Top hedge fund manager Sally Buffit believes that a stock with the same market risk as the S&P 500 will sell at year-end at a price of $40. The stock will pay a dividend at year-end of $3.00. Assume that risk-free Treasury securities currently offer an interest rate of 1.5%.   Average rates of return on Treasury bills, government bonds, and common stocks, 1900–2017 (figures in percent per year) are as follows.   Portfolio Average Annual Rate of Return (%) Average Premium (Extra return versus Treasury bills) (%) Treasury bills   3.8         Treasury bonds   5.3     1.5   Common stocks   11.5     7.7       a. What is the discount rate on the stock? (Enter your answer as a percent rounded to 2 decimal places.)           b. What price should she be willing to pay for the stock today? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Currently the S&P is returning 11% while Treasury bonds are returning 2%. If a stock has a beta of 1.3 and an expected return of 7%, what is the required return for this stock?

According to the Bloomberg Network (a Financial TV channel), the current return on the U.S T-bill is 4.0% and the market risk premium is 8.5%. Given this news, in the table below, the only stock that is correctly priced is: See attached table a. Stock E   b. Stock C   c. Stock B   d. Stock A   e. Stock D

Financial analysts forecast Wal-Mart Stores (WMT) growth for the future to be 12.00 percent. Their recent dividend was $1.93. What is the value of their stock when the required rate of return is 17.00 percent?

Use the data in the tables below to answer the following questions: Average rates of return on Treasury bills, government bonds, and common stocks, 1900-2017. Average Premium Portfolio Treasury bills Treasury bonds Common stocks Average Annual Rate of Return (%) (Extra return versus Treasury bills) (%) 3.8 5.3 11.5 1.5 7.7 Standard deviation of returns, 1900-2017. Standard Portfolio Deviation (%) Treasury bills 2.9 Long-term government bonds 9.0 Common stocks 19.7 a. What was the average rate of return on large U.S. common stocks from 1900 to 2017? b. What was the average risk premium on large stocks? c. What was the standard deviation of returns on common stocks? (Enter your answer as a percent rounded to 1 decimal place.) a. Average rate of return 11.5 % b. Average risk premium 7.7 % C. Standard deviation of returns 19.7 %

Top hedge fund manager Sally Buffit believes that a stock with the same market risk as the S&P 500 will sell at year-end at a price of $50. The stock will pay a dividend at year-end of $2. Assume that risk-free Treasury securities currently offer an interest rate of 2%. Average rates of return on Treasury bills, government bonds, and common stocks, 1900-2017 (figures in percent per year) are as follows. Average Premium (Extra return versus Treasury bills) ($) Average Annual Rate of Return ipped Portfolio ($) 3.8 Treasury bills Treasury bonds 5.3 1.5 Common stocks 11.5 7.7 Book Ask a. What is the discount rate on the stock? (Enter your answer as a percent rounded to 2 decimal places.) Print eferences Discount rate 9.70 % b. What price should she be willing to pay for the stock today? (Do not round intermediate calculations. Round your answer decimal places.) Stock price

The returns on small company stocks are 10.7%, U.S. Treasury bill offer a 1.5% return and a bank savings account offers an 1.3% return. What is the risk premium on small company stocks?

Top hedge fund manager Sally Buffit believes that a stock with the same market risk as the S&P 500 will sell at year-end at a price of $46. The stock will pay a dividend at year-end of $3.00. Assume that risk-free Treasury securities currently offer an interest rate of 2.4%. Average rates of return on Treasury bills, government bonds, and common stocks, 1900–2017 (figures in percent per year) are as follows. ortfolio Average AnnualRate of Return (%) Average Premium (Extra returnversus Treasury bills) (%) Treasury bills 3.8           Treasury bonds 5.3 1.5         Common stocks 11.5 7.7           1. What is the discount rate on the stock? (Enter your answer as a percent rounded to 2 decimal places.) 2. What price should she be willing to pay for the stock today? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Two stocks each currently pay a dividend of $1.90 per share. It is anticipated that both firms’ dividends will grow annually at the rate of 6 percent. Firm A has a beta coefficient of 1.08 while the beta coefficient of firm B is 0.83.   If U.S. Treasury bills currently yield 2.4 percent and you expect the market to increase at an annual rate of 8.2 percent, what are the valuations of these two stocks using the dividend-growth model? Do not round intermediate calculations. Round your answers to two decimal places.   Stock A: $   Stock B: $     Why are your valuations different?   The beta coefficient of (stock A or stock B) is higher, which indicates the stock's return is (less or more ) volatile.   If stock A’s price were $55 and stock B’s price were $46, what would you do?   Stock A is - (undervalued or overvalued) Iand (should or Should not) be purchased. Stock B is (undervalued or overvalued) and (should orshould notI) be purchased.

Quantitative Problem: Barton Industries estimates its cost of common equity by using three approaches: the CAPM, the bond-yield-plus-risk-premium approach, and the DCF model. Barton expects next year's annual dividend, D1, to be $2.40 and it expects dividends to grow at a constant rate gL = 5.3%. The firm's current common stock price, Po, is $26.00. The current risk-free rate, TRF, = 4.6%; the market risk premium, RPM, = 5.9%, and the firm's stock has a current beta, b, = 1.1. Assume that the firm's cost of debt, rd, is 8.91%. The firm uses a 3.9% risk premium when arriving at a ballpark estimate of its cost of equity using the bond-yield-plus-risk-premium approach. What is the firm's cost of equity using each of these three approaches? Do not round intermediate calculations. Round your answers to two decimal places. CAPM cost of equity: Bond-Yield-Plus-Risk-Premium: DCF cost of equity: % % % If you are equally confident of all three methods, then what is the best estimate of the…