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Lelechka [254]
3 years ago
6

Assume that the risk-free rate of interest is 6% and the expected rate of return on the market is 16%. A share of stock sells fo

r $50 today. It will pay a dividend of $6 per share at the end of the year. Its beta is 1.2. What do investors expect the stock to sell for at the end of the year
Business
1 answer:
Tju [1.3M]3 years ago
3 0

Answer: Price of stock at year end =$53

Explanation:

we first compute the Expected rate of return using the CAPM FORMULAE that

Expected return =risk-free rate + Beta ( Market return - risk free rate)

Expected return=6% + 1.2 ( 16%-6%)

Expected return= 0.06 + 1.2 (10%)

Expected return=0.06+ 0.12

Expected return=0.18

Using the formulae Po= D1 / R-g  to find the growth rate

Where Po= current price of stock at $50

D1= Dividend at $6 at end of year

R = Expected return = 0.18

50= 6/ 0.18-g

50(0.18-g) =6

9-50g=6

50g=9-6

g= 3/50

g=0.06 = 6%

Now that we have gotten the growth rate and expected return, we can now determine the price the investors are expected to sell the stock at the end of year.

Price of stock = D( 1-g) / R-g

= 6( 1+0.06)/ 0.18 -0.06

=6+0.36/0.12

=6.36/0.12=  $53

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The primary goal of a financial manager is​ ________. A. maximizing wealth B. minimizing return C. minimizing risk D. maximizing
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Answer:

D. maximizing profit

Explanation:

Maximizing profit because maximizing wealth may also maximize expenses by a certain limit . Minimizing return or risk may not result in maximum profit.

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8 0
3 years ago
Connor Company produces speaker systems for cars. Estimated sales (in units) in January are 40,000; in February 37,000; and in M
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Answer:

Our answer is E 114,420

Explanation:

Production budget:    

                                                 Jan   Feb            Mar

Budgeted sales units  40000   37000           34000

Add: Ending inventory        12950   11900  

Total requirement         52950   48900  

Less: Beginning inventory 14000    12950  

Budgeted production units 38950 35950  

Purchase budget of Box:    

                                               Jan           Feb  

Budgeted production  38950 35950  

Bx required per unit   3          3  

Total requirement of Boxes 116850 107850  

Add: Ending inventory         21570  

Total boxes needed  138420  

Less: Beginning inventory 24000  

Budgeted Purchase boxes 114420  

Answer is E. 114420    

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Answer:

It should listen to his mother.

Explanation:

This week cash flow handled the fixed cost of 10 to Raymond's brother.

His father is not considering that so it thinks the business flops.

Now that fixed cost are paid the following weeks his gains will increase entirely based on the sales volume so, it is better to continue the business for the next three weeks.

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3 years ago
Ford Motor Corporation is considering purchasing new technology that will increase productivity by twenty percent. If Ford Motor
Alborosie

Answer:

E. The demand for loanable funds increases.

5 0
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