Fey Fashion paid the following dividends from 2013 to 2019: 2013 2014 2015 2016 2017 2018 2019 $1.00 $1.10 $1.21 $1.33 $1.46 $1.61 $1.77 What is the stock's price today if an investor wants to earn 15%?
Cost of Capital
Shareholders and investors who invest into the capital of the firm desire to have a suitable return on their investment funding. The cost of capital reflects what shareholders expect. It is a discount rate for converting expected cash flow into present cash flow.
Capital Structure
Capital structure is the combination of debt and equity employed by an organization in order to take care of its operations. It is an important concept in corporate finance and is expressed in the form of a debt-equity ratio.
Weighted Average Cost of Capital
The Weighted Average Cost of Capital is a tool used for calculating the cost of capital for a firm wherein proportional weightage is assigned to each category of capital. It can also be defined as the average amount that a firm needs to pay its stakeholders and for its security to finance the assets. The most commonly used sources of capital include common stocks, bonds, long-term debts, etc. The increase in weighted average cost of capital is an indicator of a decrease in the valuation of a firm and an increase in its risk.
Finance
![Stocks and Stock Valuation
Fey Fashion paid the following dividends from 2013 to 2019:
2013 2014 2015 2016 2017 2018 2019
$1.00 $1.10 $1.21 $1.33 $1.46 $1.61 $1.77
What is the stock's price today if an investor wants to earn 15%?
Risk and Return
Hull Consultants, a famous think tank in the Midwest, has
provided probability estimates for the four potential economic
states for the coming year. The probability of a boom economy
is 30%, the probability of a stable growth economy is 45%, and
the probability of a recession is 25%.
Calculate the variance and the standard deviation of the two
investments: stock and corporatebond. If the estimates for both
the probabilities of the economy and the returns in each state of
the economy are correct, which investment would you choose,
considering both risk and return?
Stable
Investment Boom Growth Recession
Stock 24% 11% -15%
4%
Corporate bond 9% 8%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F01d01b29-ede7-42ba-8dcd-8c0b18e94cc8%2F936578c0-9337-458e-be93-0a7b9217f1a4%2Fbeefglp_processed.jpeg&w=3840&q=75)
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