Exercise 9 Answers

Exercise 9 Answers - 2. In 2000, Intel had 3.3 billion...

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ECON 423 – Exercise 9 A couple of examples 1. You are thinking about investing in stock in a company which paid a dividend of $5 this year and whose dividends you expect to grow at 5% per year. The risk-free rate is 1% and you require a risk premium of 10%. . What is the price that you will pay for this share? Price = $5*(1+0.05))/(0.11-0.05) = $87.5
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Unformatted text preview: 2. In 2000, Intel had 3.3 billion shares outstanding. Intel had earnings of $7 billion dollars in 1999. So, Intels earnings per share is $7 billion / $3.3 billion = $2.12 share. If the price of an Intel Share in 1999 was $60, what was the PE in 2000? PE = $60/$2.12 = 28.3 DECEMBER 2001: Intels PE ratio was 165.5 OCTOBER 6, 2011: 10.3...
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