RISK, RETURN, AND STOCK VALUATION
RISK, RETURN, AND STOCK VALUATIONAssignment Overview
For this assignment, Questions 1 and 3 are computational in nature. Questions 2 and 4 are conceptual questions. So make sure to thoroughly review the required background readings and make sure you understand the material at a conceptual level and also understand the steps involved in the computations.
Please download the Case 3 Template. You will type your answers into this document. Save the document with your last name and submit to the dropbox. Note that you will get partial credit if you show your work even if the answers are incorrect.
- Using a dividend discount model, what is the value of a stock that pays an annual dividend of $5 that is not expected to grow and the discount rate is 10%? What will be the value of the stock if the dividend is expected to grow 5% per year?
- Explain whether each of the following is systematic or unsystematic risk using references to the required background readings:
- Use the CAPM to calculate the following:
- Do you think the following companies would have a high, low, or average beta? Explain your answer using references from the background readings and your knowledge of CAPM and beta:
Answer the assignment questions directly.
- Stay focused on the precise assignment questions. Do not go off on tangents or devote a lot of space to summarizing general background materials.