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Monica [59]
2 years ago
11

Driver Products recently paid its annual dividend of $4, and reported an ROE of 15%. The firm pays out 50% of its earnings as di

vidends. The stock has a beta of 1.15. The current risk-free rate is 2.7% and the market return is 11.00%. Assuming that CAPM holds, what is the intrinsic value of this stock
Business
1 answer:
ziro4ka [17]2 years ago
6 0

Answer: $90.62

Explanation:

First, we need to calculate the expected return. This will be:

= 2.7 + [1.15 × (11 - 2.7)]

= 2.7 × 9.545

= 12.245

= 12.5

We the calculate the growth rate which will be:

= ROE × (1 - payout ratio)

= 15 × (1-0.5)

= 15 × 0.5

= 7.5

The intrinsic value of this stock will then be:

= 4 × (1+0.075) / (0.12245 - 0.075)

= 90.62

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8 0
2 years ago
Erickson Air is a large airline company that pays a customer relations representative $8,000 per month. The representative, who
Andreas93 [3]

Answer:

So total cost of processing Costumers in January is $7200

And total cost of processing Costumers in February is $6000

Explanation:

Total cost of Representative for the whole year = 8000×12 = $96,000

Total number of customers complaints processed in a year = 40,000

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Troy starts a job right out of college. He feels lucky to have found a position in the financial industry. Troy knows that he ne
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Mentoring Plan.

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It is a system of semi structured guidance whereby one person shares their knowledge, skills and experience to assist others to progress in their own lives and careers. Mentors need to be readily accessible and prepared to offer help as the need arises within agreed bounds.

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Because it makes even more sense.

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