This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: China America Manufacturing has a beta of 1.50, the risk-free rate of interest is currently 12 ... (Read 82 times)

littleanan

  • Hero Member
  • *****
  • Posts: 575
on: Jul 10, 2018
China America Manufacturing has a beta of 1.50, the risk-free rate of interest is currently 12 percent, and the required return on the market portfolio is 18 percent.
 
  The company plans to pay a dividend of 2.45 per share in the coming year and anticipates that its future dividends will increase at an annual rate consistent with that experienced over the 2001-2003 period.
 
  Estimate the value of China America Manufacturing's stock.

Question 2

Even if you are given a present value, a single future value, and a time period, solving for the rate of return, r, is still a trial-and-error process.
 
  Indicate whether the statement is true or false.


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

sabina576

  • Sr. Member
  • ****
  • Posts: 356
Reply #1 on: Jul 10, 2018
Answer to Question 1

ks = 0.12 + 1.50 (0.18 - 0.12 )
= 0.21
Growth rate of dividends:
(2.32/2.10 )1/2-1= 0.0511
P0 = = 15.42

Answer to Question 2

Answer: FALSE
Explanation: r = (FV/PV)1/n - 1


littleanan

  • Member
  • Posts: 575
Reply 2 on: Jul 10, 2018
:D TYSM

Perkypinki

  • Member
  • Posts: 339
Reply 3 on: Yesterday
YES! Correct, THANKS for helping me on my review

« previous next »
 

Did you know?

There used to be a metric calendar, as well as metric clocks. The metric calendar, or "French Republican Calendar" divided the year into 12 months, but each month was divided into three 10-day weeks. Each day had 10 decimal hours. Each hour had 100 decimal minutes. Due to lack of popularity, the metric clocks and calendars were ended in 1795, three years after they had been first marketed.

Did you know?

Many medications that are used to treat infertility are injected subcutaneously. This is easy to do using the anterior abdomen as the site of injection but avoiding the area directly around the belly button.

Did you know?

Malaria was not eliminated in the United States until 1951. The term eliminated means that no new cases arise in a country for 3 years.

Did you know?

It is important to read food labels and choose foods with low cholesterol and saturated trans fat. You should limit saturated fat to no higher than 6% of daily calories.

Did you know?

About 600,000 particles of skin are shed every hour by each human. If you live to age 70 years, you have shed 105 pounds of dead skin.

Feedforward control of breathing rate in an animal trained for athletic exercise. Feedforward control of breathing rate in an animal trained for athletic exercise.
Beta Ghiorghis (House of St. George), Lalibela, Ethiopia. Beta Ghiorghis (House of St. George), Lalibela, Ethiopia.
Factors Affecting the Environmental Lapse Rate (ELR): Heating or Cooling of the Lower Atmosphere Factors Affecting the Environmental Lapse Rate (ELR): Heating or Cooling of the Lower Atmosphere
How to calculate credit card interest when the interest is compounded How to calculate credit card interest when the interest is compounded
AAC, Inc. is planning to issue $5,000,000 in 180-day maturity notes paying a rate of 12 percent ... AAC, Inc. is planning to issue $5,000,000 in 180-day maturity notes paying a rate of 12 percent ...
Annotation of a DNA sequence containing part of the human beta-globin gene Annotation of a DNA sequence containing part of the human beta-globin gene
Video: Digestive chemicals - water, gastric acid, bile & bicarbonate

For a complete list of videos, visit our video library