(a)What are the main differences between the bond markets and stock markets?
- Rutledge, Inc., has invested $100,000 in a project that will produce cash flows of $45,000, $37,500, and $42,950 over the next three years. Find the payback period for the project.
- Using Capital Asset Pricing model (CAPM), Calculate expected rate of return for a stock if the risk free rate of return is 9 percent, expected return on market is 14 percent and beta for the stock is 1.4.
(b) Nynet, Inc., paid a dividend of $4.18 last year. The company does not expect to increase its dividend in the foreseeable future. If the required rate of return is 18.5 percent, what is the current price of the stock?