You've been asked to value a new company - KLV - that just paid a dividend of USD 0.50 per share. Your analysts expect the divided to grow at 10% per year for three years, before entering a second phase where dividends are constant (and equal to the dividend paid in the third year). KLV has a beta of 2 and it is projected to remain at that level until it enters its second phase when it is expected to have a beta of 1. The current risk-free rate of 1%/year and expected market return of 7%/year are expected to hold indefinitely. If the CAPM holds what is your value for the common stock of KLV? Show your work.
If the spot price of Japanese Yen (JPY) in British pound (GBP) is greater than the price one-year forward is the one-year interest rate higher in the United Kingdom or Japan? Assume covered-interest parity holds and use the associated equation to support your conclusion.