You are thinking of buying a stock priced at $106 per share. Assume that the risk-free rate is about 5.1% and the market risk premium is 6.4%. If you think the stock will rise to $115 per share by the end of the year, at which time it will pay a $2.59 dividend, what beta would it need to have for this expectation to be consistent with the CAPM?

Q: A stock with a beta of 1.6 has an expected rate of return of 14%. If the market return this year…

A: Beta measures the volatility or change of the stock in relation to the overall market. There can be…

Q: What is the expected rate of return and standard deviation on this stock?

A: The expected rate of return is a statistical degree used for studying the portfolio. It is the…

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

A: Required rate of return(rs) = Risk-free rate + Beta(Market risk premium) Required rate of return(rs)…

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: Your broker has recommended that you purchase stock in Alacan, Inc. She estimates that the 1-year…

A: Cost of equity = Rf + Beta * ( Rm - Rf ) = 2.70% + 0.91 * 9.50% = 2.70% + 8.645% = 11.345%

Q: Blast! stock has a beta of 0.8 and is currently selling for $22. Your DCF analysis indicates that…

A: In finance, the term “Alpha” represents a financial ratio that helps to measure the maximum return…

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

A: Rf = 4.7% Rm-Rf = 5.5% beta = 0.9 D1=$2.25

Q: Xila-Fone Corp. expects to earn $4.00 per share next year, with an expected  payout of 30%.…

A: in this problem you have to calculate required rate of return and than use dividend discount model…

Q: Currently, the nominal risk-free rate is 1.64 percent, the market risk premium is 8 percent, and the…

A: Capital Asset Pricing Model explains return of a stock using  risk free rate and market risk premium…

Q: The common stock of Up-Towne Movers is selling for $33 a share and has a beta of 1.25. If the CAPM…

A: Given information in the question Current price              = $33 Beta…

Q: Suppose that the consensus forecast of security analysts of your favorite company is that earnings…

A: The question is based on the concept of Financial analysis.

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

A: Cost of equity = Risk free rate + beta * market risk premium Cost of equity = 5.60% + (0.9*5%) Cost…

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 currently selling for $92.45 and is expected to sell for $109.07 in 1 year.  If the…

A: The overall return on an asset or investment portfolio over the time it has been kept is known as…

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: For example an investor is contemplating a stock worth $300 per share that pays a 3% annual…

A: Solution:- As per Capital Asset Pricing Model (CAPM),  ERi = Rf + (ERm - Rf) x Beta Where, ERi =…

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

A: given, beta= 0.9 Rf=2.9% market risk premium = 6% from CAPM, Ke =Rf + beta * market risk premium Ke…

Q: (a) An investor is considering an investment in XYZ stock.  The risk-free rate of return is 0.45%,…

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

Q: You are considering buying common stock in Grow On, Inc. You have projected that the next dividend…

A: Cost of equity = Risk-free rate + Beta(Market return - Risk-free rate) Cost of equity = 0.056 +…

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: The Francis Company is expected to pay a dividend of D1 = $1.25 per share at the end of the year,…

A: D1 = $ 1.25 Growth rate (G) = 6% Risk free rate = 4% Risk premium = 5.50% Beta = 0.85 Required…

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

A: in this problem we have to calculate required rate of return using CAPM and find out required growth…

Q: Stock A has a current price of $25, a beta of 1.25, and a dividend yield of 6%. If the Treasury bill…

A: Current price of stock= $25 beta (β)=1.25 Dividend yield=6% Treasury bill yield=5% Expected return…

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

A: according to gordon's growth : Pi=Di+1r-g where, Pi= price at year i DI+1= Dividend at year i+1 r=…

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

A: The capital asset pricing model (CAPM) represents the minimum rate of return required by investors…

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: Dyer Furniture is expected to pay a dividend of D1 = $1.65 per share at the end of the year, and…

A: The Gordon Growth Model or dividend discount model is a method of valuing a company's stock price…

Q: A stock is expected to pay a dividend of $2.25 at the end of the year. Its beta is 1.4, the market…

A: Stock Price for an entity can be computed using dividend amount as growing perpetuity in case growth…

Q: The Carpetto’s stock currently sells for $23 per share, will pay a dividend of $2.14 at the end…

A: Part (a) Computation of cost of common equity under DDM model: Answer: Cost of equity is 16.30%

Q: If you buy a stock for a price of $23 and if you expect the stock to pay a dividend of $1.242 one…

A: Required rate of return = (D1/P0) + g D1 = Dividend one year from now P0 = Current stock price g=…

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

A: Rate at which dividend is grow year by year is called dividend growth rate. It can be same every…

Q: FlavR Company stock has a beta of 2.14, the current risk-free rate is 2.14 percent, and the expected…

A: Beta = 2.14 Risk free rate = 2.14% Market return = 9.14%

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: What should be the market price of the stock?   $     If the current market price of the stock is…

A: As per our policy we only answer three subparts of any questions:   Information Provided: Risk-free…

Q: You build a binomial model with one period and assert that over the course of a year, the stock…

A: The standard measure of the dispersion of data which helps in measuring the risk and volatility of…

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

A: D0 = $7.00 g = 2.50% Beta = 1.42 Risk free rate = 2.80% Market risk premium = 6.50%

Q: An investor is considering a stock worth Rs.555 per share today that pays a 9% annual dividend .The…

A: The capital Asset Pricing Model is considered as one of the most accurate form of calculating…

Q: Ice Company stock has a beta of 1.92, the current risk-free rate is 5.17 percent, and the expected…

A: Beta = 1.92 Risk free rate = 5.17% Market return = 15.17%

Q: Dexter International is expected to pay a dividend next year of $2.10 per share. Dexter has a beta…

A: Dividend yield: Dividend yield is shown as a percentage and determined by multiplying the dollar…

Q: The risk-free rate is 4.6 % and you believe that the S&P 500's excess return will be 11.2 % over…

A: Given: Expected excess return over next year = 11.2% Beta of stock = 1.4