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loris [4]
3 years ago
12

The risk-free rate of return is 2.5 percent; the expected rate of return on the market is 7 percent. Stock X has a beta coeffici

ent of 1.3, an earnings and dividend growth rate of 4 percent, and a current dividend of $1.40. If the stock is selling for $35, what should you do based on CAPM and CDGM
Business
1 answer:
zvonat [6]3 years ago
4 0

Answer:

  • Stock is overpriced/ overvalued.
  • Sell if you own it.
  • Don't buy if you don't.

Explanation:

Use CAPM to find the required return on the stock:

Required return = Risk free rate + beta * ( Market return - risk free rate)

= 2.5% + 1.3 * (7% - 2.5%)

= 8.35%

Price based on Constant Dividend Growth Model (CDGM):

Price = Next dividend / (Required return - growth rate)

Next dividend = 1.40 * ( 1 + 4%)

= $1.456

Price = 1.456 / (8.35% - 4%)

= $33.47

<em>Stock is selling for $35. It is overvalued. Don't buy the stock. Sell if you have the stock. </em>

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Which of the following statements concerning the selection of risk management techniques and insurance market conditions is (are
valentinak56 [21]

Answer:

I.It's easier to purchase affordable insurance during a "soft" market than during a "hard" market

I only

Explanation:

When a purchaser of insurance wants to make a purchase he analyses the market to get a favourable condition that reduces risk and loss.

The market condition can be a soft market or hard market.

Soft market is one in which potential sellers are more than potential buyers. So supply exceeds demand. Buyers are able to buy affordable insurance.

Hard market on the other hand is when there is an upswing in market cycle. Premiums increase and capacity for insurance decreases.

It is more difficult to get affordable insurance in this market

6 0
3 years ago
It’s 5:30 a.m. The sun is sending its first rays of light over the treetops. You are sipping your morning coffee with an eye on
maxonik [38]

Answer:

Personalized action

Explanation:

In this example, the advertisers are employing the personalized action hook. A hook is an initial statement or passage that is intended to get the reader more interested in whatever the writer is presenting. This is particularly effective when the writer is trying to sell a product, as it ensures that the customer pays attention immediately. Personalized action happens when the advertisers describe an action or a situation which particularly applies to the person reading the ad.

6 0
3 years ago
Arnold learned something very valuable as a teenager from his dad. He was told to invest​ $1,000 at​ 12% interest at age 20 and
ira [324]

Answer:

The investment of $1000 that yields 12% interest per year would become $2000 in 6 years' time as shown by the calculation below

Explanation:

In determining the how long it would take for the investment to become $2000, the future value formula stated below is used.

FV=PV*(1+r)^N

FV is the $2000

PV, present value is $1000

r is the rate of return at 12%

2000=1000*(1+0.12)^N

2000/1000=1.12^N

2=1.12^N

by taking log of both sides the equation becomes

ln 2=N ln 1.12

N= ln 2/ln 1.12

N=6.116255374

approximately N is 6 years

6 0
4 years ago
Analyse safety management as a science? ​
katen-ka-za [31]

Answer:

Explanation:

Persistent endeavors have been made to promote construction safety, but fatalities still plague the industry. Recently there had been an emergence of a variety of Construction safety research focusing on topics such as safety competency, accident statistics, design for safety, and safety culture. A large number of construction safety studies with the variety of topics make it difficult for stakeholders to have an overview of this field. Hence a systematic review of previous studies is paramount for facilitating sharing useful research findings and accessing future trends in construction safety research. A five-step framework was proposed in this review. The analysis focused on publication year, journal title, country/region distribution, organizational level, project phase, project type, innovative technology application and research topic. Three groups of construction safety research were identified. The first group of research is conducted from the perspective of safety management process, such as safety assessment and safety program. The second group aims to explore the impact of individual and group characteristics in relation to construction safety, such as worker behavior, perception, and safety climate. The third group utilizes accident/incident data to improve safety performance. In order to better capture construction safety research trend, these studies were discussed from chronological and thematic perspectives. Four main research findings including construction safety research perspectives, construction safety research trends, innovative technology applications in construction safety, and safety information flow, were gained. Finally, this review identified and discussed research gaps and corresponding agenda which can serve as guidance for future construction safety research.

5 0
2 years ago
Comet Company is owned equally by Pat and his sister Pam, each of whom hold 100 shares in the company. Comet redeems 50 of Pam's
forsale [732]

Answer:

Comet's E&P will decrease by $50,000 due to the exchange.

Explanation:

50 of Pam's shares are worth 50 x $1,000 = $50,000, since the corporation is redeeming them, it will do so by decreasing its earnings and profits (retained earnings account).

Generally when larger corporations buy back stocks (AKA treasury stocks), they will credit cash and debit treasury stocks, but since Pam's stocks are being retired, they are not going to be held as treasury stocks, therefore E&P must decrease.

6 0
3 years ago
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