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
maw [93]
2 years ago
15

A common stock pays an annual dividend per share of $1.80. The risk-free rate is 5%, and the risk premium for this stock is 4%.

If the annual dividend is expected to remain at $1.80 per share, what is the value of the stock
Business
1 answer:
ArbitrLikvidat [17]2 years ago
3 0

Answer:

The value of the stock today is $20

Explanation:

Using the CAPM equation, we first calculate the required rate of retunr on the stock.

The equation for CAPM is,

r = rRF + Beta * rpM

Where,

  • rRF is the risk free rate
  • rpM is the risk premium on market
  • Beta * rpM is the risk premium on stock

r = 0.05 + 0.04

r = 0.09 or 9%

The value of the stock can be calculated using the zero growth model of DDM. The DDM values the stock based on the present value of the expected future dividends from the stock. As the dividend from the stock is expected to remain constant through out to an indefinite period, the value of the stock today is,

P0 = Dividend / r

P0 = 1.8 / 0.09

P0 = $20

You might be interested in
According to the Center for 21st Century Skills, critical thinking ability includes all of the following skills, EXCEPT ______.
Mama L [17]
I think the answer would be using your eyes
6 0
2 years ago
_____ is the act of negotiating with employers regarding employment issues by employees who are members of a union.
jek_recluse [69]

Answer:

Collective bargaining

Explanation:

Collective bargaining is the process in which working people, through their unions, negotiate contracts with their employers to determine their terms of employment, including pay, benefits, hours, leave, job health and safety policies, ways to balance work and family, and more.

3 0
2 years ago
Which is not one of the four criteria for a geometric setting?
Ipatiy [6.2K]
The <span>Three outcomes which are the success, failure, and proficient are </span><span>not one of the four criteria for a geometric setting.
</span><span>
The criteria for geometric setting are:</span>
1. Each observation is subdivided into two categories: Success and Failure.
2. The probability of success remains constant for each observation.
3. The observations are always independent.
4. The variable of interest is defined as the number of trials required to obtain the first success.
7 0
3 years ago
The responsibility report for the Augusta Division shows budgeted contribution margin of $2,000,000 and budgeted controllable fi
Mumz [18]

Answer:

D) is 20% above expectations.

Explanation:

The Augusta Division was supposed to earn a net profit of $1,000,000 (= $2,000,000 - $1,000,000). Since the division's manager and his/her team were able to cut reduce fixed costs to $900,000 and increase contribution margin to $2,100,000 (either by increasing selling price or reducing variable costs), then the division earned a net profit of $1,200,000 (= $2,100,000 - $900,000). This net profit is 20% higher than expected, therefore the manager's (and his/her team's) overall performance was 20% above expectations.

5 0
3 years ago
if the required reserve ratio is 10 percent the banking system currently has excess reserves equal to
prisoha [69]

Answer:

Experts are tested by Chegg as specialists in their subject area. We review their content and use your feedback to keep the quality high. Transcribed image text: If the required reserve ratio is 10 percent, the banking system currently has excess reserves equal to: $10 billion.

Explanation:

5 0
3 years ago
Other questions:
  • State a has a law requiring that all disputes under 15,000 be submitted to arbitration. this is an example of
    12·1 answer
  • "When a business establishes a web-site and begins to allow customers to" place orders online without ever coming into their sto
    7·1 answer
  • The _____ model is the basis for the classic purchase funnel metaphor that is often used to depict the decision process consumer
    8·2 answers
  • Television producers hope to "minimize the risk" that a tv show _____. will offend the public will be a copy of something that's
    10·1 answer
  • If JJ Camera had a policy that says no Muslim employees are allowed to work on the sales floor, the policy would be an example o
    11·1 answer
  • You have been working as an intern for your father's construction company and have been asked to sit in the on the company revis
    6·1 answer
  • A proxy given to a caretaker to vote at stockholders shares is a: A power of attorney B trading authorization C discretionary au
    10·1 answer
  • Douglas can afford 240$ a month for five years for a car loan. If the APR is 8.5%, how much can he afford to borrow to purchase
    12·1 answer
  • For each example presented below, identify the managerial skill being illustrated.
    12·1 answer
  • Crest toothpaste has selected new moms as their target market. In the process of positioning their new product BabySafeToothpast
    10·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!