Question

The risk-free rate of return is 9.5%, the expected rate of return on the market portfolio...

The risk-free rate of return is 9.5%, the expected rate of return on the market portfolio is 16%, and the stock of Xyrong Corporation has a beta coefficient of 3.0. Xyrong pays out 60% of its earnings in dividends, and the latest earnings announced were $15 per share. Dividends were just paid and are expected to be paid annually. You expect that Xyrong will earn an ROE of 10% 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.)

b-1.

If the market price of a share is currently $36, 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. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
b-2.

What is your expected one-year holding-period return on Xyrong stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The risk-free rate of return is 5.5%, the expected rate of return on the market portfolio...
The risk-free rate of return is 5.5%, the expected rate of return on the market portfolio is 14%, and the stock of Xyrong Corporation has a beta coefficient of 1.9. Xyrong pays out 50% of its earnings in dividends, and the latest earnings announced were $7.50 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...
The risk-free rate of return is 8%, the expected rate of return on the market portfolio...
The risk-free rate of return is 8%, the expected rate of return on the market portfolio is 15%, and the stock of Xyong Corporation has a beta of 1.2. Xyong pays out 40% of its earnings in dividends, and the latest earnings announced were $10 per share. Dividends were just paid and are expected to be paid annually. You expect that Xyong will earn an ROE of 20% per year on all reinvested earnings forever. If the market price of...
The risk-free rate of return is 8%, the expected rate of return on the market portfolio...
The risk-free rate of return is 8%, the expected rate of return on the market portfolio is 15%, and the stock of ABC Company has a beta coefficient of 1.2. ABC Company pays out 40% of its earnings in dividends, and the latest earning announced were $10 per share. Dividend were just paid and are expected to be paid annually. You expect that ABC Company will earn a ROE of 20% per year on all reinvested earnings forever
Assume that the risk-free rate of interest is 4% and the expected rate of return on...
Assume that the risk-free rate of interest is 4% and the expected rate of return on the market is 14%. A share of stock sells for $55 today. It will pay a dividend of $6 per share at the end of the year. Its beta is 1.5. What do investors expect the stock to sell for at the end of the year? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
The Digital Electronic Quotation System (DEQS) Corporation pays no cash dividends currently and is not expected...
The Digital Electronic Quotation System (DEQS) Corporation pays no cash dividends currently and is not expected to for the next five years. Its latest EPS was $11.50, all of which was reinvested in the company. The firm’s expected ROE for the next five years is 20% per year, and during this time it is expected to continue to reinvest all of its earnings. Starting in year 6, the firm’s ROE on new investments is expected to fall to 15%, and...
Consider the following information: Portfolio Expected Return Beta Risk-free 12 % 0 Market 13.8 1.0 A...
Consider the following information: Portfolio Expected Return Beta Risk-free 12 % 0 Market 13.8 1.0 A 11.8 0.9 a. Calculate the expected return of portfolio A with a beta of 0.9. (Round your answer to 2 decimal places.) Expected return             % b. What is the alpha of portfolio A. (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) Alpha             % c. If the simple CAPM is valid, is the above situation possible? Yes...
3.) The real risk-free rate is 2%, and inflation is expected to be 3% for the...
3.) The real risk-free rate is 2%, and inflation is expected to be 3% for the next 2 years. A 2-year Treasury security yields 5.6%. What is the maturity risk premium for the 2-year security? Round your answer to one decimal place. 4.) Renfro Rentals has issued bonds that have an 8% coupon rate, payable semiannually. The bonds mature in 10 years, have a face value of $1,000, and a yield to maturity of 7.5%. What is the price of...
Problem 18-17 The Digital Electronic Quotation System (DEQS) Corporation pays no cash dividends currently and is...
Problem 18-17 The Digital Electronic Quotation System (DEQS) Corporation pays no cash dividends currently and is not expected to for the next five years. Its latest EPS was $19.00, all of which was reinvested in the company. The firm’s expected ROE for the next five years is 17% per year, and during this time it is expected to continue to reinvest all of its earnings. Starting in year 6, the firm’s ROE on new investments is expected to fall to...
Investors require an after-tax rate of return of 13% on their stock investments. Assume that the...
Investors require an after-tax rate of return of 13% on their stock investments. Assume that the tax rate on dividends is 30% while capital gains escape taxation. A firm will pay a $3 per share dividend 1 year from now, after which the firm's stock is expected to sell at a price of $22. a. Find the current price of the stock. (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. Find the expected before-tax rate...
The Generic Genetic (GG) Corporation pays no cash dividends currently and is not expected to for...
The Generic Genetic (GG) Corporation pays no cash dividends currently and is not expected to for the next four years. Its latest EPS was $7.0, all of which was reinvested in the company. The firm’s expected ROE for the next four years is 27% per year, during which time it is expected to continue to reinvest all of its earnings. Starting in year 5, the firm’s ROE on new investments is expected to fall to 26% per year. GG’s market...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT