2) You are thinking about investing in stock in a company which paid a dividend of...

2) You are thinking about investing in stock in a company which paid a dividend of $10 this year and whose dividends you expect to grow at 4 percent a year. The required return is 8 percent. If the price of the stock in the market is $200 a share, should you buy it?

please help me !

Expert Solution

Rahul Sunny answered 2 years ago

a) You are currently thinking about investing in an ordinary share The share recently paid a...

a) You are currently thinking about investing in an ordinary share The share recently paid a dividend of $2.25 and the dividend is expected to grow at a constant rate of 5 per cent p.a. You normally require a return of 14 % p.a. on shares of similar risk.Calculate the value of the share using the Dividend Discount Model (DDM). (b) Ambrose Ltd expects to pay a dividend of $5.90 per share next year. The dividend is then expected to...

You are currently thinking about investing in a stock valued at $24 per share. The stock...

You are currently thinking about investing in a stock valued at $24 per share. The stock recently paid a dividend of $2.20 and its dividend is expected to grow at a rate of 4 percent for the foreseeable future. You normally require a return of 12 percent on stocks of similar risk. Is the stock overpriced, underpriced, or correctly priced? (Round answer to 2 decimal places, e.g. 52.75.) Current value of stock $ The stock is underpriced, correctly priced, overpriced...

Your friend, Martinez, and you are thinking about investing in a company and are discussing the...

Your friend, Martinez, and you are thinking about investing in a company and are discussing the company’s balance sheet. You are both very knowledgeable about the different formats of the balance sheet. You are convinced that the best format is the Unclassified Balance Sheet, but Martinez strongly believes that it is the Classified Balance Sheet. Given what you have read and our discussions in class of Chapter 5 and your prior accounting classes knowledge, give a well-reasoned and detailed argument of...

You are working for the CFO of a small manufacturing company and are thinking about investing...

You are working for the CFO of a small manufacturing company and are thinking about investing in new equipment. The cost of the project is 9,500 today and it pays of 15,000 in ten years. Your beta is 0.2 and the market risk premium is 5%. 1. What is the NPV of the project if the 10-year Treasury (risk-free) rate is 2.6%? 2. What is the NPV if the 10-year Treasury rate is 3.1%?

You are thinking about investing your money in the stock market. You have the following two...

You are thinking about investing your money in the stock market. You have the following two stocks in mind: stock A and stock B. You know that the economy can either go in recession or it will boom. Being an optimistic investor, you believe the likelihood of observing an economic boom is two times as high as observing an economic depression. You also know the following about your two stocks: State of the Economy RA RB Boom –2% 10% Recession...

You are thinking about investing money in the stock market and have narrowed your choices to...

You are thinking about investing money in the stock market and have narrowed your choices to one of two stocks: TD Bank or Cenovas Energy. For TD Bank you have the following statistics: • Mean monthly closing price: $75.00 • Sample standard deviation: $6.00 The monthly closing stock prices of Cenovas Energy for the last eight months is shown below: Closing Stock Price: ($) 14.00 14.50 11.00 13.00 13.75 11.00 8.75 10.00 Calculate the mean stock price of Cenovas Energy. [2 marks] Calculate the standard deviation for the sample prices...

A stock just paid a dividend of $2. The stock is expected to increase its dividend...

A stock just paid a dividend of $2. The stock is expected to increase its dividend payment by 50% per year for the next 3 years. After that, dividends will grow at a rate of 5% forever. If the required rate of return is 7%, what is the price of the stock today?

You bought Sumsung stock for $45 on April 1. The stock paid a dividend of $2...

You bought Sumsung stock for $45 on April 1. The stock paid a dividend of $2 on July 1, and had a price of $55. It is now Oct. 1, and the stock price is $50. Treasury bills yield 1%. 1. What was the arithmetic average quarterly return? 2. What was the standard deviation of quarterly returns? 3. What's your best guess for the Sharpe ratio of Samsung stock for the next quarter?

3. Suppose you are thinking of investing $100,000 in stock indexes. You are currently considering investing...

3. Suppose you are thinking of investing $100,000 in stock indexes. You are currently considering investing either in the financial sector or the technolgy sector but the returns will depend on the state of the economy. The following table summarizes the estimated net profts that would be realized during the next two years for each of the two investment alternatives you are considering. State of the Economy Good Economy Poor Economy Healthcare $60,000 $-10,000 Decision Alternative Technology $90,000 $-50,000 Probability...

ABC company. paid a dividend of $2 on its stock. The growth rate of dividends is...

ABC company. paid a dividend of $2 on its stock. The growth rate of dividends is expected to be a constant 4 percent per year, indefinitely. Investors require an 12 percent return on the stock for the first year, a 11percent return in the second year, a 10 percent return for the next four years and an 9 percent return thereafter. What is the current price for the stock?

Question