Suppose that the consensus forecast of security analysts of your favorite company is that earnings next year will be e1 = $5.00 per share. suppose that the company tends to plowback 50% of its earnings and pay the rest as dividends. if the chief financial officer (cfo) estimates that the company's growth rate will be 8% from now onwards, answer the following questions.
if your estimate of the company's required rate of return on its stock is 10%, what is the equilibrium price of the stock?
suppose you observe that the stock is selling for $50.00 per share, and that this is the best estimate of its equilibrium price. what would you conclude about either (i) your estimate of the stock's required rate of return; or (ii) the cfo's estimate of the company's future growth rate?
suppose your own 10% estimate of the stock's required rate of return is shared by the rest of the market. what does the market price of $50.00 per share imply about the market's estimate of the company's growth rate?

Daniel owns 100 shares of abc corporation's common stock. abc uses the fair value option, and recent declines in the firm's credit rating have caused the value of the firm's outstanding bonds payable to drop by 10%. daniel feels this is good news, but he wants to know what you think about the situation. which of the following represents your best response? a : "this situation may be positive for you in that the change in abc's credit standing indicates that the value of the firm's assets is likely increasing. however, the drop in bond value may negate any positive effects on your bottom line, because it means your claim on the firm's assets is simultaneously decreasing." b : "actually, this is bad news all around. the drop in the value of abc's bonds payable means shareholders' claims on the firm's assets have decreased. moreover, abc's declining credit rating means that the firm's assets are probably also dropping in value, thus magnifying your losses even more." c : "on the surface, this seems like good news because it means your claim on the firm's assets has increased. however, the drop in creditworthiness may also indicate that abc's assets are declining in value, thus offsetting any gains associated with the drop in bonds payable." d : "you're right! this is good news because it means that abc's debtholders have a decreased claim on the firm's assets. as a result, the firm's existing shareholders"like you"have seen their claim on the firm's assets increase."

One of your new suppliers, kim, has been hearing rumors about your firm’s lack of capability to deliver high quality products and writes an email asking you to address the claims being made. in replying to her, you want to be sure that you are very clear and leave no room for misinterpretation. which of the following aspects of effective communication should you give the most attention? (a) making sure you understand kim’s areas of expertise. (b) supporting your reply with relevant data and facts. (c) establishing your credibility as an expert. (d) paying attention to implied communications.

Which of the following would create the most money? the initial deposit is $6,500 and the required reserve ratio is 20 percent. the initial deposit is $3,000 and the required reserve ratio is 10 percent. the initial deposit is $7,500 and the required reserve ratio is 25 percent. the initial deposit is $4,500 and the required reserve ratio is 15 percent.