Answer:
The correct answer is 23.33 and 11.67.
Explanation:
According to the scenario, the given data are as follows:
ROE = 20%
Plowback ratio = 0.30
Earning per share = $2
Rate of return = 12%
So, we can calculate the price and P/E ratio by using following formula:
First we calculate the growth rate of the company.
So, Growth rate (g) = Plowback ratio × ROE
By putting the value we get,
Growth rate = 0.30 × 0.20 = 6%
Now we calculate the price,
So, Price = Earning × ( 1 - Plowback ratio) ÷ ( Return rate - Growth rate)
= $2 × ( 1 - 0.30) ÷ ( 0.12 - 0.06)
= 1.4 ÷ 0.06
= 23.33
And P/E ratio = Price ÷ earning per share
= 23.33 ÷ 2
= 11.67
Answer:
Explanation:
a)
It is known that,
P(Sat) = 0.35
P(Sun) = 0.30
P(no rain on Sat) = 1 - 0.35
P(no rain on Sun) = 1 - 0.30
So P(rains on the weekend) = 1 - P(no rain on Sat) P(no rain on Sun) =
= 1 - (1-0.35)(1-0.30) = 0.545
b)
P(Sat Sun) = P(rains on Sat) P(rains on Sun) + P(rains on Sat) P(no rains on Sun) = 0.35*0.30 + 0.35*(1-0.30) = 0.35
Answer:
a. 13.33%
b. 10%
c. 8%
d. 5.71%
Explanation:
The computation of nominal rate of return is given below:-
Rate of return = Dividend ÷ Current market price
For the first case
= $8 ÷ $60
= 13.33%
For the second case
= $8 ÷ $80
= 10%
For the third case
= $8 ÷ $100
= 8%
For the fourth case
= $8 ÷ $140
= 5.71%
Note :- To get $8 you need to multiply by $100 by the 8%
Answer:
Ans. Current Share Price=$33.85
Explanation:
Hi, we first have to establish the dividend for the first 3 years and the dividend when the growth rate falls off to a constant rate of 8% with the formula to find the present value of a perpetuity with constant growth rate. From there, we need to bring all the above cash flows to present value and that is the price of the share. The formula is as follows.

To find D1, D2,and D3, we have to do this.
D1=Do(1+0.19)
D2=D1(1+0.19)
D3=D2(1+0.19)
Since 0.19 is the growth rate for 3 years. Everything should look like this

notice that the sign of the last part do not coincide with the formula, that is because the growth rate from the first 3 years is -8%.
Best of luck.
Answer:
the amount of cash paid is $1,568
Explanation:
The computation of the amount of cash paid is shown below:
= (purchased value - returned goods) × (1 - discount rate)
= ($1,800 - $200) × (1 - 0.02)
= $1,600 × 0.98
= $1,568
hence, the amount of cash paid is $1,568
We simply applied the above formula so that the correct value could come
And, the same is to be considered