Schnusenberg Corporation just paid a dividend of D

Schnusenberg Corporation just paid a dividend of D -...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Schnusenberg Corporation just paid a dividend of D = $0.75 per share, and that dividend is expected to grow at a constant rate of 6.50% per year in the future. The company's beta is 1.65, the required return on the market is 10.50%, and the risk-free rate is 4.50%. What is the company's current stock price? $10.92 $7.99 $10.11 $10.41 $9.30 Cranberry Corp. has two divisions of equal size: a computer manufacturing division and a data processing division. Its CFO believes that stand-alone data processor companies typically have a WACC of 8%, while stand-alone computer manufacturers typically have a 12% WACC. He also believes that the data processing and manufacturing divisions have the same risk as their typical peers. Consequently, he estimates that the composite, or corporate, WACC is 10%. A consultant has suggested using an 8% hurdle rate for the data processing division and a 12% hurdle rate for the manufacturing division. However, the CFO disagrees, and he has assigned a 10% WACC to all projects in both divisions. Which of the following statements is CORRECT?
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 12/21/2010 for the course ECON 3001 taught by Professor Stone during the Spring '10 term at Harvard.

Ask a homework question - tutors are online