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Kobotan [32]
3 years ago
13

You want to invest in a stock that pays​ $2.00 annual cash dividends for the next four years. At the end of the four​ years, you

will sell the stock for​ $27.00. If you want to earn​ 11% on this​ investment, what is a fair price for this stock if you buy it​ today?
Business
1 answer:
Vika [28.1K]3 years ago
8 0

Answer:

Po =   <u>D1   </u>     +  <u> D2   </u>  +    <u> D3    </u>    +          <u> D4 + P4</u>

        (1 +K)         (1 +K)2       (1 + k)3               (1 + K)4

Po =  <u> $2.00 </u>   +  <u> $2.00  </u>   +   <u>$2.00 </u>    +    <u>$2.00 + $27.00</u>

         (1 + 0.11)      (1 + 0.11)2    (1 + 0.11)3        (1 + 0.11)4

Po =  <u> $2.00  </u>  +   <u>$2.00</u>     +  <u> $2.00</u>     +    <u>$29.00</u>

          (1.11)              (1.11)2           (1.11)3             (1 .11)4

Po = $1.80       +     $1.62     +   $1.46      +      $19.10

Po = $23.98

Explanation:

The current market price  of the stock is a function of dividend in year 1 divided by 1 + r plus the dividend in year 2 divided by 1 + r raised to power 2 plus dividend in year 3 divided by 1 + r raised to power 3 plus the aggregate of dividend and market price in year 4 divided by 1 + r raised to power 4. r denotes required return on stock.

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Answer:

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5 0
3 years ago
Import tariffs generally ________ the output of domestic producers of the affected products and also _________ the output of dom
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Answer:

increase , decrease

Explanation:

Import tariffs are amount levied on the imports of goods. tariffs makes imports more expensive and discourages import.

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6 0
3 years ago
On December 15, 2018, Rigsby Sales Co. sold a tract of land that cost $3,200,000 for $5,000,000. Rigsby appropriately uses the i
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Instalment receivables (net) of $2,905,600 is the correct answer.

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3 years ago
What are the advantages of taking a criminal case to the criminal grand jury?
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4 0
3 years ago
aagen Inc. is a merchandising company. Last month the company's cost of goods sold was $92,000. The company's beginning merchand
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Answer:

the company purchase is $94,000

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4 0
3 years ago
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