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Nostrana [21]
3 years ago
11

Determine the required rate of return for Johnson and Johnson​, assuming the geometric growth rate was 13.04​% for the period​ 2

001-2010, its trading price on January​ 14, 2011 was ​$62.55​, and the dividend for 2010 was ​$2.110.
Business
2 answers:
Inessa05 [86]3 years ago
7 0

Answer:

13.08%

Explanation:

Use the dividend model to calculate Required return

given P=$62.55

         g=13.04%

          D0=2.110

           r=?

The formula P=D1/r-g

 First calculate D1 =2.110×1.1304

                               =2.385

substitute in the formula and solve for r

62.55 = 2.385/r-13.04

Cross multiply we get

62.55r-815.652 = 2.385

62.55r=818.037

62.55r/62.55=818.037/62.55

r=13.078/13.08%

Aleks04 [339]3 years ago
5 0

Answer:

The required rate of return for Johnson and Johnson is 16.85%

Explanation:

Johnson and Johnson paid an annual dividend of $2.110 last year, the geometric growth rate was 13.04​ percent during last ten years.

To find out the expected dividend to be paid be Johnson and Johnson this year.

= [$2.110(1.1304)]

= $2.385

Required Rate of Return is calculated by the following formula,

R = \frac{expected dividend}{current share price} + growth rate for dividend

R = 2.385/62.55 + 0.1304

R = .1685, or 16.85%

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For a risk averse person, a. the pleasure of winning $1,000 on a bet exceeds the pain of losing $1,000 on a bet. b. the pain of
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A risk averse person is an individual or person rather who prefers lower returns with known risk than higher returns with unknown or higher risks. In this case, the individual prioritizes preservation of capital at hand over the potential of a more than average return. In this scenario, for a risk averse individual, the pain of losing $1,000 on a bet exceeds the pleasure of winning $1,000 on a bet based on the high uncertainty attached to winning the $1000 bet.

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3 years ago
Cynthia Co. exchanged Building 24 which has an appraised value of $4,800,000, a cost of $7,600,000, and accumulated depreciation
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Answer:

See the journal entries below.

Explanation:

<u>In the Book of Cynthia Co.</u>

Book value of Building 24 = Cost of Building 24 - Accumulated depreciation of Building 24 = $7,600,000 - $3,619,000 = $3,981,000

Gain on disposal of Building 24 = Building 24 an appraised value of - Book value of Building 24 = $4,800,000 - $3,981,000 = $819,000

Basis for Building M = Building M appraisal value - Gain on disposal of Building 24 = $4,560,000 - $819,000 = $3,741,000

Cash = Accumulated Depreciation of Building 24 + Basis for Building M - Cost of Building 24 -  Gain on Disposal of Building 24 = $3,619,000 + $3,741,000 - 7,600,000 - $819,000 = $1,059,000

The journal entries will look as follows:

<u>Accounts Title                                 Debit ($)                   Credit ($)      </u>

Accumulated Depreciation           3,619,000

Building M                                       3,741,000

Cash                                                1,059,000

  Building 24                                                                   7,600,000

  Gain on Disposal                                                             819,000

<u><em>To record the exchange of Building 24 for Building M from Waterway Co. </em></u>

<u>In the Book of Waterway Co. </u>

Building 24 = Building M cost + Cash - Building M depreciation = $9,096,000 + $1,059,000 - $4,747,000 = $5,408,000

The journal entries will look as follows:

<u>Accounts Title                                 Debit ($)                   Credit ($)      </u>

Accumulated Depreciation           4,747,000

Building 24                                    5,408,000                            

  Building M                                                                    9,096,000

  Cash                                                                              1,059,000

<u><em>To record the exchange of Building M for Building 24 from Cynthia Co. </em></u>

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Answer:

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