Ginger Industries stock has a beta of 1.30. The company just paid a dividend of $.30, and the dividends are expected to grow at 4 percent. The expected return on the market is 13 percent, and Treasury bills are yielding 6.3 percent. The most recent stock price for the company is $80. a. Calculate the cost of equity using the DGM method. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the cost of equity using the SML method. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. DGM method b. SML method % %
Q: can you please type out the equation
A: Solution:- When an equal amount is saved each period at end of period, it is called ordinary…
Q: Suppose that the world is described by a two-factor model, so stock returns depend on two systematic…
A: a) The pure factor portfolios would be portfolios with exposure to only one of the two factors,…
Q: Suppose that PIMCO buys $100m worth of 1-year par-valued Treasuries with a 2.5% coupon rate. Then,…
A: The repurchase agreement is referred to as a type of short-term financing for government dealers. In…
Q: Mini Case Suppose you decide (as did Steve Jobs and Mark Zuckerberg) to start a company. Your…
A: As per our guidelines, we are supposed to answer only 3 sub-parts (if there are multiple sub-parts…
Q: Dakdale Fashions, Inc.'s, 2021 income statement is reported below. (Use corporate tax rate of 21…
A: STEP 1 EBIT stands for net income before the impact of taxes and debt interest. Although both of…
Q: a-1. What is the NPV for the project if the company's required return is 12 percent? (A negative…
A: First, we will have to use the terminal cash flow approach to calculate the value of cash flows and…
Q: What statutory protection is offered to a third party who enters into a contract with a person…
A: A third party who enters into a contract with a person purporting to act on behalf of a company…
Q: Corporations can raise capital using either debt (and must pay interest) or equity (and are expected…
A: Dividend per share is $2.15. The tax rate is 35%.
Q: The force of interest is known to be δ(t)=k√t where t is in years. a) Determine k such that money…
A: The force of interest is the rate of interest that earns returns that are continuously compounded.…
Q: A 40 year old woman puts $1500 in a retirement account at the end of each quarter through 20 years…
A: The FV of a payment series is used to find out the total value of the holdings at a future date…
Q: Suppose that the interest rate is 4%. What is the value of the discount factor, v? υ Enter a value…
A: An interest rate is given. We have to find the value of the discount factor and the discount rate.…
Q: Solve for the unknown number of years in each of the following: (Do not round intermediate…
A: Time value of money concept says that a dollar amount invested today will have more value in future…
Q: Inflation is expected to average 4% for the long term and Mr. Smith earned $74,000 this year, how…
A: The current earnings (PV) is $74,000. The inflation rate (r) is 4%. The years to keep up with…
Q: Sarah is thinking about taking out a loan. The interest rate is 6.00 % p.a. and is calculated…
A: Data given: Interest rate=6% p.a. compounded quarterly Term of payment= Monthly Required: Effective…
Q: A project has the following cash flows: Year Cash Flow 0 -$ 16,300 1 2 3 a. What is the NPV at a…
A: NPV is a measure of the profitability of a project as it discounts the cash flows to the present to…
Q: The Meadows Corporation needs to raise $62 million to finance its expansion into new markets. The…
A: Companies raise money through various resources and IPO is the main source of funding but raising…
Q: Interest swaps are subject to counterparty risk. 1. Please briefly explain the consequences for a…
A: Interest swaps are subject to counterparty risk. Yes, interest rate swaps are subject to…
Q: How is net worth calculated?
A: Net Worth: The value of a person or corporation is their net worth.It can be applied to…
Q: Suppose you start saving today for a $25.000 down payment that you plan to make on a house in 5…
A: Solution: When an amount is deposited somewhere, it earns interest on it. The amount initially…
Q: a. Explain forecasting exchange rates. b. Explain four forecasting techniques.
A: STEP 1 When forecasting exchange rates, analytical principles are used to calculate future rates.…
Q: Lakonishok Equipment has an investment opportunity in Europe. The project costs €12 million and is…
A: STEP 1 NPV The discounted future cash flows are added together to create NPV. Because it is so…
Q: Fritz Benjamin buys a car costing $17900. He agrees to make payments at the end of each monthly…
A: The loan amount refers to the money that is borrowed by the borrower from the lender in against of…
Q: a. If the interest rate on the loan is 12%, how long will it take for her to repay the loan fully?…
A: By rearranging a PV of ordinary annuity formula we can determine the time taken. PV = PMT…
Q: If the treasury management section of the bank is attempting to minimise interest rate risk, how…
A: In order to minimize the risk, the treasury management must match the duration. It must calculate…
Q: At an interest rate of 11%, what is the present value of an asset that produces $2,400 a year in…
A: Data given: Cash flow=$2400 Rate=11%
Q: You are evaluating the performance of two fund managers to help a client understand their strengths…
A: Portfolio are managed by the fund managers and each manager have own strength and own weekness but…
Q: Ramona Garcia will be remodeling her kitchen before she places her home on the market to sell. She…
A: Monthly payments refer to the payment that is paid on a monthly basis for the repayment of the…
Q: Corporation X can issue straight 5-year debt (bonds) at a yield to maturity of 5%. If a 5-year…
A: A structured note issued by Corporation X would provide the return from the bonds minus the cost of…
Q: Lever Age pays an 10% rate of interest on $10.50 million of outstanding debt with face value $10.5…
A: STEP1 In general, a coverage ratio is a metric used to assess a company's capacity to pay off debt…
Q: Suppose that the bid price of Google stock is $497 per share and the ask price is $501 per share.…
A: The terms "bid price" and "ask price" relate to the highest and lowest prices, respectively, at…
Q: Francis wants to start a foundation that will pay its beneficiaries $64,000 per year forever, with…
A: The concept of money's time worth states that any sum today is worth more than its worth in the…
Q: What will happen to Big Moon’s total expected return and overall risk if the proposed new branch…
A: Whenever a new investment is added, the return and risk change or the overall investment or project.…
Q: Consider the three stocks in the following table. Pt represents price at time t, and Qt represents…
A: In a market value-weighted index, companies with larger market caps are given a higher weight in the…
Q: Find the monthly house payments necessary to amortize an 8.4% loan of $181,200 over 15 years.
A: EMI : Equated monthly installment (EMI) is a fixed payment made by a borrower to a lender on a…
Q: During the last week of December 2021, John re-assessed his situation with the following result: He…
A: In this question, we need to required to estimates the annual savings for Retirement. With the given…
Q: 5. A recent college graduate hopes to have $200,000 saved in their retirement account 25 years from…
A: Time Value of Money states that a dollar earned today is more valuable than any time in the future,…
Q: If you deposit $50,000 in an account that pays 4% annual interest, how long will it take to double…
A: The rule of 72 is a rule which is used in finding out the time period for doubling the amount of…
Q: What are the sources of gains for bondholders Interest payments Dividends Stock split Capital gains
A: Bondholders An investor or the owner of debt instruments, which are frequently issued by…
Q: Shinedown Company needs to raise $40 million to start a new project and will raise the money by…
A: Flotation costs refer to the costs that are incurred by companies at the time of financing. When…
Q: The owners' equity accounts for Vulcano International are shown here: Common stock ($.50 par value)…
A: Shares outstanding is the number of shares issued by the company and available in the market. The…
Q: A company is due to receive €2,500,000 two-months from today and wishes to save the funds for three…
A: To calculate the forward rate, we take the average of the lower and upper bounds of the interest…
Q: tions Select the images below to enlarge. Balance Sheet Murawski Company Balance Sheet December 31…
A: Inventory Turnover ratio is one of the efficiency ratio being used in business. This shows how many…
Q: Can you please write out the equations
A: Present value of annuity is the current value of the future payments that are calculated using the…
Q: If the rate at which you can exchange INR for USD is 19.3% better than the rate shown in Part 1…
A: Exchange rate quoted is 1 INR = USD 0.01637 INR is 19.3% stronger relative to USD Revised exchange…
Q: Would the above decision change if they applied the IRR method? When do the two methods give…
A: Data given: Scenario A Scenario B Year Free Cash Flow ($) Free Cash Flow ($) 0 -87000…
Q: The previous year's balance sheet for Brown's Produce showed total common equity of $4,050,000 and…
A: Book value per share refers to the value of common equity as per the balance sheet of the company. A…
Q: On his thirteenth birthday, a boy inherits $13,000 which is to be used for his college education.…
A: Return In its most basic form, a return—also referred to as a financial return—is the amount of…
Q: During 2022, Mastermind Corporation had: Revenue of $766,000 Cost of Goods Sold of $225,000…
A: Net Income is the total of earnings acquired for a specific period less the cost of goods sold and…
Q: What is the expected return of a portfolio of two risky assets if the E(Ri), standard deviation…
A: The expected return of the portfolio is weighted return of two assets in the portfolio and depends…
Q: You find the following corporate bond quotes. To calculate the number of years until maturity,…
A: STEP 1 Coupon Rate A bond's interest payment made in relation to its face value, or par, is known as…
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
- Ginger Industries stock has a beta of 1.25. The company just paid a dividend of $.40, and the dividends are expected to grow at 5 percent. The expected return on the market is 12 percent, and Treasury bills are yielding 4.7 percent. The most recent stock price for the company is $64. a. Calculate the cost of equity using the DGM method. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the cost of equity using the SML method. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)Epley Industries stock has a beta of 1.25. The company just paid a dividend of $.40, and the dividends are expected to grow at 5 percent. The expected return on the market is 12 percent, and Treasury bills are yielding 6.1 percent. The most recent stock price for the company is $78. a. Calculate the cost of equity using the DCF method. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) DCF method % b. Calculate the cost of equity using the SML method. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) SML method % eBook & Resources eBook: 14.2. The Cost of Equity Check my workFloyd Industries stock has a beta of 1.25. The company just paid a dividend of $.40, and the dividends are expected to grow at 5 percent per year. The expected return on the market is 12 percent, and Treasury bills are yielding 6.4 percent. The current price of the company's stock is $81. a. Calculate the cost of equity using the DDM method. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) DDM method % b. Calculate the cost of equity using the SML method. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) SML method %
- Are bio technology company stock is currently selling for $48.35 per share. The earnings per share are $4.14 and the dividend is $1.80. A-what is the current yield of stock as a percent round your answer to the nearest 10th of a percent?  B-what is the price earnings ratio round your answer to the nearest whole number?Gabriel Industries stock has a beta of 1.35. The company just paid a dividend of $.85, and the dividends are expected to grow at 5 percent. The expected return on the market is 11.5 percent, and Treasury bills are yielding 5 percent. The most recent stock price is $83.50. a. Calculate the cost of equity using the dividend growth model method. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the cost of equity using the SML method. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)Ginger Industries stock has a beta of 1.42. The company just paid a dividend of $.92, and the dividends are expected to grow at 5.2 percent. The expected return on the market is 11.7 percent, and Treasury bills are yielding 5.2 percent. The most recent stock price is $85.25. Calculate the cost of equity using the dividend growth model method. Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. Calculate the cost of equity using the SML method. Note: Do not round intermediate calculations and enter your answer as a percent
- Determine the cost of common stock (equity). The T-Bill rate is 5.2%. The Market Return is 12.7%. What is the company's cost of equity capital if the company has a beta of 1.27? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity %A biotechnology company's stock is currently selling for $48.35 per share. The earnings per share are $2.14, and the dividend is $1.90. (a) What is the current yield of the stock (as a %)? (Round your answer to the nearest tenth of a percent.) |% (b) What is the price-earnings ratio? (Round your answer to the nearest whole number.)Analogue Technology has preferred stock outstanding that pays a $18.80 annual dividend. It has a price of $204. What is the required rate of return (yield) on the preferred stock? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)
- Cornwell Industries stock has a beta of 1.10. The company just paid a dividend of $2.16, and the dividends are expected to grow at 4%. The expected return on the market is 10%, and Treasury bills are yielding 3.2%. The most recent stock price for the company is $72. a. Calculate the cost of equity using the dividend growth model method. (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Dividend growth model method b. Calculate the cost of equity using the SML method. (Do not round intermediate calculations. Round the final answer to 3 decimal places.) SML methodSuppose a stock had an initial price of $92 per share, paid a dividend of $2.30 per share during the year, and had an ending share price of $75.50. a. Compute the percentage total return. Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. What was the dividend yield? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. c. What was the capital gains yield? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g.132.16. Answer is complete but not entirely correct. a. Percentage total return b. Dividend yield c. Capital gains yield 13.04% 13.04% 14.62%A stock is selling today for $50 per share. At the end of the year, it pays a dividend of $3 per share and sells for $58. A. What are the dividend yield and percentage capital gain? B. Now suppose the year-end stock price after the dividend is paid is $42. What are the dividend yield and percentage capital gain in this case? (Negative amounts should be indicated by a minus sign. Enter your answers as a whole percent.)