A firm is expected to pay a dividend of $1.35 next year and $1.50 the following year. Financial analysts believe the stock will be at their price target of $68 in two years. Compute the value of this stock with a required return of 10 percent

A firm is expected to pay a dividend of $1.35 next year and $1.50 the following year. Financial analysts believe the stock will be at their price target of $68 in two years. Compute the value of this stock with a required return of 10 percent

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter31: Capital Markets

Section: Chapter Questions

Problem 8E

See similar textbooks

Related questions

Q: 7. Product & Cost Curves: Numerical Cobb-Douglas Case > Continue with the general functions from the...

Q: In statistical process control, the hourly samples are taken. The sample means are: 156.46, 199.62. ...

A: Answer is given below ...

Q: (constant dollars) Proouctvty uing 2010 chogy $120,000 00.000 60.000 Productty using 1H6 technsingy ...

A: The production function depicts the technical association between the quantities of output (Q) that ...

Q: real GDP exceeds potential GDP, then employment is nemployment rate. full employment and the unemplo...

A: Okun's law states the inverse relationship between unemployment and GDP. According to Okun's law: 2...

Q: Fill in the following table with the quantity sold, the price buyers pay, and the price sellers rece...

A: Given: Tax=$20.30

Q: Plant I of XYZ manufacturing organisation employs 5 production and 3 maintenance engineers, another ...

Q: The handcart market contains many identical firms and operates perfectl competitively. Each firm has...

A: Total Cost function : 400 + 5q + q2 In perfectly competitive market optimal production level is achi...

Q: The salary of a consumer increased from ¢90, 000 to ¢110,000, which represents his salary for 2021 a...

A: Given: Salary in 2021=90000 Salary in 2022=110000

Q: According to the net exports effect, as the price level falls relative to the rest of the world, Gr...

A: The Net export is difference between the export and import. The change in the price level affects th...

Q: 2. The following data is given for the monetary sector of the economy. Transaction demand for money,...

Q: A consumer is faced with the following utility function, U(x1 x2)=(xp1 1+xp2)1/p, where 0<p<1. The c...

Q: What is Development Planning? Why is there a need for economic development planning?

A: The creation of wealth from which the benefits of the community are being realized is known as econo...

Q: Fill in the following table, assuming that the firm pays a rent of $1000 and wages equal to $600 per...

A: Given:Rent (Fixed Cost)=$1000Wages (Variable Cost)=$600n per workerWe know,Total Cost= Fixed Cost+(N...

Q: Suppose a small country initially imports 100 units of a good. Then it imposes a tariff of $5 that r...

A: A net welfare gain refers to the impact of a government policy, or a decision by firms, on total eco...

Q: In the model of monopolistic competition, compared to a firm with higher productivity, a firm with l...

A: Monopolistic competition: - monopolistic market structure is the structure in which there is a large...

Q: Write down and briefly discuss the six Kaldor stylized facts about economic growth in the time serie...

A: Kaldor growth model - He focused on capital accumulation through technical progress. Nicholas Kaldor...

Q: Assume that the demand curve is a straight line. If the price per unit of a good rises from $2.40 to...

A: Point elasticity of demand = dQ/dP * P/Q Arc price elasticity = [(Q2 - Q1) / {(Q2 + Q1) / 2}] / [(P2...

Q: Product Fixed Variable Total workers) (boards) Costs Costs Cost Cost Costs Costs Cost 1 20 2 44 3 60...

A: Fixed Cost : The components of production process which are independent in nature which the cost of ...

Q: Suppose 5% rise in price of eggs causes its quantity demanded to fall by 10%. Then price elasticity ...

A: The principle of price elasticity of demand (PED) is important in the law of economic demand. It's a...

Q: The average salary of male employees in a firm was Dollar 5200 and that of females was Dollar 4,200....

Q: Engineers in your company have determined that the cost of production of good X follows the function...

A: The company is operating in an industry that has many competitors, making similar products and each ...

Q: Will countries be better off under a multilateral economic liberalization regime or under a system o...

A: We show that Countries will be better off under the regional economic integràtion plan. Realconsolid...

Q: 10 Supply 7.5 2.5 Demand 200 400 600 800 Q If consumers were forced to pay $7.50 per unit for the go...

A: Consumer surplus refers to the area above the price and below the demand curve. It is the difference...

Q: What will be the estimated money multiplier if the cash reserve ratio in the economy is 8%

A: In the question, Cash reserve ratio = 8% Money multiplier needed = ?

Q: The table below shows labour force information for a hypothetical economy, Selkirk. Answer the follo...

A: The labour force participation rate is the measure to evaluate working-age population in an economy.

Q: The following graph shows the short-run average total cost curves and the long-run average cost curv...

A: Answer: (1). According to the above figure, if the firm wants to keep output at the current level i...

Q: Answer the question on the basis of the following table for a particular country in which C is consu...

A: Real GDP = C + I + G + X - M Price Level C I G X M Real GDP 128 18 2 3 1 5 19 125 20 4 3 2 4 ...

Q: What will be the demand deposits as cash reserve ratio is 18.5% and the cash reserves operating in t...

A: Initially in the given question, We need to calculate the demand deposit = ? Cash reserve ratio are ...

Q: Suppose country A has five families. Their incomes are $10,000, $20,000, $30,000, $40,000, and $50,0...

A: Given: The number of families is = 5 Income of the families are $10,000, $20,000, $30,000, $40,000, ...

Q: 7. The graphs below show the production possibilities frontiers for grapes and lemons in Spain and A...

A: Given; Term of trade:- 1 million tons of grapes= 0.2 million tons of lemon 1 million tons of lemon= ...

Q: firm buys up all the rest of the hot dog vendors in the city and operates as a monopoly. Assume that...

A: In a perfectly competitive market, price is constant so it is equal to marginal revenue. Firms maxim...

Q: Sellers are willing to sell their product at a very low price even it high priced items cost more? W...

A: We know that price of goods and services are determined by the market forces interaction . It is det...

Q: Consider the model of public goods in the last section of this chapter. (a) Suppose that preference...

A: The correct answer is given in the second step.

Q: effect did the recession of 2007–2009 have on government regulation?

A: The Great Recession was the sharp decline in economic activity during the late 2000s. It is consider...

Q: Construct the consumer price index number for 2017 on the basis of 2016 from the following data usin...

A: Consumer price Index = ∑RW∑Wwhere R is relative price and W is weightR= P1P0×100

Q: TC = Q3 – 12Q? + 100Q + 256 d. Write the equations of MC, AVC, and AFC. MC = %3D AVC = AFC = %3D e. ...

A: TC=Q3-12Q2+100Q+256Here,TFC=256TVC=Q3-12Q2+100QNow,AFC=TFCQAFC=256Qand,TVC=Q3-12Q2+100QAVC=TVCQAVC=Q...

Q: 4. A factory produces a certain type of outputs by three types of machine. The respective daily prod...

Q: Market Demand for Porsche Spyder 1,050,000 Fred 1,000,000- Michel 950,000- Hua 900,000- Carlos n850,...

A: Here, the demand curve shows the different willingness to pay of different consumers.

Q: Consider an economy with only two goods: bread and wine. In 1982, the typical family bought 4 loaves...

A: Consumer price index (CPI) is used to estimate the average variation between two given periods in th...

Q: Designers of the Federal Reserve System were concerned that the Fed might form policy favorable to o...

A: The Federal Reserve System is the US government's central banking authority. It serves as the US gov...

Q: If you deposit $10000 into a fund paying 6% interest. how much will be the amount after 1 years.

A: Deposit amount = $10000 Interest rate = 6% Time = 1 year

Q: Jonathan's utility of income is represented by: U(I) = V(311) %3D where I represents annual income. ...

A: Given: U(I)=31I

Q: RON T PAGE alifornians Vote to Triple Cigarette Tax acramento, CA-Californians voted to more than tr...

Q: Distinguish between autonomous and accommodating balance of payment transaction..

A: Balance of payment transaction usually denotes the exports and imports of good, capital and the serv...

Q: annual benefits from the company a revenue?

A: Revenue refers to the entire amount of money earned through the sale of goods and services related t...

Q: Savings and wealth - Although the United States is one of the richest nations in the world, it is al...

A: Saving rate basically refers to the measure that a country save from the share of disposal income (Y...

Q: he following table shows demand and marginal cost for a monopolist. Calculate marginal revenue (MR) ...

A: Total revenue is the total receipts from selling goods or services. Total revenue is quantity multi...

Q: Q. %3D W=r=| C= LtK What is the LoNG Run:TC, AC, MC TOTAL COST Average Total cost Marginal lost

A: Production Function : Q=L1/2K1/2 Cost of Labor=wage=1 Cost of capital=rental rate=1 Cost=wL+rK Cost=...

Question

A firm is expected to pay a dividend of $1.35 next year and $1.50 the following year. Financial analysts believe the stock will be at their price target of $68 in two years.

Compute the value of this stock with a required return of 10 percent. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Questions: Compute the expected intrinsic price of each stock in year 5. Assume that All stocks are fairly priced such that the intrinsic and market values are equal. Dividends are paid at the beginning of the year How many units of each stock will Stephanie buy? Support your response with relevant computations. What will be the total investment cost for shares? Show appropriate calculations. Which bonds are acceptable for investment? Justify your response with suitable computations. What will be the total cost of investment in bonds? Do the stock and bond investments fall within Stephanie’s investment guidelines? Show appropriate computations in support of your response. Will Stephanie have enough funds for her investment in stocks and bonds, when needed? What will be the surplus / shortfall, if any? Given that Stephanie’s bank offers an interest rate of 6% per year, what additional amount should she have deposited as a fixed…
Which of the following statements about the current value of a short European call option on Warwick plc stock, a non-dividend-paying stock, is/are true? (a) The current value of a short European call option is less than or equal to zero. (b) The current value of a short European call option decreases as the volatility of returns on Warwick plc stock increases, holding all else constant. (c) The current value of a short European call option decreases as the price of Warwick plc stock increases, holding all else constant.
Which of the following is a reason why an investor would place a stop buy order on a stock? To ensure a short position is closed out for profit To ensure that the broker executes immediately at the current market price To ensure the stock is sold before its price falls to a specified level To ensure the stock is purchased when its price is rising
Suppose you expect a stock to pay a dividend of $10 every year forever and the discount rate is fixed at 5%. What would expect the price of that stock to be? What happens to the price of the stock if the discount rate falls to 2%? (Note: this exercise might help explain why the stock market is so high these days, despite the COVID-19 pandemic and lackluster economy.)
Your retirement portfolio comprises 100 shares of the Standard & Poor's 500 fund (SPY) and 100 shares of iShares Barclays Aggregate Bond Fund (AGG). The price of SPY is $115 and that of AGG is $96. If you expect the return on SPY to be 10% in the next year and the return on AGG to be 5%, what is the expected return for your retirement portfolio?
Why might a company’s stock price fall after record earnings are announced? Conversely, why might the stock price increase after losses are disclosed?
TSC, Inc. sells for $23 and pays an annual per share dividend of $2.50, which you expect to grow at 7 percent. What is your expected return on this stock? What would be the expected return if the price were $40 a share? Round your answer to the two decimal places.
Explain briefly why stock prices are a leading economic indicator.
Consider a fixed-payment security that pays $500 at the end of every year for ten years. If the rate of discount is 7 percent, find the present value of the bond? Show your work..
Imprudential, Inc., has an unfunded pension liability of $414 million that must be paid in 19 years. To assess the value of the firm’s stock, financial analysts want to discount this liability back to the present. If the relevant discount rate is 7.9 percent, what is the present value of this liability?
The market risk premium is 8 percent and the risk-free rate is 5 percent. Which stock has the most systematic risk? Which one has the most unsystematic risk? Which stock is “riskier”? Explain.
what equation can determine whether a stock or asset is overvalued significantly?