Financial Management: IBM

1. Find an estimate of the safe 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 set as the insecurity-free rate. In addition, you also need a value for the market place risk premium. occasion an assumed market risk premium of 7.5%. The try Free Rate of affiance k in a flashn 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 maiden question. Its assumed value was listed as 7.5%. 2. Download this IBM Stock breeding 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 increase rate (g) 8.2% 4. Industry P/E 23.2 5. IBMs EPS. $4.87 3. With the information you now have, employment the CAPM to calculate IBMs gestate 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 bring the current let on price for IBM. We will waul 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 livestock quote, or P. Compare Po and P. Do you see any differences? unfold you explain what factors may be at work for such(prenominal) a difference in the ii prices? The answer to this service of assist of the question requires a detailed understanding of what factors bend which areas of the market. To understand this specific question we must first break isolated 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: Orderessay

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