Melissa Cutt is thinking about buying some shares of EZLawn Equipment, at $ 48.44 per share....
Melissa Cutt is thinking about buying some shares of EZLawn Equipment, at
$ 48.44
per share. She expects the price of the stock to rise to
$ 55.62
over the next
3
years. During that time she also expects to receive annual dividends of
$4.44
per share.a. What is the intrinsic worth of this stock, given a required rate of return of
11 %?
b. What is its expected return?
a. The intrinsic worth of this stock is
$nothing.
(Round to the nearest cent.)b. The expected return is
nothing%.
(Round to one decimal place.)
Homework Answers
Answer (a)
Intrinsic Value = Dividend/Rate of Return _ _ _ _ _ _(using perpetuity Formula)
= 4.44/ .11
= $ 40.36
Intrinsic Value is $ 40.36
Answer (b)
Expected Return = {(Selling Price - Purchase purchase + Dividend) / Purchase Price} *100
= {{55.62 - 48.44 + (4.44*3)}/ 48.44} *100
= 42.32%
Stock gives a 42.32% return in 3 years.
NOTE: The answer to your question has been given below/above. If there is any query regarding the answer, please ask in the comment section. If you find the answer helpful, do upvote. Help us help you.
Add Answer to:
Melissa Cutt is thinking about buying some shares of EZLawn
Equipment, at
$ 48.44
per share....
Melissa Cutt is thinking about buying some shares of EZLawn Equipment, at $ 31.36 per share....
Melissa Cutt is thinking about buying some shares of EZLawn Equipment, at $ 31.36 per share. She expects the price of the stock to rise to $ 46.61 over the next 3 years. During that time she also expects to receive annual dividends of $ 3.35 per share. a. What is the intrinsic worth of this stock, given a required rate of return of 12 %? b. What is its expected return?
You're thinking about buying some stock in Affiliated Computer Corporation and want to use the P/E...
You're thinking about buying some stock in Affiliated Computer Corporation and want to use the P/E approach to value the shares. You've estimated that next year's earnings should come in at about $3.07 a share. In addition, although the stock normally trades at a relative P/E of 1.07 times the market, you believe that the relative P/E will rise to 1.13, whereas the market P/E should be around 16.6 times earnings. Given this information, what is the maximum price you...
Lisa Lasher buys 400 shares of stock on margin at $30 per share. If the margin...
Lisa Lasher buys 400 shares of stock on margin at $30 per share. If the margin requirement is 40 percent, how much must the stock rise for her to realize a 15-percent return on her invested funds? (Ignore dividends, commissions, and interest on borrowed funds.) Round your answer to the nearest cent. $
Lisa Lasher buys 410 shares of stock on margin at $20 per share. If the margin...
Lisa Lasher buys 410 shares of stock on margin at $20 per share. If the margin requirement is 40 percent, how much must the stock rise for her to realize a 40-percent return on her invested funds? (Ignore dividends, commissions, and interest on borrowed funds.) Round your answer to the nearest cent.
You are thinking of buying a stock priced at $90 per share. Assume that the risk-free...
You are thinking of buying a stock priced at $90 per share. Assume that the risk-free rate is about 4.3% and the market risk premium is 6.1%. If you think the stock will rise to $123 per share by the end of the year, at which time it will pay a $1.86 dividend, what beta would it need to have for this expectation to be consistent with the CAPM? The beta is N. (Round to two decimal places.)
You are currently thinking about investing in a stock valued at $25.00 per share. The stock...
You are currently thinking about investing in a stock valued at $25.00 per share. The stock recently paid a dividend of $2.25 and its dividend is expected to grow at a rate of 5 percent for the foreseeable future. You normally require a return of 14 percent on stocks of similar risk. What is the stock worth? Is the stock overpriced, underpriced, or correctly priced? $25, it is underpriced $26.25 it is overpriced $26.25 it is underpriced $25 it is...
You are thinking of buying a stock priced at $107 per share. Assume that the risk...
You are thinking of buying a stock priced at $107 per share. Assume that the risk free rate is about 4.3% and the market risk premium is 5.5%. If you think the stock will rise to $117 per share by the end of the year, at which time it will pay a $3.41 dividend, what beta would it need to have for this expectation to be consistent with the CAPM?
Compute the total and annual returns on the described investment. Four years after buying 150 shares...
Compute the total and annual returns on the described investment. Four years after buying 150 shares of XYZ stock for $70 per share, you sell the stock for $ 15,000. The total return is nothing%. (Do not round until the final answer. Then round to one decimal place as needed.) The annual return is nothing%. (Do not round until the final answer. Then round to one decimal place as needed.)
P.2) Jack is thinking about investing in some foreign securities and is looking at the stock...
P.2) Jack is thinking about investing in some foreign securities and is looking at the stock of Bayer AG, the big German chemical and health-care firm. Bayer AG, trades on the Frankfurt Exchange, is currently priced at 53.25 euros (€) per share. It pays annual dividends of 1.50 € per share. Jack expects the stock to climb to 60.00 € per share over the next 12 months. The current exchange rate is 0.9025 U.S. $/€ euro, but that's expected to...
You are thinking of buying a stock priced at $104 per share. Assume that the? risk-free...
You are thinking of buying a stock priced at $104 per share. Assume that the? risk-free rate is about 5.2% and the market risk premium is 6.4%. If you think the stock will rise to $123 per share by the end of the? year, at which time it will pay a $3.04 ?dividend, what beta would it need to have for this expectation to be consistent with the? CAPM?
You're thinking about buying some stock in Affiliated Computer Corporation and want to use the P/E approach to value the shares. You've estimated that next year's earnings should come in at about $3.07 a share. In addition, although the stock normally trades at a relative P/E of 1.07 times the market, you believe that the relative P/E will rise to 1.13, whereas the market P/E should be around 16.6 times earnings. Given this information, what is the maximum price you...
You are thinking of buying a stock priced at $90 per share. Assume that the risk-free rate is about 4.3% and the market risk premium is 6.1%. If you think the stock will rise to $123 per share by the end of the year, at which time it will pay a $1.86 dividend, what beta would it need to have for this expectation to be consistent with the CAPM? The beta is N. (Round to two decimal places.)
You are currently thinking about investing in a stock valued at $25.00 per share. The stock recently paid a dividend of $2.25 and its dividend is expected to grow at a rate of 5 percent for the foreseeable future. You normally require a return of 14 percent on stocks of similar risk. What is the stock worth? Is the stock overpriced, underpriced, or correctly priced? $25, it is underpriced $26.25 it is overpriced $26.25 it is underpriced $25 it is...
You are thinking of buying a stock priced at $107 per share. Assume that the risk free rate is about 4.3% and the market risk premium is 5.5%. If you think the stock will rise to $117 per share by the end of the year, at which time it will pay a $3.41 dividend, what beta would it need to have for this expectation to be consistent with the CAPM?
P.2) Jack is thinking about investing in some foreign securities and is looking at the stock of Bayer AG, the big German chemical and health-care firm. Bayer AG, trades on the Frankfurt Exchange, is currently priced at 53.25 euros (€) per share. It pays annual dividends of 1.50 € per share. Jack expects the stock to climb to 60.00 € per share over the next 12 months. The current exchange rate is 0.9025 U.S. $/€ euro, but that's expected to...
Most questions answered within 3 hours.
-
Where is the error in this code sequence?
String s1 = "Hello";
String s2 = "ello";...
asked 10 months ago -
Financial data for Joel de Paris, Inc., for last year
follow:
Joel de Paris, Inc.
Balance...
asked 10 months ago -
Consider this reaction:
Al2(SO4)3 (aq)+ BaCl3
(aq) Al2Cl6 (aq)- +
3BaSO4(s) . What is the...
asked 10 months ago -
Suppose that Savneet is considering increasing her
recent random sample from 20 car rentals to 40...
asked 10 months ago -
Trucks arrive at an unloading terminal at an average rate of 120
per hour.
Trucks arrive...
asked 10 months ago -
Why are methanol and ethanol completely soluble in water while
octanol is not very little soluble....
asked 10 months ago -
A facilities manager at a university reads in a research report
that the mean amount of...
asked 10 months ago -
When the CuSO4 is rehydrated by adding water to the anhydrous
compound, is this an endothermic...
asked 10 months ago -
A ray of sunlight is passing from diamond into crown glass; the
angle of incidence is...
asked 10 months ago -
A block of mass 0.249 kg is placed on top of a light, vertical
spring of...
asked 10 months ago -
how do the kidneys compensate in the presences of acidosis
a) trigger hyperventilate
b) reserve acid...
asked 10 months ago -
Question 501 pts
The rental rate of capital to the firm increases. Which of the
following...
asked 10 months ago