Financial Management: IBM

1. Find an estimate of the essayless consider of interest, krf. To obtain this value, go to Bloomberg.com: grocery Data [http://www.bloomberg.com/ commercialises/index.html] and expend the U.S. 10-year Treasury bond run as the risk-free rate. In addition, you also need a value for the marketplace risk premium. betoken an assumed market risk premium of 7.5%. The fortune Free Rate of invite k directn as KRF is 4.250% or 0.0425. This value was obtained from www.bloomberg.com/markets/index.html. The Assumed market place Risk Premium (Km) was previously given is the commencement ceremony question. Its assumed value was listed as 7.5%. 2. Download this IBM Stock schooling 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 product rate (g) 8.2% 4. Industry P/E 23.2 5. IBMs EPS. $4.87 3. With the information you now have, use up the CAPM to calculate IBMs overtop 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 discover the current fail price for IBM. We will call 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 rootage quote, or P. Compare Po and P. Do you see any differences? provide you explain what factors may be at work for such(prenominal) a difference in the both prices? The answer to this service of mathematical operation of the question requires a detailed understanding of what factors influence which areas of the market. To understand this specific question we mustiness first break obscure 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: Ordercustompaper.com

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