Current Price Assignment

Our professional writers will address all you homework
requirements and provide a quality paper with guarantees of 100% plagiarism free.
We provide 24/7 customer Support.

Order Research Paper In a Few Clicks



    Get my paper done

    By clicking “Get my paper done”, you agree to our terms of service and privacy policy. We’ll occasionally send you promo and account related emails.

    Current Price Assignment

    Current Price Assignment Micah is investing in the stocks of the company KNS. KNS just paid a dividend of $1 per share (D0 = 1). Micah expects the dividend growth rate to be -10% for Year One and 5% for Year Two. Afterwards, Micah believes the growth rate to be constant at g forever. Micah uses CAPM model to determine the discount rate (expected rate of return). And he calculates the following: E(rm) = 6%, rf = 1%, and βKNS = 0.6. (a) If g = 3%, what is Micah’s estimate of the current price using the Dividend Discount Model? (b) Suppose that the current price of KNS is $120 and Micah decides to short sell 100 shares of KNS stock using margin. The initial margin requirement is

    Current Price Assignment

    Micah is investing in the stocks of the company KNS. KNS just paid a dividend of $1 per share (D0 = 1). Micah expects the dividend growth rate to be -10% for Year One and 5% for Year Two. Afterwards, Micah believes the growth rate to be constant at g forever. Micah uses CAPM model to determine the discount rate (expected rate of return). And he calculates the following: E(rm) = 6%, rf = 1%, and βKNS = 0.6. (a) If g = 3%, what is Micah’s estimate of the current price using the Dividend Discount Model?
    Current Price Assignment(b) Suppose that the current price of KNS is $120 and Micah decides to short sell 100 shares of KNS stock using margin. The initial margin requirement is 50%. How much does Micah have to deposit into the margin account?
    (c) If the price goes up to $140 per share and the maintenance margin is 35%, will Micah receive a margin call?
    (d) Suppose Micah receives a margin call under 2(c). What is the minimum amount of cash that Micah can use to bring the margin back to 35%?Get Finance homework help today