I would say the answer is age. I hope this helps !
Answer:
don't know how to help you with your answer sssssorryyyyyyy
Answer:
1. $146,666.67
2. $129,411.76
Explanation:
In this question, we apply the Capital Asset Pricing Model (CAPM) formula which is shown below
Expected rate of return = Risk-free rate of return + Beta × (Market rate of return - Risk-free rate of return)
1. For computing the value of the firm, first we have to compute the Expected rate of return which is shown below:
= 5% + 0.5 × (10% - 5%)
= 5% + 0.5 × 5%
= 5% + 2.5%
= 7.5%
Now the value of firm would be
= Expected cash flows ÷ Expected rate of return
= $11,000 ÷ 7.5%
= $146,666.67
2. If beta is 0.7, then the expected rate of return and the value of firm would be
= 5% + 0.7 × (10% - 5%)
= 5% + 0.7 × 5%
= 5% + 3.5%
= 8.5%
Now the value of firm would be
= Expected cash flows ÷ Expected rate of return
= $11,000 ÷ 8.5%
= $129,411.76
Answer:
Consider the following calculation
Explanation:
Year 1 dividend = 2.85 (1 + 30%) = 3.705
Year 2 dividend = 3.705 (1 + 30%) = 4.8165
Year 3 dividend = 4.8165 (1 + 30%) = 6.26145
Year 4 dividend = 6.26145 + 2.4 = 8.66145
Year 5 dividend = 8.66145 (1 + 2%) = 8.834679
Value at year 4 = D5 / required rate - growth rate
Value at year 4 = 8.834679 / 0.108 - 0.02
Value at year 4 = 8.834679 / 0.088
Value at year 4 = 100.39408
Share price = Present value of cash inflows
Share price = 3.705 / (1 + 0.108)1 + 4.8165 / (1 + 0.108)2 + 6.26145 / (1 + 0.108)3 + 8.66145 / (1 + 0.108)4 + 100.39408 / (1 + 0.108)4
Share price = $84.23
