Q: The wider the dispersion of returns on a stock, the:
A: Investors evaluate the portfolio or security on the basis of risk profile. The risk profile can be…
Q: Market's required yield on preferred stock is actually the promised rate of return. Explain this…
A: A profit on an investment is referred to as a return in finance. It includes interest payments,…
Q: Should the goal of the firm be to maximize the price of its stock?
A: Every company has its own vision and mission statement. Having a vision paves way for achieving the…
Q: what is the current 'share price?
A: Introduction: The term share price can be defined as the price at which the stock is currently…
Q: How does higher expected growth affect a stock’s value?
A: Stock value is referred to as the shares of the corporation, which used to appear to trade at the…
Q: What are the two components of most stocks’ expected total return?
A: Expected total return refers to the full return of an investment over a certain period of time.
Q: discuss what is the stock price?
A: >Stocks, when referred to in relation with the paid in capital of a corporation, refers to the…
Q: The required return on Miller Corporation stock is
A: The beta of a stock is the degree of responsiveness to movements in price with changes in the stock…
Q: Is stock price maximization good or bad forsociety?
A: Answer: Maximization of stock prices occurs because it benefits the society at large. The stock…
Q: How does forward pe effect the stock market?
A: P/E refers to the price earnings ratio. It is one of the important valuation metrics that we use in…
Q: On what do stock valuations rest?
A: The answer:
Q: Discuss how changes in the general stock and bond markets could lead to changes in the required rate…
A: Required rate of return- is the minimum rate of return which an investor expects in return for a…
Q: Define required rate of return on stock
A: Answer: Usually, return is a benefit received on investment. This covers any change in stock…
Q: Define Rate of return on stock investment.
A: Capital Stocks: Common stock and preferred stock are the two types of capital stocks. Common…
Q: Explain required rate of return on stock
A: The required rate of return is the minimum acceptable rate of return that an investor expects to…
Q: The value of Seagate's stock is $
A: Formula to calculate the stock price using dividend discount model is: P = D1/ke - g Where D1 is…
Q: Is the following equation correct for finding the value of a constant growth stock? Explain.
A: Price of stock can be found from the constant growth model of dividend discount method.
Q: Calculate the expected return for Stock A.
A: Expected Return: It represents the profit or loss expected by an investor on an investment. It is…
Q: Using the corporate valuation model approach, what should be the company's stock price today?
A: Free cash flow = (EBIT*(1-T)) + Depreciation exp. - Capital expenditure - Changes in working capital…
Q: Explain realized rate of return on stock
A: Realized Rate of Return on stock gives you the percentage return on holding the stock for a certain…
Q: How do you calculate the beta of stock?
A: Beta is the measure of stock's volatility to the overall market, and is calculated as-
Q: What is the firm’s cost of preferred stock?
A: Introduction: Preferred stock is one of two types of securities sold by any company, and the other…
Q: How GARCH (generalized ARCH model) model is applied to Stock Price Volatility?
A: GARCH model is one of the models that is usually used by the financial analysts. The financial…
Q: What is a firm’s intrinsic value? Its current stock price? Is the stock’s “true” long-run valuemore…
A: An estimation of the true value of the stock of the company by considering the risk and return…
Q: The return of stock B is __% The volatility of stock A is __% The volatility of stock B is __%
A: Thank you for posting questions. Since you have posted multiple questions, as per the guideline I am…
Q: what can you say about the price movements of the stock? (TEL)
A: TEL is the ticker of TE Connectivity Ltd. This stock is listed in the NYSE.
Q: How do you calculate dividend yield for stock?
A: dividend yield is the ration of dividend paid by the firm divided by price of share of the firm.
Q: what are factors that can influence the price of a stock?
A: Stocks are the company’s securities issued by the companies to raise the funds. Prices of stock…
Q: What role does sentiment play to explain stock price volatility? Explain
A: The role of emotion in determining the price of a company is one of the most significant aspects to…
Q: Define actual rate of return on stock
A: Actual rate of return on stock
Q: How to calculate market price range of common stock?
A: Market price per share: A market price per share is total value of company divided by number of…
Q: How does the current price of a stock depend on its own past values, as well as the current and past…
A: Market index of stock gauges the stock market which assists investors to analyze the market…
Q: What conditions must hold in order for a stock to be evaluatedusing the constant growth model?
A: Stock: It the investment in the form of equity which is a part of the ownership of a company that is…
Q: What is the difference between a stock’s price and its intrinsic value? Why do investors and…
A:
Q: What is the new value of the company? What is the new stock price?
A: Market value of common stock : 18*$26=$468Millions Proceeds in to the company by share warrants =…
Q: What is the expected return for stock A?
A: Expected Return: It is computed by the sum of individual returns proportionately weighted by each…
Q: How to know what price target to buy a stock?
A: A price target is an analyst's forecast for the future value of a commodity. Price targets can apply…
Q: What will be the current stock price?
A: The current price of a stock is the most recent selling price of a stock in the market. It is the…
Q: What is the Security Market Line (SML)? How isbeta related to a stock’s required rate of return?
A: Security market line (SML): It could be a line drawn on a graph that works as a graphical…
Q: How will the change in required return influence the price of a stock? How will the dividend growth…
A: The Gordon growth model calculates the price of the stock by using the dividends, growth rate of…
Q: Discuss the impact of investor sentiment on stock returns conditional on economic conditions
A: Investor's sentiment means the attitude of the investors toward different securities or even the…
Q: Ultimately what determines the value of a share of common stock? Which would be more appropriate for…
A: Common shares are the most important security issued by the companies to raise the funds. Since,…
Q: How do you calculate conditional volatility of a stock returns?
A: Volatility represents how large an asset's price swing around the mean price i.e the statistical…
Q: Why doesn’t total stockholders’ equity equal the market value of the firm?
A: Stockholders’ equity: Stockholders' equity means the net claim of owners of corporation on the…
Q: If a firm takes steps that increase its expected future ROE, does this necessarily meanthat the…
A: Return on Equity (ROE) is the measure of a company’s annual return. The formula to calculate Return…
Q: When the share price series breaks through the moving average line from below, what would a…
A: Moving Averages are averages with little more extension Moving Average is Popular Technical…
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
What is the expected return on the firms stock
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- You are the CFO of a profitable firm that is financially constrained. The stock market is currently going through a boom phase (assume this is a bubble). From what you have learned in this course, you know that the rational decision would be to issue new shares and use this income to pursue positive NPV projects. Before you make this decision, what is the most important variable that you would examine Assume you have information on all these variables. Select one: O a. Market Q O b. Fundamental Q O c. Elasticity of price demand for common shares O d. Cash SavingsInitial Public Offering (IPO) - In the chapter we are provided with an example of the Industrial and Commercial Bank of China offering shares of their corporation to the public. The biggest pro of a firm based in Mexico taking this route, would be the gain of capital. A con that comes with this is a loss of control of your company. IF you were to lose majority control over your business, this could have potentially catastrophic impacts. The Global Bond Market - "Companies will issue international bonds if they believe it will lower their cost of capital" Foreign bonds - On the pro side of foreign bonds, the firm can raise capital in foreign currencies. This opens up more potential investors to the firm. A con of foreign bonds would be the exposure of foreign exchange risk. Foreign exchange risk can be risky, and if the Mexican peso depreciates significantly on the foreign exchange market, this could potentially crush the Mexican capital market. Eurobonds - Eurobonds are another and…Q1. (a) You are a stock analyst in charge of valuing high-technology firms, and you are expected to come out with buy-sell recommendations for your clients. You are currently analyzing a firm called etalk.com that specializes in internet-based communication. You are expecting explosive growth in this area. However, the company is not currently profitable even though you believe it will be in the future. Your projections are that the firm will pay no dividends for the next 2 years. Three years from now, you expect the stock to pay its first dividend of $1.50 per share. You expect dividends to increase at a rate of 10 percent per year for two years after that. At that point, the industry will start to mature and growth will slow down; dividends will continue to grow at a rate of 5 percent per year for the foreseeable future.The stock is trading on the Sauder Stock Exchange for $15 per share. If you believe that the required rate of return is 12 percent, what is your estimate of the value…
- In a few sentences, answer the following question as completely as you can. Imagine you are the treasurer of a small manufacturing firm. Your firm is planning to go public (i.e., sell stock to investors for the first time). One unresolved question concerns the market’s required return on the stock. Given what you have learned, how do you think the required return will affect the market value of your firm’s stock? How would you go about estimating this rate?man.3 Imagine you are a CFO of a company that is publicly traded in stock exchange and has one of the smallest market capitalisations among all the companies available at the stock market. Assume that a risk-free rate is 2%, average return on broadly defined stock index is 12% and according to your computations the company has a market beta of 1.5. Estimate the cost of equity capital for your company and discuss, in the light of the empirical findings on the performance of CAPM and the existing anomalies, the quality of your investment decisions when using this value for the purpose of project evaluation. The expected return on the firm's equity is:You have been hired as a financial consultant by Himalaya Ltd. The CEO, Ms. Natasha Romanoff has just returned from a conference of top managers, held at a prestigious University in Australia where the issue of share buy-backs, dividends, and earnings per share (EPS) were debated. She was particularly puzzled after hearing the quote below: Share buybacks (repurchases) are going into the market and pumping up the price of your shares by using your own cash, not to invest in business. - (Elizabeth Warren, U.S. Senator,2021)Required:In light of the above statement write a short memorandum format report to the CEO, Natasha Romanoff to answer the following four questions raised by Ms. Romanoff.i. Discuss what dividends, EPS and share buybacks are?ii. Discuss at least TWO reasons why companies pay dividends to shareholders?iii. Based on the statement above by Elizabeth Warren (U.S. Senator) criticallyevaluate why companies may consider buying back its own shares. iv. Discuss at least TWO…
- In the Republic of Atlantis the regulators decide to allow private placement of equity (see problem set 2 extra questions). A firm called Fish Inc. currently trades in their stock market at a price of $3 (Atlantic dollars) with 100 million shares outstanding. The manager currently needs to raise extra $300m. They decide to do that in a private placement and sell the shares to an individual investor at a discount of 20% of current share price. Which of the following statements is (are) true: (i) Private placements are fair. (ii) The company will issue 125m extra shares. (iii) Pre-existing investors will lose $34p per share.Required to answer. Single choice.Which is true about IPOs? O The most common type of IPO arrangement with underwriters is the firm commitment cash offer. O IPOs tend to outperform the market over the long-run. O On the day of the IPO, most insiders sell the majority of their shares to get liquidity. O On the first day of trading, there tends to be little change in the stock prices of newly-public firms.(iii) Presently, your company’s Face Value of Equity Share RO 10 and Market Value of your Share in MSM is RO 25 per share. In order to increase the trading volume and market liquidity of your company stock, will you suggest the management to go for stock split? Explain your management about concept of stock slip with the advantage of splitting the stock of your company with the current scenario. (iv) Given the current scenario COVID 19 and its impact on Cement sector in the near future, what are the factors that you consider affecting the dividend policy of your company? Critically evaluate and justify.
- The Financial Sector-End of Chapter Problem You are discussing buying stocks with a friend and mention that you want to buy a few shares of Amazon stock. Your friend says that's a terrible idea because Amazon has never paid dividends to its shareholders so you would never receive any of Amazon's profits or make any money off the stock. What might you say to your friend to defend your desire to purchase a few shares of Amazon stock? You explain that the price of Amazon stock will always have to rise because dividends are not paid. the fundamental value of the stock is not determined by the dividends paid, but by the present value of future profits. purchasing stock is better than purchasing bonds because stockholders are the first in line to get paid if the company goes bust. buying a few shares will give you a significant say in how Amazon will be run in the future.Suppose three honest individuals gave you their estimates of Stock X’s intrinsic value. Oneperson is your current roommate, the second person is a professional security analyst withan excellent reputation on Wall Street, and the third person is Company X’s CFO. If thethree estimates differed, in which one would you have the most confidence? Why?Suppose we live in a world with a semi-strong form efficient market. Explain if you could expect to generate excess returns if you make trades based on the following information and why? a. Record earnings information about a stock provided by your broker. b. Rumors about a potential merger of a firm. C. An announcement that came out yesterday about a successful test of a new product.