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andrew-mc [135]
3 years ago
13

The risk-free rate of return is 5.5%, the expected rate of return on the market portfolio is 17%, and the stock of Xyrong Corpor

ation has a beta coefficient of 2.7. Xyrong pays out 25% of its earnings in dividends, and the latest earnings announced were $10.00 per share. Dividends were just paid and are expected to be paid annually. You expect that Xyrong will earn an ROE of 18% per year on all reinvested earnings forever.
a. What is the intrinsic value of a share of Xyrong stock? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)
Intrinsic value $
b. If the market price of a share is currently $8.00, and you expect the market price to be equal to the intrinsic value 1 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. Omit the "%" sign in your response.)
Expected one-year holding-period return %
Business
1 answer:
Katen [24]3 years ago
8 0

Answer:

1. $12.31

2. -11.96%

Explanation:

a) Calculation to determine the intrinsic value of a share of Xyrong stock

First step is to calculate the Required Return

Using this formula

Required Return = Risk-free Rate + [Beta * (Expected Market Return - Risk-free Rate)]

Let plug in the formula

Required Return= 5.5% + [2.7 * (17% - 5.5%)]

Required Return= 5.5% + 31.05% = 36.55%

Second step is to calculate g using this formula

g = ROE * (1 - Payout Ratio)

Let plug in the formula

g= 18% * (1 - 0.25)

g= 13.5%

D0 = EPS0 * Payout Ratio = $10 * 0.25 = $2.50

P0 = [D0 * (1 + g)] / [r - g]

= [$2.50 * (1 + 0.135)] / [0.3655 - 0.135]

= $2.8375 / 0.2305 = $12.31

b). Holding Period Return = [P1 + D1 - P0] / P0

= [$8 + $2.8375 - $12.31] / $12.31 = -$1.4727 / $12.31 = -0.1196, or -11.96%

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According to state agencies that monitor day care facilities, a typical sanitation requirement is that one toilet and handwashin
kompoz [17]
After the word every the answer would be "students"

Final answer,

According to state agencies that monitor day care facilities, a typical sanitation requirement is that one toilet and handwashing fixture be provided for <span>every student</span>


6 0
3 years ago
You bought one of Great White Shark Repellant Co.’s 5.8 percent coupon bonds one year ago for $1,030. These bonds make annual pa
defon

Answer:

total rate of return on the Bond = 9.40%

Explanation:

given data

coupon bonds  = 5.8%

bonds price =  $1,030

maturity time = 14 year

required return on the bonds = 5.1 percent

solution

we know here market price of the bond is Present Value of Coupon Payments + Present face Value  

so that face Valueof  bond = $1,000

and here annual Coupon Amount will be

annual coupon amount = $1000 × 5.80%

annual coupon amount = $58

and here Market Price of the Bond will be

Market Price of Bond = Present Value of Coupon Payments + Present face Value    ......................1

here Present Value of Coupon Payments  at PVIFA 5.10% and 14 Years

Present Value Annuity Inflow Factor (PVIFA) =  \frac{1-(1/(1+r)^t}{r}  ....2

Present Value Annuity Inflow Factor =  \frac{1-(1/(1+0.0510)^14}{0.0510}

Present Value Annuity Inflow Factor = 9.83566

and

Present Value Inflow Factor (PVIF) 5.10%, 14 Years= \frac{1}{(1+r)^t}   ...........3

Present Value Inflow Factor (PVIF) = \frac{1}{(1+0.0510)^14}

Present Value Inflow Factor = 0.49838

so

Market Price of Bond = ( $58 × 9.83566 ) + ( $1,000 × 0.49838 )

Market Price of Bond = $1,068.85

so total rate of return on the Bond will be

total rate of return on the Bond = [ { Annual Coupon Amount + ( Change in Bond Price ) } ÷ Current Price]  ...............4

total rate of return on the Bond = \frac{58+(1068.85-1030)}{1030}

total rate of return on the Bond = 9.40%

5 0
3 years ago
On October 10, the stockholders’ equity of Sherman Systems appears as follows. Common stock–$10 par value, 74,000 shares authori
uysha [10]

Answer:

1,                            Journal entries

Date    Account and explanation         Debi$       Credit$

          Treasury stock (5200*27)          140,400

           Cash                                                              140,400

           (To record purchase treasury stock)

            Cash (1,050*33)                           34,650  

            Paid in capital from sale of treasury stock    6,300

            Treasury stock (1,050*27)                               28,350

             (To record sale of treasury stock)  

              Cash (4,150*22)                             91,300

              Paid in capital from sale of            6,300

              treasury stock  

              Retained earnings                         14,450

              Treasury stock (4,150*27)                                112,050

              (To record sale of treasury stock)  

2.  Revised equity section

<u>Contributed capital</u>

Common Stock                             740,000

Paid in capital in excess of           <u>226,000</u>

par value-Common Stock

Total paid in capital                        966,000

Retained earnings                         <u> 880,000</u>

Total                                                1,846,000

Less: Treasury stock                      <u>(140,400)</u>

Total Stockholder's equity            $<u>1,705,600</u>

5 0
3 years ago
This is an organization of workers that negotiates with employers for better pay
a_sh-v [17]

Answer: The correct answer is a labor union.

Explanation: A labor union is an organized group of workers who are often in a common trade or profession. The union is formed to protect and further the rights and interests of the members. This normally includes collectively bargaining, where the labor union negotiates the salaries and benefits that will be paid to all of its members.

5 0
3 years ago
Wholesale insurance brokers (also called excess and surplus lines brokers) are intermediaries between:
valina [46]

Answer:

3. an insurance agent and an insurance company

Explanation:

Insurance simply means protection from financial loss.

Types of insurance are:

1. Property insurance

2. Life or personal insurance

3. Marine insurance

4. Fire insurance

5. Liability insurance

6. Social insurance

7. Guarantee insurance

Insurance Agents are people that work for insurance companies to reach out to new and existing customers to sell insurance. An insurance agent acts as an intermediary between an insured and the marketplace

An insured means a person or organization covered by insurance. They are like consumers.

Insurance company (insurer) is a business that provides coverage, in the form of compensation resulting from loss, damage or injury, treatment or hardship in exchange for premium payments.

Wholesale Broker is a type of insurance broker who acts as an intermediary between a retail broker (insurance agent ) and an insurer while having no contact with the insured

6 0
3 years ago
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