The risk-free rate of return is 6.5%, the expected rate of return on the market portfolio is 13.5%, and the stock of Xyrong Corporation has a beta coefficient of 1.2. Xyrong pays out 40% of its earnings in dividends, and the latest earnings announced were $8.50 per share. Dividends were just paid and are expected to be paid annually. You expect that Xyrong will earn an ROE of 18.5% per year on all reinvested earnings forever. Required: What is the intrinsic value of a share of Xyrong stock? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. If the market price of a share is currently $100, and you expect the market price to be equal to the intrinsic value one year from now, what is your expected 1-year holding-period return on Xyrong stock? Note: Do not round intermediate calculations. Round your answer to 2 decimal places.

The risk-free rate of return is 6.5%, the expected rate of return on the market portfolio is 13.5%, and the stock of Xyrong Corporation has a beta coefficient of 1.2. Xyrong pays out 40% of its earnings in dividends, and the latest earnings announced were $8.50 per share. Dividends were just paid and are expected to be paid annually. You expect that Xyrong will earn an ROE of 18.5% per year on all reinvested earnings forever. Required: What is the intrinsic value of a share of Xyrong stock? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. If the market price of a share is currently $100, and you expect the market price to be equal to the intrinsic value one year from now, what is your expected 1-year holding-period return on Xyrong stock? Note: Do not round intermediate calculations. Round your answer to 2 decimal places.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

Section: Chapter Questions

Problem 23P

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What is the intrinsic value of a share of Xyrong stock?

Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
If the market price of a share is currently $100, and you expect the market price to be equal to the intrinsic value one year from now, what is your expected 1-year holding-period return on Xyrong stock?

Note: Do not round intermediate calculations. Round your answer to 2 decimal places.

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