Problem 6-01 Considering the world economic outlook for the coming year and estimates of sales and earning for the pharmaceutical industry, you expect the rate of return for Lauren Labs common stock to range between -30 percent and +45 percent with the following probabilities. Possible Returns Probability 0.08 -0.30 0.12 -0.25 0.17 0.10 0.27 0.15 0.25 0.25 0.11 0.45 Compute the expected rate of return E(R) for Lauren Labs. Round your answer to four decimal places. Problem 6-01Considering the world economic outlook for the coming year and estimates of sales and earning for the pharmaceutical industry, youexpect the rate of return for Lauren Labs common stock to range between -30 percent and +45 percent with the following probabilities.Possible ReturnsProbability0.080.120.170.270.250.11Compute the expected rate of return E(R) for Lauren Labs. Round your answer to four decimal places.-0.30-0.250.100.150.250.45

Expected return is the sum of product between the possible returns and their corresponding…

Considering the world economic outlook for the coming year and estimates of sales and earning for the pharmaceutical industry, you expect the rate of return for Lauren Labs common stock to range between -30 percent and +45 percent with the following probabilities. Possible Returns Probability 0.08 0.12 0.17 0.27 -0.30 -0.25 0.10 0.15 0.25 0.45 0.25 0.11 Compute the expected rate of return E(R) for Lauren Labs. Round your answer to four decimal places.

Considering the world economic outlook for the coming year and estimates of sales and earning for the pharmaceutical industry, you expect the rate of return for Lauren Labs common stock to range between -30 percent and +45 percent with the following probabilities. Possible Returns Probability 0.08 0.12 0.17 0.27 -0.30 -0.25 0.10 0.15 0.25 0.45 0.25 0.11 Compute the expected rate of return E(R) for Lauren Labs. Round your answer to four decimal places.

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter14: Valuation: Market-based Approach

Section: Chapter Questions

Problem 18PC

See similar textbooks

Similar questions

Ch. 11 Profitabiity Index Please solve the following and explain in detail. Calderon Kitchen Supplies is planning to invest $210,000 in a product. The product is expected to generate a net present value of $56,700. The profitablity index is???
Problem 7-09 Inflation is a general increase in prices and may be measured by the Consumer Price Index (CPI). Use Appendix A to answer the questions. In Year 1 the CPI was 100; 25 years later, it was 225. What was the annual rate of inflation? Round your answer to the nearest whole number. % Nancy and Pam both currently earn $110,000. If the annual rate of inflation is 4 percent, how much must each earn after eleven years to maintain their purchasing power? Round your answer to the nearest dollar.$ Your parents bought a home for $50,000 in Year 1 and sold it in Year 31 for $280,000. What was the annual rate of price increase over the 30 years? Round your answer to the nearest whole number. %
Please answer Question 8 & 9 8.On March 24, 2020, the Dow Jones Industrial Average opened at $18,591.93 and closed at $20,704.91. What was the daily return that day, and what was the effective annual rate return (in percent) of the stock market that day?Daily Return: __________% EAR:_________ % 9. Financial analysts forecast GDY Inc.’s growth for the future to be 8%. GDY's recent annual dividend was $6.00. What is the value of GDY stock when the required return is 11%?Stock Value: $___________________
Problem 9-10Cost of Equity The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 3% per year in the future. Shelby's common stock sells for $29.75 per share, its last dividend was $2.00, and the company will pay a dividend of $2.06 at the end of the current year. Using the discounted cash flow approach, what is its cost of equity? Round your answer to two decimal places. % If the firm's beta is 0.6, the risk-free rate is 4%, and the expected return on the market is 13%, then what would be the firm's cost of equity based on the CAPM approach? Round your answer to two decimal places. % If the firm's bonds earn a return of 12%, then what would be your estimate of rs using the over-own-bond-yield-plus-judgmental-risk-premium approach? Round your answer to two decimal places. (Hint: Use the midpoint of the risk premium range.) % On the basis of the results of parts a through c, what would be your estimate of Shelby's cost of equity? Assume Shelby values each…
Problem 9-21 Risk, Return, and Their Relationship (LG9-3, LG9-4)Consider the following annual returns of Estee Lauder and Lowes Companies: Estee LauderLowes CompaniesYear 123.9%6.0%Year 224.016.6Year 318.14.7Year 450.444.0Year 517.314.0Compute each stocks average return, standard deviation, and coefficient of variation.Note: Round your answers to 2 decimal places.
Question content area top Part 1 (Related to Checkpoint 7.2) (Calculating the geometric and arithmetic average rate of return) Marsh Inc. had the following end-of-year stock prices over the last five years and paid no cash dividends: Time Marsh 1 $ 11 2 14 3 17 4 6 5 11 (Click on the icon in order to copy its contents into a spreadsheet.) a. Calculate the annual rate of return for each year from the above information. b. What is the arithmetic average rate of return earned by investing in Marsh's stock over this period? c. What is the geometric average rate of return earned by investing in Marsh's stock over this period? d. Considering the beginning and ending stock prices for the five-year period are the same, which type of average rate of return (the arithmetic or geometric) better describes the average annual rate of return earned over the period? Question content area bottom Part 1…
Problem 6-32 Stock Valuation and Cash Flows Anya Manufacturing has projected sales of $116 million next year. Costs are expected to be $67.2 million, and net investment is expected to be $12.6 million. Each of these values is expected to grow at 10 percent the following year, with the growth rate declining by 1 percent per year until the growth rate reaches 6 percent, where it is expected to remain indefinitely. There are 4.9 million shares of stock outstanding and investors require a return of 11 percent on the company’s stock. The corporate tax rate is 22 percent. a. What is your estimate of the current stock price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Suppose instead that you estimate the terminal value of the company using a PE multiple. The industry PE multiple is 13. What is your new estimate of the company’s stock price? (Do not round intermediate calculations and round your answer to 2 decimal places,…
Problem 6-1 Stock Values The Cricket Co. just paid a dividend of $1.60 per share on its stock. The dividends are expected to grow at a constant rate of 6 percent per year indefinitely. Investors require a return of 10 percent on the company's stock. a. What is the current stock price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What will the stock price be in 3 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What will the stock price be in 12 years
1. Question 1 Company TYK forecasts that it will begin paying dividends seven years from now, at which point dividends are $1 per share. Thereafter, dividends are expected to growth at a constant rate of 6% per year. The discount rate for TYK is 10%. How much would you pay for one share in Company TYK? *Make sure to input all currency answers without any currency symbols or commas, and use two decimal places of precision. the awnser 14.11 is wrong
QNo 1: Being a newly appointed analyst at Credit Suisse, one of your prime role is to facilitate the Global head of valuations in providing detailed and timely analysis. The next meeting is being scheduled for the upcoming Saturday, and you are required to calculate the price of a few stocks and provide their valuations. The information is mentioned below: a) The Walgreens Boots alliance Company has recently paid dividend D0 = $3, and growth is expected to remain 5% throughout. The required rate of return is 10%. Calculate dividend streams for the next 2 years, and their PVs? b) You have forecasted NIKE dividends of $5, $5.70, and $5.95 over the next three years respectively. After the end of three years the anticipated selling market price of NIKE will be $135. What is NIKE stock price provided a 7% expected rate of return? c) Merck & Co. is predicted to pay Rs. 1.70 dividend in one year. Further, the…
Question 11 ABC company is growing at a constant rate of 8% every year. Last week the company paid a dividend of $2.8. If dividends are expected to grow at the same rate as the fi rm and the required rate of return is 12 percent, what should be the stock’s price four years from now? Show your calculation. Only typing answer Please explain step by step without table and graph thankyou
Question 15 Lightscape FX, an exterior landscape lighting company, paid an annual dividend of R1,42 a share last month. The company plans to pay R1,50, R1,75 and R1,80 a share over the next three years respectively. After that, the dividend will be constant at R2 per share per year. What is the market price of this stock if the market rate of return is 10,50%? 1. R18,24 2. R19,66 3. R22,17 4. R25,11