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Artemon [7]
3 years ago
12

Todd Mountain Development Corporation is expected to pay a dividend of $3 in the upcoming year. Dividends are expected to grow a

t the rate of 11% per year. The risk-free rate of return is 8%, and the expected return on the market portfolio is 18%. The stock of Todd Mountain Development Corporation has a beta of 0.80. Using the constant-growth DDM, the intrinsic value of the stock is _________. Multiple Choice 8.80 11.11 27.27 60.00
Business
1 answer:
PilotLPTM [1.2K]3 years ago
7 0

Answer:

the intrinsic value of the stock is $60

Explanation:

The computation of the intrinsic value of the stock is as follows:

But before that the cost of equity is

The Cost of Equity is

= Risk Free Rate + Beta × (Market Return - Risk Free Rate)

= 8% + 0.80 × (18% - 8%)

= 16%

Now

Intrinsic Value is

= Next year Dividend  ÷ (Rate of Return - Growth rate)

= $3 ÷ (16% - 11%)

= $60

hence, the intrinsic value of the stock is $60

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Timothy is a passionate speaker and has a political science degree. He is a natural leader and enjoys a challenge. Suzette also
MA_775_DIABLO [31]

Answer:

b) Tim should be in Governance and Suzette should be in Planning.

Explanation:

Sorry this is a bit late

6 0
3 years ago
Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 27%. The T-bill rate
Mice21 [21]

Answer:

The slope of the CML = (13% - 7%)/25% = 0.24

Explanation:

Given that:

expected rate of return of 17%

standard deviation of 27%.

The T-bill rate is 7%.

You estimate that a passive portfolio invested to mimic the S&P 500 stock index yields an expected rate of return of 13% with a standard deviation of 25%.

The slope of the CML is

Slope of the CML = (Expected return of Market - Risk free return)/Standard deviation of market

The slope of the CML = (13% - 7%)/25% = 0.24

= (0.13 - 0.07) /0.25

= 0.24

8 0
3 years ago
g 3) You are interested in purchasing an apartment complex for $2,000,000 that has Net Operating Income (NOI) of $120,000 and is
Paraphin [41]

Answer:

the cap rate is 6%

Explanation:

The computation of the cap rate is as follows:

= Net operating Income ÷ Current market value of property

= $120,000 ÷  $2,000,000

= .06

=  6%

Hence, the cap rate is 6%

We simply divided the net operating income from the Current market value of property so that the cap rate could come

4 0
3 years ago
When an activity threatens to harm the environment or society, policy makers should consider implementing?
Margarita [4]

<span>When an activity threatens to harm the environment or society, policy makers should consider implementing precautionary measures. Precautionary measures should be taken even if some cause and effect relationships are not fully established scientifically to ensure safety to an environment or society.</span>

5 0
3 years ago
John likes Coca-Cola. After consuming one Coke, John has a total utility of 10 utils. After two Cokes, he has a total utility of
andre [41]

Answer:

A. Increasing Marginal Utility  B.  Yes, John will spend

Explanation:

Total Utility is the total satisfaction from all units of consumption

Marginal Utility is additional satisfaction from an additional consumption unit.

Coca Cola    TU         MU

1                   10         10

2                   25        15 (25-10)

3                   50         25 (25-15)

John's Marginal Utility is increasing each time in succeeding unit over its preceding unit.

b. John having $3, price of a coke = $1: will be willing to spend 1st 2nd & 3rd dollar on coke consumption because - its gainful for him (MU > P) each time.

8 0
3 years ago
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