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
dezoksy [38]
2 years ago
14

A company just paid a $2 dividend per share. The dividend growth rate is expected to be constant at 10% for 2 years, after which

dividends are expected to grow at a rate of 3% forever. If the company’s required return (rs) is 11%, what is its current stock price?
Business
1 answer:
Olin [163]2 years ago
5 0

Answer:

Do =  $2.00

D1= Do(1+g)1 =  $2(1+0.1)1 = $2.20

D2= Do(1+g)2 = $2(1+0.1)2 = $2.42

PHASE 1

V1 = D1/1+ke + D2/(1+ke)2  

V1 = 2.20/(1+0.11) + 2.42/(1+0.11)2  

V1 = $1.9820 + $1.9641

V1 = $3.9461

PHASE 2

V2 = DN(1+g)/ (Ke-g )(1+k e)n                                                                                                                                                                                                                                        V2 = $2.42(1+0.03)/(0.11-0.03)(1+0.11)2      

V2 = $2.4926/$0.0649

V2 = $38.4068

The current stock price is calculated as follows:

Po = V1 + V2

Po = $3.9461 + $38.4068

Po = $42.35

Explanation: This question relates to valuation of shares with 2-phase growth model.  The value of shares in the first phase will be determined by discounting the dividend for the 2 years by cost of equity. The dividends for year 1 and year 2 were obtained by subjecting the current dividend paid (Do) to growth rate.  

Moreso, the value of shares for the second phase was calculated by considering the last dividend paid(D2) and then subject it to the new growth rate. The adjusted dividend was then capitalized at the appropriate discount rate of the company.

You might be interested in
Christin, the CEO of a national IT manufacturer, was approached by Ultimate Phones, a new company that is marketing a new type o
Monica [59]

Answer:

The correct option is B, bounded rationality

Explanation:

An ethical dilemma occurs when there is a conflict between one's interest and the interest of the organization leaving one with making choices between   serving in the interest one the company or feathering one's nest.

Groupthink implies giving credence to the decision of a group over individual's thinking and creativity.

Bounded rationality is theme that was introduced by Herbert Simon which refers to the fact that making a rational decision is sometimes limited to the information at one's disposal as well as  one's mental prowess.

4 0
3 years ago
Read 2 more answers
William installs custom sound systems in cars. If he installs seven systems per day, his total costs are $300. If he installs ei
Margarita [4]

Answer:

D. $100

Explanation:

Given: William install 7 system per day at the cost of $300.

           William install 8 system per day at the total cost of $400.

Remember, If the marginal cost curve is upward-sloping, this means that as output increase, marginal costs will also increase.

Marginal cost is an additional cost incurred in producing additional unit of output.

Now, finding additional payment that eighth customer has to pay.

Change in marginal cost= Cost\ incurred\ in\ installing\ 8\ system - cost\ incurred\ in\ installing\ 7\ system

⇒ Change in marginal cost=  \$400-\$300

∴  Change in marginal cost= \$ 100

Hence, there is an increase in marginal cost by $100 as output increases, therefore, William will install eight sound systems per day only if the eighth customer is willing to pay at least $100.

5 0
3 years ago
Ea games is a video game development company. The creation of their video games require ideation, design and development before
borishaifa [10]

Answer:

The answer is the testing process is a significant part in game development. as it gives an overview of the query and correction that needs to be done in order to make a game more effective.


Explanation:

The testing process is a crucial part of game development. as it gives an overview of the problem and modification that needs to be done in order to make a game more effective enjoyable error-free and productive. the problem arises when the test department finds a critical bug and cannot proceed further until it has been fixed. this change could potentially impact the entire game and the testing team has to completely redo all their testing which results in an extension in the release date and adds to the production cost. the data system is a systematic and organized way that will definitely help ea sports to organize and analyze the data in a better way. it will make the communication process more effective and will prove to be a boon for the company. reducing the cost and saving time.

3 0
2 years ago
The accounting staff of Wyoming Outfitters, Inc.,has assembled the following information for the year ended December31, 2015:
lbvjy [14]

Answer:

<u>statement of cash flows under direct method.</u>

Cash flow from Operating Activities

Cash received from customers                              835,000

Cash paid to suppliers and employees               (606,000)

Cash Generated From Operations                        229,000

Interest paid                                                              (19,000)

Income taxes paid                                                   (70,000)

Net Cash from Operating Activities                       140,000

Cash flow from Investing Activities

Cash paid to acquire plant assets                          (23,000)

Loans made to borrowers                                         (5,200)

Interest and dividends received                              32,400

Proceeds from sales of plant assets                         9,000

Net Cash from Investing Activities                           13,200

Cash flows from Financing Activities

Proceeds from short-term borrowing                      10,000

Collections on loans (excluding interest)                 4,000

Dividends paid                                                        (53,000)

Net Cash used in Financing Activities                   (39,000)

Net Cash Flow Movement During the Year            114,200

Add Cash and cash equivalents, Jan. 1                   35,800

Cash and cash equivalents, Dec. 31                       150,000

Explanation:

Show Cash flow resulting from:

  1. Operating Activities (Direct Method)
  2. Investing Activities
  3. Financing Activities
6 0
2 years ago
Workers in the nation of Brotherton expect managers to forcefully tell employees what to do, how to do it, and when. On the othe
Natasha_Volkova [10]

Answer: Socio-cultural

Explanation:      

  According to the given question, the socio-culture is one of the type of method that basically emphasizing the main responsibilities in terms of culture and social.

The socio-culture is one of the learning process which helps in explain the different types of learning perspective of the people and the interaction trajectory is helps in exploring the given concept.

According to the given question, the socio-culture difference is the concept which is used to differentiate between the american workers and the brother-ton workers that representing the management challenge in the market.    

 Therefore, Socio-culture is the correct answer.

7 0
3 years ago
Other questions:
  • I need help with this not really good at this
    6·1 answer
  • At year end, CurlZ, Inc.'s inventory consists of 370 bottles of CleanZ at $3 per bottle and 270 boxes of DyeZ at $10 per box. Ma
    7·1 answer
  • PharmY, Inc., is a U.S. GAAP reporter that is in the pharmaceutical industry. In the current year, PharmY incurred expenditures
    11·1 answer
  • What happened to anyone who could not keep up with the march?
    8·1 answer
  • Which of the following is not a basic consumer right?
    14·2 answers
  • Tom, an experienced salesperson for road construction equipment, has been hired as the sales representative for Caterpillar Trac
    14·1 answer
  • Kent and Craig, who want to start a horse-training business, spoke to an insurance agent about getting insurance to cover potent
    14·1 answer
  • You're buying a new car and the bank says they'll loan you the required balance of the $30,000 price if you'll put down $3,000.
    7·1 answer
  • Which of the following is an example of the effective use of email communications?​ When sending an email, Jake avoids using a d
    7·1 answer
  • The income statement begins with revenue and subtracts various operating expenses until arriving at Earnings Before Interest and
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!