Question

The current risk-free rate is 4 percent and the market risk premium is 5 percent. You...

The current risk-free rate is 4 percent and the market risk premium is 5 percent. You are trying to value ABC company and it has an equity beta of 0.9. The company earned $3.50 per share in the year that just ended. You expect the company's earnings to grow 4 percent per year. The company has an ROE of 11 percent.

  1. What is the value of the stock? Do not round intermediate calculations. Round your answer to the nearest cent.

    $  

  2. What is the present value of the growth opportunity? Do not round intermediate calculations. Round your answer to the nearest cent.

    $  

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 current risk-free rate is 2 percent and the market risk premium is 3 percent. You...
The current risk-free rate is 2 percent and the market risk premium is 3 percent. You are trying to value ABC company and it has an equity beta of 0.7. The company earned $3.50 per share in the year that just ended. You expect the company's earnings to grow 2 percent per year. The company has an ROE of 12 percent. What is the value of the stock? Do not round intermediate calculations. Round your answer to the nearest cent....
The current risk-free rate is 3 percent and the market risk premium is 5 percent. You...
The current risk-free rate is 3 percent and the market risk premium is 5 percent. You are trying to value ABC company and it has an equity beta of 0.7. The company earned $2.00 per share in the year that just ended. You expect the company's earnings to grow 3 percent per year. The company has an ROE of 13 percent. What is the value of the stock? Do not round intermediate calculations. Round your answer to the nearest cent....
The risk-free rate of return is 4 percent, and the expected return on the market is...
The risk-free rate of return is 4 percent, and the expected return on the market is 7.1 percent. Stock A has a beta coefficient of 1.4, an earnings and dividend growth rate of 6 percent, and a current dividend of $1.50 a share. Do not round intermediate calculations. Round your answers to the nearest cent. What should be the market price of the stock? $ If the current market price of the stock is $45.00, what should you do? The...
The risk-free rate of return is 2 percent, and the expected return on the market is...
The risk-free rate of return is 2 percent, and the expected return on the market is 7.8 percent. Stock A has a beta coefficient of 1.7, an earnings and dividend growth rate of 7 percent, and a current dividend of $3.00 a share. Do not round intermediate calculations. Round your answers to the nearest cent. If the beta coefficient falls to 1.4 and the other variables remain constant, what will be the value of the stock? $___________ Explain why the...
A stock has an expected return of 10.2 percent, the risk-free rate is 5 percent, and...
A stock has an expected return of 10.2 percent, the risk-free rate is 5 percent, and the market risk premium is 9 percent. What must the beta of this stock be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Multiple Choice .5778 .7562 .5168 .4333 .6008
The Clipper Sailboat Company is expected to earn $4 per share next year. The company will...
The Clipper Sailboat Company is expected to earn $4 per share next year. The company will have a return on equity of 17 percent and the company will grow 5 percent in the future. The company has a cost of equity of 15 percent. Given that information, answer the following questions. What is the value of the company's stock? Do not round intermediate calculations. Round your answer to the nearest cent. $   What is the present value of the growth...
With a risk free rate of 3.8% and a market-risk premium of 8.1% , a stock's...
With a risk free rate of 3.8% and a market-risk premium of 8.1% , a stock's expected rate of return is 15.8%. The following year, the market-risk premium decreases by 1% but the stock's beta and the risk free rate remain the same. What will be the expected rate of return on the stock for that year? answer as a percent return to the nearest hundreth as in xx.xx
The company's stock has a beta equal to 1.22 , the risk-free rate is 4.5 percent,...
The company's stock has a beta equal to 1.22 , the risk-free rate is 4.5 percent, and the market risk premium is 7.0 percent. What is your estimate of the stock's required rate of return? Answer in a percentage without the % sign, and round it to two decimal places, i.e., 10.54 for 10.54% (or 0.1054). A company has just paid a dividend of $ 3 per share, D0=$ 3 . It is estimated that the company's dividend will grow...
In February 2017 the risk-free rate was 4.37 percent, the market risk premium was 7 percent,...
In February 2017 the risk-free rate was 4.37 percent, the market risk premium was 7 percent, and the beta for Twitter stock was 1.56. What is the expected return that was consistent with the systematic risk associated with the returns on Twitter stock? (Round answer to 2 decimal places, e.g. 17.54%.)
A company had $17 of sales per share for the year that just ended. You expect...
A company had $17 of sales per share for the year that just ended. You expect the company to grow their sales at 5.75 percent for the next five years. After that, you expect the company to grow 3.25 percent in perpetuity. The company has a 15 percent ROE and you expect that to continue forever. The company's net margins are 6 percent and the cost of equity is 11 percent. Use the free cash flow to equity model to...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT