Eclipse Mints stock is expected to pay a dividend of $0.50 next year, $0.70 in the following year, $1.30 per year from year 3 to year 6, and $1.80 each year thereafter. Eclipse Mints is 25% more risky than market as a whole. Return on market is 11% and risk free rate is 4%. If the current price of Eclipse is $12, would you buy this stock?

Expected return of eclipse?

Present value of perpetuity in year 7?

Present value of perpetuity in year 0?

Present value of annuity in year 3?

Present value of annuity in year 0?

Present value of year 1?

Present value of year 2?

Price of Eclipse?

Comment on your decision.

What is the current dividend of Eclipse?

Calculate the present value of all dividends.

Calculate intrinsic value of Eclipse.

If the market price is $25 should the investor buy Eclipse? Comment on your decision.

From the following information calculate

State of Economy Axe Brand Eclipse Mints Market

Bad 12% 24% 10%

Good 22% 14% 30%

Calculate and comment on Beta of Axe brand.

Calculate and comment on Beta of Eclipse mint.

Assume that you want to invest $43,000 out of your $78,000 total investment in Axe Brand. What is portfolio beta?