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 77 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
Wow, this really help

dantucker

  • Member
  • Posts: 346
Reply 3 on: Yesterday
Great answer, keep it coming :)

« previous next »
 

Did you know?

Cutaneous mucormycosis is a rare fungal infection that has been fatal in at least 29% of cases, and in as many as 83% of cases, depending on the patient's health prior to infection. It has occurred often after natural disasters such as tornados, and early treatment is essential.

Did you know?

Complications of influenza include: bacterial pneumonia, ear and sinus infections, dehydration, and worsening of chronic conditions such as asthma, congestive heart failure, or diabetes.

Did you know?

Approximately 25% of all reported medication errors result from some kind of name confusion.

Did you know?

Recent studies have shown that the number of medication errors increases in relation to the number of orders that are verified per pharmacist, per work shift.

Did you know?

Serum cholesterol testing in adults is recommended every 1 to 5 years. People with diabetes and a family history of high cholesterol should be tested even more frequently.

Variation in the rate of evolution as a function of the strength of selection, assuming genetic drif Variation in the rate of evolution as a function of the strength of selection, assuming genetic drif
THE RATE OF PHOTOSYNTHESIS THE RATE OF PHOTOSYNTHESIS
Monopoly, patented in 1935, was an instant best-seller: Players risk all their assets in an attempt Monopoly, patented in 1935, was an instant best-seller: Players risk all their assets in an attempt
How at Risk Are You? How at Risk Are You?
A bus starts from restat a station and accelerates at a rate of 2 m/s^2 for 15 seconds. It then runs A bus starts from restat a station and accelerates at a rate of 2 m/s^2 for 15 seconds. It then runs
Find the proceeds of the following promissory note. A five-year, $4500.00 note bearing interest ... Find the proceeds of the following promissory note. A five-year, $4500.00 note bearing interest ...
Video: Muscle Twitch and Muscle Tension - Motor unit size and force

For a complete list of videos, visit our video library