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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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Answer:

C) Sales markets of the foreign entity are primarily in foreign countries.

Explanation:

The US dollar is the most commonly used currency in the world, and most of foreign trade is carried out using the US dollar. If the foreign entity sells most of its production overseas (exports) then they will use the US dollar as their functional currency since all their exports will be valued in US dollars.

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3 years ago
Blue Ridge Bank has a PM of 12 percent, an interest income to total assets ratio of 6.00 percent, and a noninterest income to as
lakkis [162]

Answer:

8.10 Percent

Explanation:

= 0.12 * (6% + 1.50%) * 9

= 8.10%

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3 years ago
Johnson Bailey and Kailey Clark's corporation, Bailey-Clark Financial, is branching out into the field of escrow handling. They
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C. No, they must also meet the requirements in Answers A and B. In addition, the corporation must furnish a surety bond in the amount of $25,000.00, or more, based upon yearly average trust fund obligations

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3 years ago
Fred Flintlock wants to earn a total of 10% on his investments. He recently purchased shares of ABC stock at a price of $20 a sh
svlad2 [7]

Answer:

Option (C) is correct.

Explanation:

Return on the stock = (Dividend ÷ Investment) + (capital gain ÷ investment )

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10 = 5 + 5 × ( final price - 20)

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Therefore, the stock price should increase by [(21 - 20) ÷ 20] × 100

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6 0
3 years ago
Weather speech is going to be delivered before one or 100 people this speaker should
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3 years ago
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