Currently, inventors in the stock market expect the price of the XYZ corporation's stock next year to be $115. They also expect the corporation to pay $5 of dividend next year. Currently the price of stock is $100. The investors hear some good news about the corporation. As a result, they now expect the price of the stock next year to be $130 and for the corporation to pay a dividend of $8. According to the efficient markets hypothesis, the price of the stock today will jump to  dollars.

Please correct answer and step by step solution

A share of stock with a beta of 0.78 now sells for $58. Investors expect the stock to pay a year-end dividend of $2. The T-bill rate is 5%, and the market risk premium is 8%. a. Suppose investors believe the stock will sell for $60 at year-end. Calculate the opportunity cost of capital. Is the stock a good or bad buy? What will investors do? b. At what price will the stock reach an "equilibrium" at which it is perceived as fairly priced today? Complete this question by entering your answers in the tabs below. Required A Required B Suppose investors believe the stock will sell for $60 at year-end. Calculate the opportunity cost of capital. Is the stock a good or bad buy? What will investors do? Note: Do not round intermediate calculations. Round your opportunity cost of capital calculation as a percentage rounded to 2 decimal places. Opportunity cost of capital The stock is a bad buy and the investors will t invest %

NeuroDyne Corporation (NDC) currently has a 100% dividend payout ratio, pays a dividend of $5 per year, and has a Re of 8%. Using the Dividend Discount Model (DDM), what is the price of NDC stock? If NDC reduces its payout ratio to 75% and starts investing in new projects with IRRs of 10%, what will the new stock price be?