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faust18 [17]
3 years ago
13

Lohn Corporation is expected to pay the following dividends over the next four years: $18, $14, $13, and $7.50. Afterward, the c

ompany pledges to maintain a constant 4 percent growth rate in dividends forever. If the required return on the stock is 14 percent, what is the current share price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Business
1 answer:
Lerok [7]3 years ago
4 0

Answer:

current share price = $85.96

Explanation:

Find the PV of each dividend

PV= FV / (1+r)^t

r= required return

t= total duration

PV(D1) = 18 / (1.14)= 15.78947

PV(D2) = 14 / (1.14^2) = 10.77255

PV(D3) = 13 / (1.14^3) = 8.774630

PV(D4) = 7.50 / (1.14^4) = 4.44060

PV(D5 onwards) is a two-step process, first PV of growing perpetuity;

PV(D5 onwards) at yr4 =[7.50*(1+0.04) ] / (0.14-0.04) = 78

second, finding PV today ; PV(D5 onwards) at yr 0 = 78 / (1.14^4) = 46.18226

Add the PVs to get the current share price = $85.96

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Competition- <span>Companies have a competitive drive, thus better quality goods and more variety of products which are at lower prices. (more productively efficient )</span>
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Grainger Company is a major automotive parts manufacturer operating in six countries. It has no restrictions on stock sales and
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The correct word for the blank space is: public.

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What are the benefits of naming a secondary beneficiary in a will? Check all that apply. It could prevent a will from going into
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Answer:

• It could prevent a will from going into probate

•It avoids confusion if the primary beneficiary on dies first

•It allows for another option if the primary beneficiary cannot inherit it

Explanation:

A Secondary beneficiary otherwise known as contingent beneficiary is a person or an entity who has been named in a Will, insurance policy or trust to inherit assets therein should the main or primary beneficiary dies before the grantor.

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3 years ago
When the price of good A is $50, the quantity demanded of good A is 500 units. When the price of good A rises to $70, the quanti
katen-ka-za [31]

Answer:

total revenue  for 500 is $2500

total revenue  for 400 is $2800

Explanation:

given data

price of good A = $50

quantity demanded of good A = 500 units

price of good A rises = $70

quantity demanded of good A falls = 400 units

solution

we get here Elasticity of demand that is express as

Elasticity of demand = (change in quantity ÷ average quantity) ÷ (change in price ÷ average price)   .......................1

here

Change in quantity is = 400 - 500 = -100  

and average quantity is =  \frac{400+500}{2} = 450

and change in price is = 70 - 50 = 20

average price is = \frac{70+50}{2} = 60

so now we put all value in equation 1

Elasticity of demand  = \frac{\frac{-100}{450} }{\frac{20}{60} }

Elasticity of demand  = -0.67

as here the elasticity of demand is inelastic because elasticity is above -1

so about total revenue when price will increases as elasticity is inelastic

so increase in price will cause increase in revenue because revenue is maximum when elasticity = -1

and increase in price will cause increases elasticity in the absolute term and revenue will increase

total revenue = price × quantity

so

total revenue  for 500 = 500 × 5 = $2500

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5 0
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