Financial Management: IBM

1. Find an estimate of the unhazardous consider of interest, krf. To obtain this value, go to Bloomberg.com: grocery Data [http://www.bloomberg.com/ commercialises/index.html] and ingest the U.S. 10-year Treasury bond come in as the insecurity-free rate. In addition, you also need a value for the mart risk premium. expenditure an assumed market risk premium of 7.5%. The jeopardize Free Rate of fasten on k directlyn as KRF is 4.250% or 0.0425. This value was obtained from www.bloomberg.com/markets/index.html. The Assumed grocery Risk Premium (Km) was previously given is the archetypical question. Its assumed value was listed as 7.5%. 2. Download this IBM Stock teaching document (.pdf file). https://mycampus.aiu-online.com/courses/FIN410/Assignment_Assets/FIN410_u3ips.pdf 1. IBMs beta (ß) 1.64 for 5 years 2. IBMs current annual dividend $.80 3. IBMs 3-year dividend evolution rate (g) 8.2% 4. Industry P/E 23.2 5. IBMs EPS. $4.87 3. With the information you now have, habituate the CAPM to calculate IBMs necessitate rate of return or ks. krf= .0425 km= .075 beta= 1.64 ks= krf + (km-krf) x beta ks= .0425 + (0.075-.0425) x 1.64 ks=0.0958 or 9.58% 4. Use the CGM to recall the current stool price for IBM. We will squall this the theoretical price or Po. ks= 0.0958 D1= $0.812 g= 8.2% or .082 Po= D1/ks-g Po= $0.812/.0958-.082 Po= $58.84057971 ($58.84) 5.

Now use appropriate Web resources to find IBMs current investment company quote, or P. Compare Po and P. Do you see any differences? advance you explain what factors may be at work for such(prenominal) a difference in the 2 prices? The answer to this service of cognitive process of the question requires a detailed understanding of what factors define which areas of the market. To understand this specific question we must first break isolated the necessary information. The essential key would be what the beta has been for the particular stock we are looking at. If you want to get a full essay, order it on our website: Orderessay

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