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lisov135 [29]
3 years ago
7

Rossdale Co. stock currently sells for $72.87 per share and has a beta of 1.22. The market risk premium is 7.10 percent and the

risk-free rate is 2.90 percent annually. The company just paid a dividend of $4.29 per share, which it has pledged to increase at an annual rate of 3.45 percent indefinitely. What is your best estimate of the company's cost of equity?
Business
1 answer:
Paul [167]3 years ago
7 0

Answer:

Cost of Equity =11.56%

Explanation:

The cost of equity can be determined using any of the following methods:

  1. The Dividend Valuation Model(DVM)
  2. Capital Asset Pricing Model (CAPM)

The Dividend Valuation Model(DVM) is a technique used to value the worth of an asset.

According to this model, the value of an asset is the sum of the present values of the future cash flows would that arise from the asset discounted at the required rate of return.  

Price = D/Kp

D- Dividend payable

Kp- cost of preferred stock

The capital asset pricing model (CAPM): relates the price of a share to the market risk or systematic risk. The systematic risk is that which affects all the all the economic agents, e.g inflation, interest rate e.t.c  

This CAPM is considered superior to DVM because it incorporates risk. Hence, we will use the CAPM  

Using the CAPM , the expected return on a asset is given as follows:  

E(r)= Rf +β(Rm-Rf)  

E(r) =? , Rf- 2.90%, Rm-Rf- 7.10% β- 1.22

E(r) = 2.90% + 1.22×(7.10)% = 11.562  %

Cost of Equity =11.56%

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Serjik [45]

Answer:

$23,290.00

Explanation:

Preparation forn a schedule of cost of contract services performed

Supplies used on consulting contracts 1,940.00

Salaries of professionals working on contract 16,400.00

Service Overhead:

Janitorial services for professional offices 800.00

Insurance on contract operations 880.00

Utilities for contract operations 2,360.00

Depreciation on equipment used for contract work 910.00

Total service overhead 4,950.00

(800.00+880.00+2,360.00+910.00)

Cost of Contract Services Provided 23,290.00

(1,940.00+16,400.00+4,950.00)

Administrative expenses:

Supplies used in administrative offices 1,700.00

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Salaries of administrative office personnel 8,690.00

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Insurance on administrative operations 930.00

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TOTAL 15,280

Therefore the schedule of cost of contract services performed will be 23,290.00

4 0
3 years ago
The total of paul's taxable gifts, assuming he does not elect gift splitting with his spouse, subject to the unified transfer ta
Tanya [424]

Gift splitting permits a married couple to merge their gift tax exemptions to help enhance the advantages of tax-free gifting.

<h3>What is a gift-splitting gift?</h3>

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Gift splitting allows a wedding couple to combine their gift tax exemptions to help enhance the advantages of tax-free gifting.

The unified tax credit gives a set dollar quantity that an individual can gift during their lifetime and give on to heirs before any gift or estate taxes apply.

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Which option enables you to grammatical change
snow_tiger [21]

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5 0
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Jason Liang has gotten three job offers. He is now looking at the benefits packages of all three to see what he likes and doesn'
Dovator [93]

Answer:

Which step in the career planning process is Jason completing?

E) Evaluate financial and other factors of positions offered.

Explanation:

Career planning is an aspect of career management that involves self evaluation and formulation goals to have a strong career path. It involves constant evaluation in improving skills and setting goals to ensure that one achieves career objectives that they set out. Career planning is a step-wise procedure that is to move an individual to a direction that will make him/her achieve professional excellence in the career that is chosen. The following steps are involved in career planning;

1. Self assessment

Self assessment involves the evaluation of one's own skills and interests and also capabilities to understand what he/she already has and where he/she wants to be in the career path.

2. Research on careers

Once the skills and interests has been assessed, one can research on the careers they would love to pursue to find out if they align with their skills, capabilities and interests

3. Set career objectives

The individual should then set clean career objectives, both short-term and long-term objectives.

4. Learn and improve skills

In order to align with set career objectives, the individual should keep improving and acquiring new skills.

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7 0
3 years ago
A corporation issued 2,500 shares of its no par common stock at a cash price of $11 per share. The entry to record this transact
Rus_ich [418]

Answer:

B. Debit cash $27,500 ; Credit common stock $27,500

Explanation:

The journal entry to record the transaction is;

Cash account Dr $27,500

(2,500 shares × $11)

To Common stock account Cr $27,500

Cash is an asset hence debited because it decreases as it was used to pay for bills while common stock is credited because it increases shareholder's equity.

5 0
3 years ago
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