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
Ad libitum [116K]
3 years ago
7

The risk-free rate of return is 8%, the expected rate of return on the market portfolio is 15%, and the stock of Xyrong Corporat

ion has a beta coefficient of 1.2. Xyrong pays out 40% of its earnings in dividends, and the latest earnings announced were $10 per share. Dividends were just paid and are expected to be paid annually. You expect that Xyrong will earn an ROE of 18% per year on all reinvested earnings forever.
A) What is the intrinsic value of a share of Xyrong stock?


B) If the market price of a share is currently $103, and you expect the market price to be equal to the intrinsic value one year from now, what is your expected one-year holding-period return on Xyrong stock?
Business
1 answer:
Reptile [31]3 years ago
5 0

Answer:

A)

risk free rate = 8%

market rate = 15%

Xyrong's beta = 1.2

pays 40% of income in dividends

latest EPS = $10

ROE = 18%

k = 8% + (1.2 x 7%) = 16.4%

g = ROE x (1 - 40%) = 10.8%

div1 = [(40% x $10) x (1 + g)] = $4 x 1.108 = $4.432

stock price = $4.432 / (16.4% - 10.8%) = $79.14

B)

div0 = $4

div1 = $4.432

price0 = $103

price1 = $79.14 x (1 + g) = $79.14 x 1.108 = $87.69

holding period return = ($4.43 + $87.69 - $103) / $103] = -0.1056 or -10.56%

You might be interested in
You are the marketing officer for either a large hotel or a car dealer. Produce a report for
Klio2033 [76]
Hbvhhhbbhjj
Bbhbbbbbhh
5 0
2 years ago
The Cole Beverage Company (CBC) has a soft drink product that has a constant annual demand of 3,600 cases per year. A case of th
skad [1K]

Answer:

a. 480

Explanation:

The computation of the economic order quantity is given below:

EOQ = \sqrt{\frac{2\times annual \ demand \times ordering\ cost }{carrying \ cost}}  \\\\= \sqrt{\frac{2\times 3600\times \$32}{\$1} }

= 480 units

The carrying cost could be determined below:

= $4 × 25%

= $1

hence, the carrying cost is $1

Therefore the economic order quantity is 480

Thus, the correct option is a.

7 0
2 years ago
If revenues are greater than total variable costs of production but less than total costs, a firm A) earns a profit. B) suffers
vesna_86 [32]

Answer:

C) breaks even.

Explanation:

Cost-volume-profit analysis is also known as the break even analysis, it is an important tool in predicting the volume of activity, the costs to be incurred, the sales to be made, and the profit to be earned is. It is used to determine how changes in differing levels of activities such as costs and volume affect a company's operating income and net income.

Hence, if revenues are greater than total variable costs of production but less than total costs, a firm breaks even because the amount of money being generated is greater than the cost of running the business.

8 0
3 years ago
Read 2 more answers
You take out a loan for $100,000 at an annual interest rate of 5.9% that is to be paid with three equal annual payments of $37,3
Hunter-Best [27]

Answer:

The principal repaid in the second year will be $33,296.

Explanation:

Out of each 37,341.79 payment a part of it will be principal repayment and a part of it will be interest payment. When the first 100,000 is paid (0.059*100,000)=5,900 is interest and (37,341-5,900)= 31,441 is principal repayment which means, that in the second year the principal remaining is (100,000-31,441)=68,559. So the interest payment in the second year will be (0.059*68,559)=4,045 and the principal repaid will be (37,341-4,045)=33,296.

8 0
3 years ago
a bond has a face value of $1,000, an annual coupon rate of 7 percent, yield to maturity of 10 percent, and 20 years to maturity
rewona [7]

The bond that has a face value of $1,000 has a duration of 10 years.

<h3>What is a bond?</h3>

A bond is a type of security in the financial world where the issuer (debtor) owes the holder (creditor) a debt and is required, depending on the terms, to repay the bond's principal (i.e., the amount borrowed) at the bond's maturity date as well as interest (referred to as the coupon) over a predetermined period of time. The interest is typically due at regular intervals, such as every six months, once a year, and less frequently at other times. To finance long-term investments or, in the case of government bonds, to finance immediate expenses, the borrower can obtain external funds through the sale of bonds. Both bonds and stocks are considered to be forms of security, but the main distinction between the two is that (capital) stockholders have an equity stake in a company, whereas bondholders have a creditor stake.

To learn more about bond, visit:

brainly.com/question/28362992

#SPJ4

5 0
1 year ago
Other questions:
  • A construction company provides hard hats to employees working at a construction site. This measure taken by the company for its
    9·2 answers
  • According to the fiedler contingency model, high managerial control is characterized by ________.
    14·1 answer
  • 9. An arrangement that maintains the power of attorney in the event that the principal becomes
    11·1 answer
  • Kingbird Music School borrowed $24,000 from the bank signing a 6%, 6-month note on November 1. Principal and interest are payabl
    11·1 answer
  • Strategic alliances almost always result in one company taking over the financial interests of another company true or false
    14·1 answer
  • What market structure predominantly uses product differentiation to attract consumers?
    8·2 answers
  • Asking yourself" what can I do to build a loyal customers base? is an example of
    9·2 answers
  • Are the actions undertaken by the companies or individuals in the following scenarios legal or illegal pursuant to U.S. law? Ple
    13·1 answer
  • Match each given scenario to its cause.
    15·1 answer
  • Zach company previously recorded receiving $1,000 cash in advance. Zach company has earned ½ of the amount. the adjusting entry
    7·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!