HomeworkLib
Question

Your broker has recommended that you purchase stock in National Bank & Trust, Inc. National Bank...

Your broker has recommended that you purchase stock in National Bank & Trust, Inc. National Bank & Trust recently paid its annual dividend of $16. Dividends have consistently grown at a rate of 3.50%. Analysts estimate that the stock has a beta of 1.41. The current risk-free rate is 2.60% and the market return is 11.1%. Assuming that CAPM holds, what is the intrinsic value of this stock?

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Expected return = risk free rate + beta * market risk premium

= 2.6% + 1.41 * (11.1% - 2.6%)

= 14.585%

Price = dividend next year/(Required return - growth rate)

= 16*1.035/(0.14585 - 0.035)

= 149.39

0 0
Add a comment
Know the answer?
Add Answer to:
Your broker has recommended that you purchase stock in National Bank & Trust, Inc. National Bank...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Your broker has recommended that you purchase stock in National Bank & Trust, Inc. National Bank...

    Your broker has recommended that you purchase stock in National Bank & Trust, Inc. National Bank & Trust recently paid its annual dividend of $8. The firm has an ROE of 15% and pays out 50% of its earnings as dividends. Based on your analysis, you estimate that the stock has a required return of 15%. What is the intrinsic value of this stock? Group of answer choices $119.60 $123.32 $114.67 $106.98 $112.58

  • ZZZ-Best, Inc. recently issued $65 par value preferred stock that pays an annual dividend of $17....

    ZZZ-Best, Inc. recently issued $65 par value preferred stock that pays an annual dividend of $17. If the stock is currently selling for $76, what is the expected return of this preferred stock? 22.37% 22.94% 0 24.42% O 20.27% O 22.60% Your broker has recommended that you purchase stock in National Bank & Trust, Inc. National Bank & Trust recently paid its annual dividend of $5. Dividends have consistently grown at a rate of 3.1%. Based on your analysis, you...

  • Please show steps and NOTE that this is different from just finding intrinsic value. Please be...

    Please show steps and NOTE that this is different from just finding intrinsic value. Please be sure to show proper formula Question 9 1 pts Your broker has recommended that you purchase stock in ZZZ-Best, Inc. She estimates that the 1-year target price is $64, and ZZZ-Best consistently pays an annual dividend of $13. Analysts estimate that the stock has a beta of 1.12. The current risk-free rate is 2.7% and the market return is 12.4%. Assuming that CAPM holds,...

  • Lehman & Company has an annual dividend of $14. The stock has a beta of 1.36,...

    Lehman & Company has an annual dividend of $14. The stock has a beta of 1.36, the risk-free rate is 2.4% and the market return is 9.9%. Assuming that CAPM holds, what is the intrinsic value of this stock?

  • Question 6 1 pts Intercoastal Corporation recently paid a common stock dividend of $2.50. Analysts predict...

    Question 6 1 pts Intercoastal Corporation recently paid a common stock dividend of $2.50. Analysts predict that the firm and its dividends will grow at a rate of 12% per year. Intercoastal has a beta of 1.35. The current risk-free rate of interest is 5.0% and the current return on the market is 13%. What is the intrinsic value of Intercoastal common stock? O $114.50 O $73.68 O $100 $140.34 $127.20

  • You are considering the purchase of a stock with a beta of 1.20. If the market...

    You are considering the purchase of a stock with a beta of 1.20. If the market risk premium is 7% and the risk‐free rate is 2.35%, use the Capital Asset Pricing Model (CAPM) to estimate the expected return on this stock.

  • Stock A has a beta of 1.70 and an expected return of 19.5 percent. Stock B...

    Stock A has a beta of 1.70 and an expected return of 19.5 percent. Stock B has a beta of 1.10 and an expected return of 14 percent. If CAPM holds, what should the return on the market and the risk-free rate be?

  • The stock of Alpha Company has an expected return of 18% and a beta of 1.5,...

    The stock of Alpha Company has an expected return of 18% and a beta of 1.5, and Gamma Company stock has an expected return of 15.6% and a beta of 1.2. Assume the CAPM holds. What’s the risk-free rate? 8.0% 6.0% 0% 4.7%

  • National City Corporation, a bank holding company, reported earnings per share (E0) of $2.40 in 2017,...

    National City Corporation, a bank holding company, reported earnings per share (E0) of $2.40 in 2017, and paid dividends per share of $1.06 (D0) in 2017. The earnings were expected to grow 6% (g=6%) annually in the long term. The stock had a beta of 1.05. The risk free rate was 4% and the expected market return was 12%. Estimate the justified leading and trailing P/E Ratios for National City Corporation.

  • Problem 10.[10 pts]. Suppose Bank of America stock has a beta of 1.65, whereas Boeing stock...

    Problem 10.[10 pts]. Suppose Bank of America stock has a beta of 1.65, whereas Boeing stock has a beta a- b- c- d- of 1.40. If the risk-free interest rate is 4% and the expected return of the market portfolio is 12%, according to the CAPM, (Show your calculations) What is the expected return of Bank of America stock? What is the expected return of Boeing stock? What is the beta of a portfolio that consists of 60% Bank ofAmerica...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT