1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
IrinaVladis [17]
3 years ago
5

The risk-free rate of return is 7.5%, the expected rate of return on the market portfolio is 14%, and the stock of Xyrong Corpor

ation has a beta coefficient of 2.8. Xyrong pays out 40% of its earnings in dividends, and the latest earnings announced were $25 per share. Dividends were just paid and are expected to be paid annually. You expect that Xyrong will earn an ROE of 16% per year on all reinvested earnings forever.What is the intrinsic value of a share of Xyrong stock?if the market price of a share is currently $67, and you expect the market price to be equal to the intrinsic value one year from now, calculate the price of the share after one year from now.What is your expected one-year holding-period return on Xyrong stock?
Business
1 answer:
Pepsi [2]3 years ago
7 0

Answer:

The intrinsic value of a share of Xyrong stock = $68.075.

the expected one-year holding-period return on Xyrong stock = 0.27716.

Explanation:

Without mincing words, let's dive straight into the solution to the question above:

The intrinsic value of a share of Xyrong stock can be calculated as given below;

The intrinsic value of a share of Xyrong stock = [ (1 + growth rate) × G° ] ÷ (cost of equity - growth rate). -------------------(1).

=> Where, growth rate = 16%( 1 - 0.4) = 9.6% = 0.96.

=> Cost of equity = 2.8( 14 - 7.5) + 7.5 = 25.7% = 0.257.

Thus, slotting in the values into the equation (1) above, we have;

The intrinsic value of a share of Xyrong stock = [ (1 + growth rate) × G° ] ÷ (cost of equity - growth rate).

The intrinsic value of a share of Xyrong stock = [( 1 + 0.96) × 10] ÷ (0.257 - 0.96) = $68.075.

Hence, the expected one-year holding-period return on Xyrong stock = G° × ( 1 + growth rate) + [ (The intrinsic value of a share of Xyrong stock) × (1 + growth rate )] - market price of share ÷ market price of share.

= [ 10 × ( 1 + 0.96) + {$68.075 × (1 + 0.96)} - 67] ÷ 67 = 0.27716.

You might be interested in
In addition to the positive welfare effects that free trade has on an economy, there are a variety of other benefits of internat
otez555 [7]

Increased competition.

Answer: Option 3.

<u>Explanation:</u>

Free trade is the trade of goods and services from one country to the other country without any boundations and without any restrictions. As a result of the free trade, the consumers have more variety of a particular good in the market.

In this particular case, since Rooby is no longer the only producer of this particular because of the free trade in the market, he can not charge too high for a particular good and it increases the competition between the producers.

5 0
3 years ago
Mary has already won her case at the U.S. Court of Appeals. When the case is reviewed by the Supreme Court, only eight judges ar
belka [17]

Answer:

B. Mary will win the case as she had already won at the U.S. Court of Appeals.

Explanation:

When 8 judges review Mary's case and is split 4-4 she will win the case as she has won it in the lower court. However the case will not set a precedent for future cases.

This is a rare occurrence as there are usually 9 justices presiding in supreme court reviews.

6 0
3 years ago
Respas Corporation has provided the following data concerning an investment project that it is considering:
Ber [7]

Answer:

$462

Explanation:

The computation of the net present value is shown below:

= Present value of all year cash inflows by considering the salvage value - initial investment

where,

Present value of all year cash inflows by considering the salvage value is

= Annual cash flows × PVIFA factor for 4 years at 15% + Salvage value × discount rate at 4 year on 15%

= $54,000 × 2.855 + $11,000 × 0.572

= $154,170 + $6,292

= $160,462

And, the initial investment is $160,000

So, the net present value is

= $160,462 - $160,000

= $462

We simply applied the above formula to determine the net present value

Refer to the PVIFA table and discount factor table

This is the answer but the same is provided in the given option

4 0
3 years ago
A production line has three machines A, B, and C, with reliabilities of .99, .96, and .93, respectively. The machines are arrang
Lina20 [59]

Answer: plan B is better

Explanation:

Machines _____reliability

__A__________ 0.99

__B__________ 0.96

__C__________ 0.93

Backup machines A, B, C also have similar probabilities :

PLAN 1:

P(success) = 0.99 * 0.96 * 0.93 = 0.8839

P(line fails) = 1 - 0.8839 = 0.1161

P(backup) = 0.99 * 0.96 * 0.93 = 0.8839

P(success) + [p(line fails) * p(backup)]

0.8839 + (0.1161 * 0.8839)

0.8839 + 0.10262079

= 0.9865

Plan B:

Backup is provided for each machine ;

P(success) + [p(line fails) * p(backup)] for each of machine A, B and C

Machine A:

0.99 + (1 - 0.99)*0.99 = 0.9999

Machine B:

0.96 + (1 - 0.96)*0.96 = 0.9984

Machine C:

0.93 + (1 - 0.93)*0.93 = 0.9951

A*B*C = 0.9999 * 0.9984 * 0.9951 = 0.9934

Plan B has greater probability of success.

2.) plan A provides a central or one single backup option should any of the machines fail. However, plan B provides separate backup options for each of machines A, B and C.

3.) choosing a plan may also depend on the cost of providing each backup plan.

3 0
3 years ago
Mark has a weekly income of $40, which he plans to spend on coffee and subway
strojnjashka [21]

The opportunity cost of a cup of coffee is  $4.

weekly income = $40

The price of a cup of coffee = $4

The price of a subway ticket is $2

Theopportunity cost of particular interest is the cost or advantage given up via carrying out that activity, relative to conducting an alternative pastime. more truly, it approaches if you chose one activity (for example, the funding you're giving up the possibility to do a one-of-a-kind alternative. The most reliable interest is the one that, net of its possible cost, provides a greater return compared to every other sport.

As a representation opportunity cost of the relationship between shortage and preference, the objective of possible value is to ensure the efficient use of scarce sources. It includes all related charges of a choice, both explicit and implicit. opportunity cost additionally includes the utility or monetary gain a character misplaced, if it's miles indeed more than the eco geo or actions taken

Hence, The opportunity cost of a cup of coffee is  $4.

Learn more about opportunity cost here:-brainly.com/question/1549591

#SPJ9

8 0
1 year ago
Other questions:
  • How should the davises react to adidas' planned acquisition of reebok? what aspects of new balance's operations strategy should
    7·1 answer
  • All of the following are reasons people favor home ownership EXCEPT:
    10·1 answer
  • In which part of a résumé would you mention the names and contact details of your previous employers? In your résumé, you need t
    10·2 answers
  • Quince products is a small company in southern california that makes jams and preserves. recently, a sales rep from one of the c
    7·1 answer
  • On March 1, 2021, Stratford Lighting issued 10% bonds, dated March 1, with a face amount of $690,000. The bonds sold for $678,00
    10·1 answer
  • According to the PPC, as we produce more military goods and our resources remain constant, what will happen to the production of
    8·1 answer
  • A warehouse manager who is placing an order for maintenance supplies for delivery vehicles would be making a programmed decision
    7·1 answer
  • On January 1, 2021, Majestic Mantles leased a lathe from Equipment Leasing under a finance lease. Lease payments are made annual
    7·1 answer
  • Describe the nature and types of businesses. ​
    9·1 answer
  • global marketers such as pepsico have embraced technology that enables them to form better relationships and communicate with cu
    11·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!