EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 12, Problem 22P
a)
Summary Introduction
To determine: Whether the stock price an
b)
Summary Introduction
To determine: The equilibrium price.
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Visa, Inc. (V) has a beta of 1.08, is selling for $56.72, and will pay a $2.35 dividend at the end of the year. If the stock is priced at $57.15 at year-end, it is __________, so __________ it. Assume the risk-free rate is 3.05%, and the expected market return is 3.92%.
A.
underpriced / sell
B.
underpriced / buy
C.
overpriced / sell
D.
fair-valued / hold
Assume the risk-free rate is 2.5% and the market risk premium is 8.0%. The beta of GE is 1.10.
The dividend forecast for the next four years is as follows:
2017: $1.04
2018: $1.22
2019: $1.41
2020: $1.60
Using the dividend payout ratio (53%) and Return on Equity (19.5%), what is closest to the intrinsic value of GE stock using the dividend discount model?
Question 9 options:
a)
$53.40
b)
$140.00
c)
$97.98
d)
$75.83
Dyer Furniture is expected to pay a dividend of D1 = $1.25 per share at the end of the year, and that dividend is expected to grow at a constant rate of 6.00% per year in the future. The company's beta is 1.85, the market risk premium is 5.50%, and the risk-free rate is 4.00%. What is Dyer's current stock price?
Select the correct answer.
a. $16.23
b. $16.70
c. $17.17
d. $15.29
Chapter 12 Solutions
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Ch. 12 - Prob. 1QTDCh. 12 - Prob. 2QTDCh. 12 - Prob. 3QTDCh. 12 - Prob. 4QTDCh. 12 - Prob. 5QTDCh. 12 - Prob. 6QTDCh. 12 - Prob. 7QTDCh. 12 - Prob. 8QTDCh. 12 - Prob. 9QTDCh. 12 - Prob. 10QTD
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