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Author Question: Eastern Auto Parts' last dividend was Do = 0.50, and the company expects to experience no growth in ... (Read 88 times)

urbanoutfitters

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  • Posts: 530
on: Jul 10, 2018
Eastern Auto Parts' last dividend was Do = 0.50, and the company expects to experience no growth in the next 2 years.
 
  However eastern will grow at an annual rate of 5 in the third and fourth years, and, beginning with the fifth year, it should attain a 10 growth rate which it should sustain thereafter. Eastern has a cost of capital of 12. What should be the present price per share of Eastern common stock?
  A) 19.26
  B) 31.87
  C) 30.30
  D) 20.84
  E) 19.95

Question 2

Consider the two assets outlined in the table below. What is the beta of the two asset portfolio given that 40 is invested in X?
 
  Asset Expected Return Beta
  X 12 0.40
  Risk Free 5 0
 
  A) 0.026
  B) 0.085
  C) 0.160
  D) 0.190
  E) 0.220


jamesnevil303

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Reply #1 on: Jul 10, 2018
Answer to Question 1

D

Answer to Question 2

C


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