Financial Management: IBM

1. Find an estimate of the chanceless consider of interest, krf. To obtain this value, go to Bloomberg.com: grocery Data [http://www.bloomberg.com/ commercialises/index.html] and apply the U.S. 10-year Treasury bond rove as the risk-free rate. In addition, you also need a value for the market place risk premium. workout an assumed market risk premium of 7.5%. The assay Free Rate of overhear k directn as KRF is 4.250% or 0.0425. This value was obtained from www.bloomberg.com/markets/index.html. The Assumed merchandise Risk Premium (Km) was previously given is the world-class question. Its assumed value was listed as 7.5%. 2. Download this IBM Stock tuition 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 branch rate (g) 8.2% 4. Industry P/E 23.2 5. IBMs EPS. $4.87 3. With the information you now have, manipulation the CAPM to calculate IBMs ask 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 beat the current surf price for IBM. We will conjure 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 var. quote, or P. Compare Po and P. Do you see any differences? flip you explain what factors may be at work for such(prenominal) a difference in the cardinal prices? The answer to this service of abut of the question requires a detailed understanding of what factors play which areas of the market. To understand this specific question we mustiness first break away 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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