The risk-free rate of return is 9.0%, the expected rate of return on the market portfolio...

The risk-free rate of return is 9.0%, the expected rate of return on the market portfolio is 14%, and the stock of Xyrong Corporation has a beta coefficient of 2.0. Xyrong pays out 50% of its earnings in dividends, and the latest earnings announced were $20 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 intrinsic value of a share of Xyrong stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Intrinsic value $

b-1. If the market price of a share is currently $108, 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.)

Price $

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.)

Expected one-year holding-period return %

Solutions

Expert Solution

jeff jeffy answered 9 months ago

Next > < Previous

Related Solutions

The risk-free rate of return is 9.0%, the expected rate of return on the market portfolio...

The risk-free rate of return is 9.0%, the expected rate of return on the market portfolio is 14%, and the stock of Xyrong Corporation has a beta coefficient of 2.0 resulting in a required rate of return of 19.00%. Xyrong pays out 50% of its earnings in dividends, and the latest earnings announced were $20 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...

The risk-free rate of return is 6%, the expected rate of return on the market portfolio...

The risk-free rate of return is 6%, the expected rate of return on the market portfolio is 15%, and the stock of Xyrong Corporation has a beta coefficient of 2.3. Xyrong pays out 45% of its earnings in dividends, and the latest earnings announced were $9.00 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 10.0%, the expected rate of return on the market portfolio...

The risk-free rate of return is 10.0%, the expected rate of return on the market portfolio is 17%, and the stock of Xyrong Corporation has a beta coefficient of 1.6. Xyrong pays out 30% 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 20% per year on all reinvested earnings forever. a. What is the...

The risk-free rate of return is 6%, the expected rate of return on the market portfolio...

The risk-free rate of return is 6%, the expected rate of return on the market portfolio is 14%, and the stock of Xyrong Corporation has a beta coefficient of 1.3. Xyrong pays out 50% of its earnings in dividends, and the latest earnings announced were $8.00 per share. Dividends were just paid and are expected to be paid annually. You expect that Xyrong will earn an ROE of 15% per year on all reinvested earnings forever. a. What is the...

Given that the risk-free rate is 5% and the expected return on the market portfolio is...

Given that the risk-free rate is 5% and the expected return on the market portfolio is 10%, if bush company's beta is 2, what is Dow's expected return? A. 18% B. 21% C. 10% D. 15% What is the best measure of risk for an asset that is to be held in isolation (one stock portfolio)? A. market risk B. Beta C. Diversifiable risk D. Standard deviation Which is the best measure of risk for choosing an asset which is...

The risk-free rate is 8%, the expected return on the market portfolio is 15%, and the...

The risk-free rate is 8%, the expected return on the market portfolio is 15%, and the stock of Hudson Corp. has a beta of 1.2. Hudson pays 40% of its earnings as dividends. The earnings next year are expected to be $12 per share. You expect Hudson to earn an ROE of 20%. A. What is the value of Hudson Corp. stock? B. What is the present value of growth opportunities? C. What is the P/E ratio of Hudson Corp.?

The risk-free rate is 5%, the expected return on the market portfolio is 14%, and the...

The risk-free rate is 5%, the expected return on the market portfolio is 14%, and the standard deviation of the return on the market portfolio is 25%. Consider a portfolio with expected return of 16% and assume that it is on the efficient frontier. (a) What is the beta of this portfolio? (b) What is the standard deviation of its return? (c) What is its correlation with the market return? (d) Draw the portfolio in two diagrams: one in the...

Given that the risk-free rate is 5%, the expected return on the market portfolio is 20%,...

Given that the risk-free rate is 5%, the expected return on the market portfolio is 20%, and the standard deviation of returns to the market portfolio is 20%, answer the following questions: You have $100,000 to invest. How should you allocate your wealth between the risk free asset and the market portfolio in order to have a 15% expected return? What is the standard deviation of your portfolio in (a)? Now suppose that you want to have a portfolio, which...

The risk free rate of return is 3%, the expected return on themarket portfolio is...

The risk free rate of return is 3%, the expected return on the market portfolio is 11% and the stock of Xyr Corp has a beta coefficient of 1.2. Kyr pays out 35% of its earnings in dividends and the latest earnings announced were $7.50/share. Dividends were just paid and are expected to be paid annually. You expect that Xyr will earn an RoE of 19% per year on all reinvested earnings forever.a. What is the intrinsic value of a...

Suppose the risk-free rate is 5.2 percent and the market portfolio has an expected return of...

Suppose the risk-free rate is 5.2 percent and the market portfolio has an expected return of 11.9 percent. The market portfolio has a variance of .0482. Portfolio Z has a correlation coefficient with the market of .38 and a variance of .3385 According to the capital asset pricing model, what is the expected return on Portfolio Z? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).) Expected return ????? %

Subjects