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adoni [48]
3 years ago
14

The risk-free rate of return is 6%, the expected rate of return on the market portfolio is 15%, and the stock of Xyrong Corporat

ion has a beta coefficient of 2.3. Xyrong pays out 45% of its earnings in dividends, and the latest earnings announced were $9.00 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? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b. If the market price of a share is currently $22, and you expect the market price to be equal to the intrinsic value one year from now, what is your expected 1-year holding-period return on Xyrong stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Business
1 answer:
Doss [256]3 years ago
7 0

Answer:

(i) $26.49375

(ii) $29.11

(iii) 52.54%

Explanation:

Required rate of return using CAPM model:

= risk free rate + beta (expected return - risk free rate)

= 0.06 + 2.3 (0.15 - 0.06)

= 0.267 or 26.7%

Growth rate = (1 - dividend payout ratio) × ROE

                    = (1 - 0.45) × 0.18

                    = 0.099 or 9.9%

a)

Dividends per share will be $4.05 since payout ratio is 45%

Intrinsic value of share = D1 ÷ (Rate - growth)

                                      = 4.05(1.099) ÷ (0.267 - 0.099)

                                      = 4.45095 ÷ 0.168

                                      = $26.49375

b)

Price after 1 year = 26.49( 1 + 0.099)

Price after 1 year = $29.11

c)

One year holding period return = ( $29.11 + 4.45 - 22) ÷ 22

                                                     = 0.5254 or 52.54%

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Answer:

The answer is D) aggregation

Explanation:

An aggregate forecast addresses a company's capacity requirements

5 0
3 years ago
Robert Gillman, an equity research analyst at Gillman Advisors, believes in efficient markets. He has been following the mining
taurus [48]

Answer:

Growth rate 2.4%

Explanation:

MV=D1/(Ke-g)

Where MV=share market value=$15

D1=Dividend at year end=$.72

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By putting above values in formula, we get;

MV=D1/(Ke-g)

15=.72/(7.2%-g)

15*7.2%-15g=.72

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4 0
3 years ago
Read 2 more answers
If many firms enter the computer software industry and consequently bid up the price of programmers, then:
Lena [83]

Answer:

the correct option is C) If many firms enter the computer software industry and consequently bid up the price of programmers, then: the long-run industry supply curve will slope downward.

Explanation:

When many firm enter an industry, there is competition and the presence of multiple players will eventually cause the cost of production to decline.

In the short run,  if many firms enter the computer software industry and consequently bid up the price of programmers, then the increase in participation will increase the number of software developed.

In the long run, industry supply curve will slop downwards indicating a price reduction.

4 0
3 years ago
Larson Company on July 15 sells merchandise on account to Stuart Co. for $1,000, terms 2/10, n/30. On July 20 Stuart Co. returns
pickupchik [31]

Answer:

b. $588

Explanation:

Terms 2/10, n/30 means that 2% discount for the payment within 10 days and the full amount to be paid within 30 days.

When Larson Company sold merchandise, the following entry was made to recording revenue (sales) and the receivable:

Debit Receivable Account $1,000

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On July 20 Stuart Co. returns merchandise, the entry is made to record the decreasing of Receivable Account:

Debit Revenue $400

Credit Receivable Account $400

The balance Receivable Account of Stuart Co. = $1000-$400 = $600

On July 24, Stuart Co. makes the payment, the sales discount was:

$600 x 2% = $12

The amount of cash received = $600-$12=$588

The following entry is made:

Debit Cash: $588

Debit Sales discount: $12

Credit Receivable Account $600

7 0
3 years ago
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That companies gain a competitive advantage by giving customers focus, cost leadership, and differentiation

<h3>What is competitive advantage?</h3>

A firm seeks a competitive advantage when it aims to surpass its rivals in terms of profitability. An organization must be able to communicate to its chosen target market that it has a higher comparative or differential value than its rivals in order to establish and retain a competitive advantage. For instance, a business is likely to have a competitive advantage if it advertises a product at a lower price than a similar product from a rival. The same holds true if the marketed item is more expensive but has special characteristics that buyers are ready to pay for.

The SWOT (Strengths, Weaknesses, Opportunities, and Threats) analytical technique is credited to Albert Humphrey at the Stanford Research Institute. Porter's Five Forces is an alternative model that helps businesses understand their position within a competitive landscape.

8 0
1 year ago
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