Please Give Step by Step AnswerOtherwise I give DISLIKES !! Round Barn stock has a required return of 12.20% and is expected to pay a dividend of $4.30 next year. Investors expect a growth rateof 4.80% on the dividends for the foreseeable future.Required:a. What is the current fair price for the stock?Note: Round your answer to 2 decimal places.Current fair priceb. Suppose the stock is selling at this price, but then investors revise their expectations. The new expectation for the growth rate is4.00%. If investors are rational, what will be the new price for Round Barn stock?Note: Round your answer to 2 decimal places.New price

Given that,Dividend = $4.30Expected Return = 12.20%Dividend Growth Rate = 4.80% a. What is the…

Answered: Round Barn stock has a required return…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 14P

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Now assume that the stock is currently selling at $30.29. What is its expected rate of return?
You are thinking of buying a stock priced at $98 per share. Assume that the risk-free rate is about 4.7% and the market risk premium is 5.5%. If you think the stock will rise to $122 per share by the end of the year, at which time it will pay a $1.74 dividend, what beta would it need to have for this expectation to be consistent with the CAPM? The beta is (Round to two decimal places.)
← You are thinking of buying a stock priced at $109.31 per share. Assume that the risk-free rate is about 4.03% and the market risk premium is 6.48%. If you think the stock will rise to $118.76 per share by the end of the year, at which time it will pay a $3.48 dividend, what beta would it need to have for this expectation to be consistent with the CAPM? The beta is (Round to two decimal places.) ...
Required: Investors expect the market rate of return this year to be 19.00%. The expected rate of return on a stock with a beta of 1.2 is currently 22.80%. If the market return this year turns out to be 17.60%, how would you revise your expectation of the rate of return on the stock? (Do not round intermediate calculations. Round your answer to 1 decimal place.) Revised rate of return %
You are thinking of buying a stock priced at $100 per share. Assume that the risk-free rate is about 4.5% and the market risk premium is 6%. If you think the stock will rise to $117 per share by the end of the year, at which time it will pay a $1 dividend, what beta would it need to have for this expectation to be consistent with the CAPM?
The price of a non-dividend-paying stock is $100. Suppose that the contínuously compounded risk-free rate is 1% per year, the market expected return is 7% (continuously compounded), the stock beta is 1.2, and the stock price volatility is 30% per year. Assume that the stock price follows the Geometric Brownian Motion. a) Solve for the expected stock return per year 0.32 (0.01 + 1.2 * 0.07) + = 0.139 b) A derivative pays off $100 if the stock price is in the range between $90 and $110 in year two and 0 otherwise. Determine its current price. 100 0.1392 = 75.73 c) What is the two-year 95% VaR if you short 100 shares of the stock today given that N (0.05) = -1.645? Note that the stock price follows a log normal distribution rather than a normal distribution
You are considering an investment in General Electric’s common stock. The stock is expected to pay a dividend of $5 a share at the end of this year; its beta is 0.9; the risk-free rate is 5.6%; and the market risk premium is 6%. The dividend is expected to grow at some constant rate g, and the stock currently sells for $25 a share. Assuming the market is in equilibrium, what the market believes will be the stock’s price at the end of 3 years &5 Years?
Investors expect the market rate of return this year to be 16.50%. The expected rate of return on a stock with a beta of 1.5 is currently 24.75%. If the market return this year turns out to be 14.50%, how would you revise your expectation of the rate of return on the stock? (Do not round intermediate calculations. Round your answer to 1 decimal place.)
A share of stock with a beta of 0.76 now sells for $51. Investors expect the stock to pay a year-end dividend of $2. The T-bill rate is 3%, and the market risk premium is 7%. a. Suppose investors believe the stock will sell for $53 at year-end. Calculate the opportunity cost of capital. Is the stock a good or bad buy? What will investors do? (Do not round intermediate calculations. Round your opportunity cost of capital calculation as a percentage rounded to 2 decimal places.) b. At what price will the stock reach an “equilibrium” at which it is perceived as fairly priced today? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
PeteCorp's stock has a Beta of 1.29. Its dividend is expected to be $3.17 next year, and will grow by 5% per year after that indefinitely. Assume the risk-free rate is 5%, and the Market Risk Premium is 6%. The stock price would currently be estimated to be $ ____________ Margin of error for correct responses: +/- .05 Rounding and Formatting instructions: Do not enter dollar signs, percent signs, commas, X, or any words in your response. Do not round any intermediate work, but round your *final* response to 2 decimal places (example: if your answer is 12.3456, 12.3456%, or $12.3456, you should enter 12.35).
A share of stock with a beta of 0.71 now sells for $61. Investors expect the stock to pay a year-end dividend of $3. The T-bill rate is 4%, and the market risk premium is 7%. Suppose investors believe the stock will sell for $63 at year-end. Calculate the opportunity cost of capital. Is the stock a good or bad buy? What will investors do? At what price will the stock reach an “equilibrium” at which it is perceived as fairly priced today?
If you buy a stock for a price of $23 and if you expect the stock to pay a dividend of $1.242 one year from now and to grow at a constant rate g = 8% in the future, then the required rate of return will be __________.

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