homework help
Username
Password
Homework helpPost homework
questionPost homework answerMy homework help
Save on Textbooks!



Other
  Other Homework Help ( 1295 )
Math
  Math- Algebra 1 ( 2527 )
  Math- Algebra 2 ( 1228 )
  Math- Calculus ( 399 )
  Math- Geometry ( 640 )
  Math- Other ( 1596 )
  Math- Precalculus ( 427 )
  Math- Trigonometry ( 297 )
Biology
  Biology- Animal ( 159 )
  Biology- Cell ( 542 )
  Biology- Ecological ( 112 )
  Biology- General ( 681 )
  Biology- Microbiology ( 102 )
Business
  Business- Accounting ( 713 )
  Business- Finance ( 544 )
  Business- Other ( 484 )
Chemistry
  Chemistry- Biochem ( 164 )
  Chemistry- Organic ( 171 )
  Chemistry- Other ( 1368 )
Economics
  Economics- Macroeconomics ( 879 )
  Economics- Microeconomics ( 640 )
Essay Service
  Essay Correction ( 99 )
  Essay Writing ( 425 )
History
  History- World ( 864 )
  US History- Post 1877 ( 487 )
  US History- Pre 1877 ( 357 )
Language
  English ( 898 )
  Foreign Languages ( 120 )
  World Literature ( 199 )
Physics
  Physics- Electricity, Magnetism ( 261 )
  Physics- General ( 1809 )
  Physics- Mechanical, Heat, Sound ( 360 )
  Physics- Wave, Quantum Physics ( 121 )
z Medical Questions

Your Question
Cannot attach file for some reason. Not good at Finance at all! Need help and need to show work. Please and Thank You!
Question 1: Fasco Industries just paid a dividend of D0 = $1.45. Analysts expect the company\'s dividend to grow by 28% this year, by 11% in Year 2, and at a constant rate of 6% in Year 3 and thereafter. The required return on this low-risk stock is 11.00%. What is the best estimate of the stock’s current market value?

Question 2: Why are cash flows that are connected to common stock difficult to estimate? How does this compare to those related to bonds.


Po = D1/(r - g)
To do that we will have to estimate the vales of r, g, and D1.
To estimate the value of r we will use the Capital Asset Pricing Model:
CAPM = Rf + Beta(Rm - Rf)
Where:
Risk Free Rate = Rf = 3.5%
Market Return = Rm = 12%
Beta of BA 217 Corp. = .85

Question 3: Calculate \"r\".
Next we estimate the value of \"g\" using the average growth rate of past dividends.
Assume 6 years ago AB 217 paid a dividend of $1.20 and this year they paid a dividend
of $1.55, using the Excel RATE formula calculate the average growth rate it took for the
dividend to the current level in the period of time.

Question 4: Calculate \"g\".
Next we estimate the value of D1, the dividend next year as required by the Constant
Growth Model.
D1 = Do(1 + g), where Do = the dividend today, $1.55
Unit

Question 5: Calculate \"D1\".
Using your solutions estimate the value of AB 217 Corporation\'s stock using the
Constant Growth Model.
Po = D1/(r - g)

Question 6: Calculate the estimated value or Price Today of AB 217 = \"Po\".
Finally comment on this question. If the actual market value was BELOW your
estimated value of AB217, and you were highly confident in your assumptions, what
action might you take?
Please Login to Answer the Question
LOGIN


wireless broadband  Online Courses | Cheap Car Insurance  |  CRM  |  
Copyright © 2003-2009 StudentQuestions.comTerms of Service | Resources