Assume that CAPM is valid. A share of stock is now selling for $155. It will pay a dividend of $6 per share at the end of the year. Its beta is 1. What do investors expect the stock to sell for at the end of the year? Assume the risk-free rate is 5% and the expected rate of return on the market portfolio is 20%. (Round your answer to 2 decimal places.) Expected selling price A

Q: Assume that the risk-free rate of interest is 5% and the expected rate of return on the market is…

A: Growth Model: As per this model, the value of the stock as of today can be determined based on the…

Q: A stock is trading at $80 per share. The stock is expected to have a year-end dividend of $4 per…

A: Formula for current price of the stock is: Current price = Expected dividend / (required return -…

Q: One year from nowAlafaya is expected to have a price of $69.0. The firm pays an annual dividend of…

A: In the given question we require to calculate the Intrinsic value of Alafaya stock from the…

Q: A share of stock with a beta of .75 now sells for $50. The investors expect the stock to pay a…

A: Beta = 0.75 P0= $50 D1 = $2 Rf = 4% RM = 7% Where, D = Expected Dividend Po = Current Price Rf =…

Q: A share of stock with a beta of 0.75 now sells for $50. Investors expect the stock to pay a year-end…

A: Expected Return = Risk free rate + Market risk premium * Beta

Q: You are considering an investment in Crisp Cookware’s common stock. The stock is expected to pay a…

A: As per CAPM Ri = Rf + B (Rm - Rf) Where Ri = Return on equity Rf = Risk free rate of return B =…

Q: A) If a firm has stock price of $52 and a required rate of return of 10% and earnings are expected…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: For a stock, you are given: i) The current stock price is 70 in) The stock will pay dividend…

A: The binomial tree approach of pricing options is used to price American options. An American option…

Q: A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return…

A: The Dividend Growth Model refers to a model that helps in calculating the intrinsic value of a stock…

Q: A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return…

A: Stock's Current Price = Dividend / ( Required rate of return - growth rate)

Q: A stock is expected to pay a dividend of $1.65 at the end of the year. The required rate of return…

A: Expected dividend (D1) = $ 1.65 Required return (rs) = 9.32% Growth rate (g) = 7.2%

Q: A stock is expected to pay a dividend of $0.75 at the end of the year (i.e., D1 = $0.75), and it…

A: Pricen = Dividendn+1 / ( Required rate - Growth rate )

Q: A stock is expected to pay a dividend of $1.26 at the end of the year. The required rate of return…

A: Formula: Current stock = Expected dividend/(Required rate - Growth rate)

Q: PeteCorp's stock has a Beta of 1.22. Its dividend is expected to be $1.87 next year, and will grow…

A: Details given in the question are : Beta = 1.22 Expected dividend next year (D1) = $1.87 Growth rate…

Q: A stock is currently trading at $57 and we assume a three-period binomial tree model where each…

A: The following flow chart shows the price up and drop in the stock :

Q: You are thinking of buying a stock priced at $106 per share. Assume that the risk-free rate is about…

A: according to CAPM: Rstock =rf+β×rm-rfwhere,rf= risk free raterm= market return

Q: You are considering an investment in MBC Group's stock, which is expected to pay a dividend of $3.96…

A: The question can be answered by determining the expected return for the stock using the capital…

Q: Assume that the risk-free rate of interest is 6% and the expected rate of return on the market is…

A: Given that;Risk free rate is 6%Market return is 16%Beta is 1.2

Q: You are considering an investment in the common stock of Crisp's Cookware. The stock is expected to…

A: A stock is a financial security issued by a corporation to raise equity funds for the long-term…

Q: You are considering an investment in Eagle Corporation's stock, which is expected to pay a dividend…

A: GIVEN, Rf=3.3% beta = 0.9 Rm= 5% therefore,  from CAPM model,…

Q: A stock is expected to pay a dividend of $1.27 at the end of the year. The required rate of return…

A: Formula: Current stock price = Expected dividend / (Required return - Growth rate)

Q: A share of stock with a beta of 0.75 now sells for $50. Investors expect the stock to pay a year-end…

A: In the given question we are required to calculate the expected return according to CAPM: According…

Q: Your broker has recommended that you purchase stock in Beacan, Inc. Beacan recently paid its annual…

A: Given information: Annual dividend is $14.00 ROE is 15% Retention ratio is 50%, pay-out is 50% Stock…

Q: You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend…

A: Required rate of return: Required return = Risk free rate+Beta*Market risk premium Required return =…

Q: A stock is expected to pay a dividend of $0.50 at the end of the year (i.e., D1 = $0.50), and it…

A: Expected Dividend (D1) = $0.50 Dividend growth rate (g) = 4% Required Rate of Return (R) = 12%…

Q: You are thinking of buying a stock priced at $98 per share. Assume that the risk-free rate is about…

A: Holding period return = Dividend paid + ( Price at year 1 - Price at year 0 ) / Price at year 0

Q: The risk-free rate of return, rRF, is 11 percent; the required rate of return on the market, rM, 14…

A: This question require us to compute the value of stock. As per Dividend Discount model: Value of…

Q: A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return…

A: The Dividend Growth Model refers to a model that helps in calculating the intrinsic value of a stock…

Q: Suppose the risk-free rate of return is 4.5 percent and the market risk premium is 8 percent. Stock…

A: Risk free rate = 4.5%  Market risk premium = 8% The beta of stock U = 1.3  The selling price of…

Q: stock is expected to pay a dividend of $1.50 at the end of the year (i.e., D1 = $1.50), and it…

A: In this we have to use dividend discount model to calculate the price of stock.

Q: Blast! stock has a beta of 1.4 and is currently selling for $16. Your DCF analysis indicates that…

A: GIVEN, beta = 1.4 current price (p0) = $16 p1=$18.5 dividend (d1) = $1 risk free rate ( rf) = 5%…

Q: AV’s stock is expected to pay a $2.50 dividend at the end of the year (D1 =$2.50). The dividend is…

A: The dividend discount model (DDM) is a quantitative method used for predicting the worth} of a…

Q: A stock is expected to pay a dividend of $1.76 at the end of the year. The required rate of return…

A: The dividend growth model will be used to calculate the stock price. This model values a company's…

Q: Linke Motors has a beta of 1.30, the T-bill rate is 3.00%, and the T-bond rate is 6.5%. The annual…

A: according to SML model  firms required return =rf+beta ×rm-rf where, rf= risk free rate rm= market…

Q: A stock is expected to pay a dividend of $1.00 at the end of the year (i.e., D1 = $1.00), and it…

A: Next dividend (D1) = $1 Growth rate (g) = 0.09 Required return (r) = 0.14 Stock's expected price 2…

Q: A stock is expected to pay a dividend of $1.00 at the end of the year (i.e., D1 = $1.00), and it…

A: Next dividend (D1) = $1.00 Growth rate (g) = 10% Dividend after 5 years (D5) = D1*(1+g)4…

Q: A stock is expected to pay a dividend of $1.75 at the end of the year (i.e., D1 = $1.75), and it…

A: Using dividend discount model

Q: A stock is expected to pay a dividend of $1.00 at the end of the year (i.e., D1 = $1.00), and it…

A: FORMULA  Stock's expected price 4 years from today = D5/(i-g) Where D5 - Dividend after 5 years from…

Q: You are considering an investment in General Electric’s common stock. The stock is expected to pay a…

A: Given, Risk free rate 5.6% Market risk premium 6% Beta 0.9   Current Price (P0) = $25 Expected…

Q: You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend…

A: Capital invested in the business comes with the respective cost called the cost of capital.  It…

Q: A stock is expected to pay a dividend of $2.25 at the end of the year (i.e., D1 = $2.25), and it…

A: Expected dividend (D1)= $2.25 Growth rate (g) = 8% Required return (r) = 12%

Q: What is the value of a common stock if: a. the firm's earnings and dividends are growing annually…

A: We need to use constant growth model to calculate valuation stock. The equation Stock price(P0)…

Q: A stock is expected to pay a dividend of $1.25 at the end of the year (i.e., D1 = $1.25), and it…

A: As per DDM, Current stock Price = D1 /(ke-g) D1 = $1.25 growth rate (g)= 4% Required return (ke) =…

Q: Suppose the risk-free rate of return is 3.5 percent and the market risk premium is 7 percent. Stock…

A: In the given question we required to calculate the price of Stock U using dividend discount model…

Q: Diddy Corp. stock has a beta of 1.3, the current risk-free rate is 3 percent, and the expected…

A: The Capital Asset Pricing Model (CAPM) refers to the model which tells us how the financial markets…

Q: Diddy Corp. stock has a beta of 1.2, the current risk-free rate is 5 percent, and the expected…

A: Cost of equity = Risk free rate + beta(market return - risk free rate) Cost of equity = 5% +…

Q: a) The following information is given. The expected rate of return of the index in next year is 30%,…

A: the calculations are stated below  rate of return = rf+beta(rm-rf)       rf = risk-free rate…

Q: A firm recently paid a dividend of $2.65 per share, but analysts expect the dividend to increase by…

A: A model that represents the relationship of the required return and beta of a particular asset is…