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MODULE 6 - UNRECORDED

# MODULE 6 - UNRECORDED - View Attempt...

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06_Unrecorded Stocks Started: April 17, 2010 7:36 PM Submitted: April 17, 2010 7:36 PM Time spent: 00:00:07 Total score: 0/245 = 0% Done 1-8 DCF model 1. Branscome expected dividend Sharon Branscome is considering buying the common stock of Altria Group (previously named Philip Morris). Ms. Branscome requires a nominal 24 percent per year rate of return on investment in stocks with Altria's beta of 1.05. She expects the stock price to be \$97.88 at the end of her investment (holding) period in 1½ years. The most recent quarterly dividend (at time t=0) was 52½¢. The expected growth rate is a nominal 21% annualized quarterly rate. Draw a cash flow timeline and tell me the dividend Ms. Branscome expects at the end of the holding period in 1½. Nearest Student Response Value Correct Answer Feedback A. 71.37¢ B. 61.21¢ C. 58.16¢ D. 67.81¢ E. 64.42¢ General Feedback: This ISN'T an annuity. REM to use periodic rates for all values. The initial dividend at time t=0 isn't part of the intrinsic value calculation, but it determines the values for the subsequent six quarterly dividends. Score: 0/10 2. Branscome PV of dividends Sharon Branscome is considering buying the common stock of Altria Group. She requires a nominal 24 percent per year rate of return on investment in stocks with a Aaltria's beta of 1.05. Ms. Branscome expects the stock price to be \$97.88 at the end of her investment (holding) period in 1½ years. The most recent quarterly dividend (at time t=0) was 52½¢ and she expects the dividend to grow at a nominal 21% annualized quarterly rate. What is the present value (at time t=0) of expected dividends Ms. Branscome should use in calculating intrinsic value? Nearest Student Response Value Correct Answer Feedback View Attempt https://ecampus.unt.edu/webct/urw/lc3868415321231.tp3868415343231/... 1 of 17 4/17/2010 7:40 pm

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Student Response Value Correct Answer Feedback General This ISN'T an annuity. REM to use periodic rates for all values. REM, too, that the dividend at time t=0 isn't part of intrinsic value because the model uses expected dividends, that is, the six quarterly dividend starting at the end of time t=1. Use the cash flow routine for this problem, then look at Exhibit 4 at the end of the chapter to see details. Score: 0/10 3. Branscome PV of sale price Sharon Branscome is considering buying the common stock of Altria Group. Ms. Branscome requires a nominal 24 percent per year rate of return on investment in stocks like Altria with a beta of 1.05. She expects the stock price to be \$97.88 at the end of her investment (holding) period in 1½ years. How much is the present value (at time t=0) of the expected sale price of the common stock? Nearest Student Response Value Correct Answer Feedback General Again, this ISN'T an annuity. REM to use periodic rates for all values. Try your cash flow routine on this, and look at Exhibit 4 at the end of the chapter. Note she would be indifferent between \$69 now and \$97.88 at the end of a year and a half if her opportunity cost is a nominal 24%.
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MODULE 6 - UNRECORDED - View Attempt...

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