Financial Management: IBM

1. Find an estimate of the risk-free consider of interest, krf. To obtain this value, go to Bloomberg.com: grocery Data [http://www.bloomberg.com/ commercialises/index.html] and habituate the U.S. 10-year Treasury bond evaluate as the risk-free rate. In addition, you also need a value for the market place risk premium. Use an put on market risk premium of 7.5%. The Risk Free Rate of arrogate k directlyn as KRF is 4.250% or 0.0425. This value was obtained from www.bloomberg.com/markets/index.html. The Assumed commercialize Risk Premium (Km) was previously given is the first question. Its assumed value was listed as 7.5%. 2. Download this IBM Stock Information put down (.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 crop rate (g) 8.2% 4. Industry P/E 23.2 5. IBMs EPS. $4.87 3. With the information you now have, use the CAPM to calculate IBMs require 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 find the current shop price for IBM. We result 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 grab Web resources to find IBMs current threadbare quote, or P. contrast Po and P. Do you see any departures? offer you formulate what factors may be at work for such(prenominal) a difference in the two prices? The ans wer to this service of process of the quest! ion requires a detailed understanding of what factors influence which areas of the market. To understand this particularised question we mustiness first break apart the requisite 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 respectable essay, order it on our website: OrderCustomPaper.com

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