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FN300 Unit 6 assignment




Question;#2.;The stock of Sedly Inc. is expected to pay the following dividends;Year;1 2 3 4;Dividend $2.25 $3.50 $1.75 $2.00;At the end of the fourth year its value is;expected to be $37.50. What should Sedly;sell for today if the return on stocks of similar risk is 12%?;#5.;The Spinnaker Company has paid an annual dividend of $2 per share for;some time. Recently, the board of;directors voted to grow the dividend by 6% per year from now on. What is the most you would be willing to pay;for a share of Spinnaker if you expect a 10% return on your stock investments?;#17;Blackstone Corporation?s $7 preferred was issued five years ago. The risk-appropriate interest rate for the;issue is currently 11%. What is this;preferred selling for today?;11.;Laurel Wilson has a portfolio of five stocks. The stocks' actual investment;performance last year is given below along with an estimate of this year's;performance.;Compute;the actual return on Laurel's overall portfolio last year and its expected;return this year.;13. The stocks in Problem 11 have the following;betas;Stock Beta;A 1.1;B 0.6;C 1.0;D 1.6;E 0.8;Calculate;Laurel?s portfolio beta for last year and for this year. Assume that the changes in investment (value);come from changing stock prices rather than buying and selling shares. What has happened to the riskiness of;Laurel?s portfolio? Should she be;concerned?;? 17.;You have recently purchased stock in Topical Inc. which has;returned between 7% and 9% over the last three years. Your friend, Bob, has;criticized your purchase and insists that you should have invested in Combs;Inc., as he did, because it's been returning between 10% and 12% in the last;three years. Bob knows nothing about financial theory. Topical's beta is 0.7;and Comb's is 1.2. Treasury bills are currently yielding the risk-free rate of;4.2%, while the stock market is returning an average rate of 9.4%.;a.;What return should you expect;from Topical? What return should Bob;expect from Combs?;b.;Write a few work explaining to;Bob why these expected returns aren?t the whole story.;21. The Framingham Company expects to grow at 4%;indefinitely. Economists are currently asserting that investment opportunities;in short-term government securities (Treasury bills) are readily;440441available at a risk-free rate of 5%. The stock market is returning an;average rate of 9%. Framingham's beta has recently been calculated at 1.4. The;firm recently paid an annual dividend of $


Paper#50706 | Written in 18-Jul-2015

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