) = 0.045

beta(non diversifiable risk) = 0.9

Ke= 0.032 + 0.9 (0.045)

Ke 0.07250

this will be the return we use in the formula for grow

g = 0.0725 - 1.5/40 = 0.03500

At this rate our dividends will grow and also our share price

the stock in 3 years will be the current price capitalized with the grow rate

Stock \: (1+ grow)^{time} = Stock_{3years}

Stock    40.00

time 3.00

rate         0.035

40 \: (1+ 0.035)^{3} = Stock_{3years}

Futue value in 3 years = 44.35

You might be interested in
What are some of the major complexities encountered in developing cooperative strategies such as strategic alliances and joint v
____ [38]

Strategic alliances are generally meant to increase the business strength. Most of the cooperative strategies aim at drawing upon the individual strengths of partners to be more competitive as a single unified unit.

There are a lot of  challenges in getting cooperative strategies to work as envisaged during the planning phases. When corporate companies seek cooperation strategies, the hindsight which comes is that most of them compete against each other).

Hence, it is  natural that such companies will seek to fulfill their interests first before considering the interests of their partnerships. Then, some companies seek cooperative partnerships with partners who are already having other collaborators.

It  also follows that such cooperation lacks commitment. There is also a lack of detailing the operational structure by which operational strategy will be a great success.

To know more about Strategic alliance here:

brainly.com/question/14014533

#SPJ4

5 0
1 year ago
To compete in today's market, how often should firms focus on marketing planning so that managers and executives have the core i
OleMash [197]

Answer: at all times

Explanation: To compete and stand out in today's market, there is need for proper marketing planning and this should be done AT ALL TIMES. This is because the more you plan, the more you discover new strategies of making your market stand out, the more your goals are attainable.

6 0
3 years ago
what was a benefit of square inc. that differentiated it from the other pos systems that were available at the time it first lau
Mice21 [21]

Small businesses were able to afford to accept credit and debit card transactions because a flat fee was charged per transaction.

Smaller companies and individual vendors were able to accept credit and debit cards for payment since they didn't need to invest in expensive servers or infrastructure. Servers at restaurants were able to process customer payments right at the table, increasing the speed at which they could turn over tables.

Smaller groups and individual carriers had been capable of taking delivery of credit and debit cards for the price considering the fact that they did not need to spend money on high-priced servers or infrastructure. This led organizations to attention to how their personnel was prompted and managed and led to the development of a principle Y management fashion that specializes in the force for character self-achievement. McGregor's perspective places the obligation for performance on managers in addition to subordinates.

Learn more about The Benefits of square inc. here:-brainly.com/question/5777247

#SPJ4

3 0
1 year ago
The definition of inventory includes which of the following items? (Select all that apply.) a) items used currently in the produ
Yanka [14]

Answer:

Items a) and b)

a) items used currently in the production of goods to be sold items

b) held for resale items currently in production for future

Explanation:

Inventory consists of current assets to be used in production of final goods or are the ones which are final goods and held for sale.

In the given case also, statement a includes raw materials, which are used to make the final good to be sold, which is a part of inventory.

Further, statement b includes work in production or final goods which are currently in production but would be resold.

The items which are kept for their use as like machinery or furniture or which shall be disposed are not inventory but are in fixed assets category.

3 0
3 years ago
What happens during the exit stage of a company?
bekas [8.4K]
<span>The Exit stage is when the entrepreneur gets out of the day-to- day commitment of running the company.</span>
3 0
2 years ago
Read 2 more answers
Other questions:
  • True or false, The only way to produce a resume for free is to use a template in Microsoft Word.
    13·2 answers
  • To encourage potential buyers to take its new Model 3 sedan for a test drive, BMW posts a video on its website of the Model 3 sp
    13·1 answer
  • When medicare was passed in 1965, its sponsors said it would cost about ____ a year?
    12·1 answer
  • Anne Mullens is the bookkeeper for DWG Refrigeration Repair. One afternoon while she was preparing the bank deposit, a customer
    6·1 answer
  • If a typical firm in a perfectly competitive industry is earning profits. True or False
    6·1 answer
  • Yuki was just hired as a financial analyst and will spend the next two weeks learning company policies, procedures, and culture
    8·1 answer
  • 1. Based on the above article, if you were an entrepreneur, which sector would fit you the most? Justify your answer by conducti
    8·1 answer
  • Able, Baker, and Charlie co-own property. Charlie dies, leaving behind a will that transfers his one-third interest in the prope
    11·1 answer
  • Training and development are roles filled by human resource specialists true or false
    9·2 answers
  • Pls help me and thank you
    9·2 answers
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!