1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Kobotan [32]
4 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]4 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.

You might be interested in
Which of the following is a function of the Federal Reserve System Board of Governors?
vfiekz [6]

Answer:

The answer is below

Explanation:

The Federal Reserve System Board of Governors is one of the five branches of the Federal Reserve System. Their roles involve carrying out the analysis of economic data, executing supervision of Reserve Banks, establishing and overseeing financial regulations.

The board comprises seven members with 14-year terms. They also partake in the Federal Open Market Committee and as well liaising with leaders in other parts of the government.

4 0
3 years ago
Module Ten: Text Questions
Andru [333]
The last thing i purchesd was a yen inch reborndoll.the technique i was impacted by was all the people that were bying them the strategies i used were is 1.is this doll really worth it 2. what is it made of and 3. is it water proof . the things i will do differently next time are :1. look for a bigger doll 2. look for clothes it can wear.&3. pick a different gender
7 0
3 years ago
Gillstrap Promotions has projected the following values for the next three months:
alex41 [277]

Answer:

1.9058n n=15x x=17g g=5L

Explanation:

4 0
3 years ago
Suppose that Rearden Metal currently has no debt and has an equity cost of capital of 12%. Rearden is considering borrowing fund
Alexxandr [17]

Answer:

Option (C) is correct.

Explanation:

We have to use MM proposition that cost of equity will change itself in such a manner so that it can take care of its debt.

Cost of equity:

= WACC of all equity firm + (WACC of all equity - Cost of debt ) × (Debt -to-equity ratio)

At the beginning, when there was no debt,

WACC = cost of equity = 12 %

Levered cost of equity:

= 12% + ( 12% - 6%) × 0.5

= 15%

Therefore, Rearden's levered cost of equity would be closest to 15%.

4 0
4 years ago
On December 31, 2022, Monty Company prepared an income statement and balance sheet and failed to take into account three adjusti
irga5000 [103]

Answer:

Salaries and Wages are owed so they are now liabilities. They are also expenses and will reduce the Net Income.

Rent Revenue was in advance for 2 months meaning one of those months will be December which is in the current period so;

= 7,520/2

= $3,760 will be added to net income for the year

The same amount will be removed from Liabilities as the revenue has now been recognized.

Depreciation reduces the value of Fixed assets so will be deducted from Assets.

It is also an expense so it will reduce Net Income.

Whatever happens to Net Income will happen to Stockholders' equity as well because Net Income is an Equity account.

5 0
3 years ago
Other questions:
  • Edwards Auto Body uses a job order cost system. Overhead is applied to jobs on the basis of direct labor hours. During the curre
    5·1 answer
  • Jim Jones, the landlord, rents a property to Tom Smith, a physically disabled person. Mr. Smith, with Mr. Jones' permission, mod
    11·1 answer
  • The Fox Company uses the weighted average method. The beginning work in process consists of 20,000 units (100% complete as to ma
    13·1 answer
  • Do you think government officials in developing countries like Russia and China welcome McDonalds? Why or why not?
    14·1 answer
  • Problem 1: G. Rifkin is considering investing some or all of a $60,000 inheritance. He looks at a one year cirtificate of deposi
    12·1 answer
  • On November 1, Mason Corp. issued $800,000 of its 10-year, 8% term bonds dated October 1. The bonds were sold to yield 10%, with
    12·1 answer
  • 21. Website: https://www.responsibletravel.com/
    14·1 answer
  • US Corp. is charged with determining which small projects should be funded. Along with this assignment, she has been granted the
    8·1 answer
  • The management of Kawneer North America is considering investing in a new facility and the following cash flows are expected to
    6·1 answer
  • You want to buy a car, and a local bank will lend you $25,000. The loan will be fully amortized over 5 years (60 months), and th
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!