Answer:
The intrinsic value of the stock is $21.52
Explanation:
To calculate the intrinsic value of the stock, we will use the constant growth model of the dividend discount model (DDM). The DDM values the stock based on the present value of the expected future dividends from the stock. The formula for price today under the constant growth model of DDM is,
P0 = D0 * (1+g) / r - g
Where,
- D0 * (1+g) is D1 or the next expected dividend
- r is the required rate of return
- g is the growth rate in dividends
First of all, we need to calculate the r or required rate of return using the CAPM equation,
r = rRF + Beta * (rM - rRF)
Where,
- rRF is the risk free rate
- rM is the return on market
r = 0.024 + 1.12 * (0.107 - 0.024)
r = 0.11696 or 11.696%
P0 = 2 * (1+0.022) / (0.11696 - 0.022)
P0 = $21.52
Answer:
She possessed the land for 3.14 years.
Explanation:
3Giving the following information:
Present Value (PV)= $67,900
Future Value (FV)= $64,800
Decrease rate (d)= 1.5%
<u>To calculate the number of years passed, we need to use the following formula:</u>
n= ln(FV/PV) / ln(1+i)
n= ln(64,800 / 67,900) / ln(1.015)
n= -3.14 years
She possessed the land for 3.14 years.
Answer:
$217.668
Explanation:
The computation of net income is shown below:-
ROE = Profit Margin × Total Asset Turnover × Equity Multiplier (Assets ÷ Equity)
ROE = (Profit Margin) × (Sales ÷ Total Assets) × (1 + Debt-Equity ratio)
16% = Profit margin × ($4,400 ÷ $2,985) × ( 1 + 1.20)
16% = Profit margin × 1.47 × 2.20
16% = Profit margin × 3.234
Profit margin = 16% ÷ 3.234
= 0.04947
Now as we know that
Profit margin = Net income ÷ Sales
0.04947 = net income ÷ $4,400
net income is
= $4,400 × 0.04947
= $217.668
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The share of profit paid to share holders are known as dividends
