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-BARSIC- [3]
3 years ago
15

You have just purchased a share of stock for $ 19.09. The company is expected to pay a dividend of $ 0.51 per share in exactly o

ne year. If you want to earn a 10.8 % return on your​ investment, what price do you need if you expect to sell the share immediately after it pays the​ dividend?
Business
1 answer:
frozen [14]3 years ago
8 0

Answer:

$20.64

Explanation:

Use the rate of return formula to solve for the new price;

r = ( P1 +Div1 -P0)/P0

whereby;

r = rate of return = 10.8% or 0.108 as a decimal

Div1 = Next year's dividend amount = $0.51

P1 = next year's stock price =?

P0 = Current stock price = $19.09

Next, plug in the numbers to the formula;

0.108 = (P1 + 0.51 - 19.09) / 19.09

Multiply both sides by 19.09;

2.0617 = P1 -18.58

Add 18.58 on both sides;

2.0617 + 18.58 = P1

20.64 = P1

Therefore, you need to sell the share at $20.64

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1 year ago
The annual carrying cost for a consumer product is $115, the ordering cost is $1,150, and the annual demand is estimated to be 1
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Answer:

Store should take the advantage of discount.

Explanation:

Economic order quantity is the level of units ordered which minimize the total cost.

The economic order quantity (EOQ) is computed by applying the following formula

EOQ = [ ( 2DO ) / H ]^1/2

where D = Annual Demand in units = 1,000

S = Setup or ordering cost = $1,150

H = Holding or carrying cost per unit, per year = $115

EOQ = [ ( 2 x 1,000 x $1,150 ) / $115 ]^1/2

EOQ = [ $2,300,000 / $115 ]^1/2

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Cost of EOQ

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Carrying cost = ( 141.42 / 2 ) x $115 = $8,132

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Cost of Discount

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Total cost = $648,000 + $7,616 + $8,683 = $664,299

Store should take the advantage of discount because it incurs lower cost.

4 0
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