Answer:
Ans. The value of this stock today is $27.05
Explanation:
Hi, we have to bring to present value all future dividends of the relevant period of time (that is all 3 year dividends), the horizon period (I mean, from year 4 and beyond) we need to use another formula, which we will also bring to present value.
For the first 3 years, the formula is as follows.
Where r is the discount rate (in our case, 0.15 or 15%), n is the year where the dividend takes place.
For the horizon value, since there is no growth rate from there, the formula is:
We have to bring it to present value (this formula provides the value in year 3 of all future dividends from year 4 and beyond), so the complete formula is:
Now, the whole calculation should look like this:
So, the value of this stock today if the required return is 15 percent is $27.05
Best of luck
Answer:
Option (d) is correct.
Explanation:
Setting the high price for the products is not considered as the barrier to the other firms in the market.
In a market condition of monopoly, there is only a single firm in the whole market. Economics of scale, Government authorization, patents and trademark are considered as the barriers to the entry of the other firms.
And if other firms enters with a lower price of the products then they can obtained the significantly large share of the market.
Answer: 200%
Explanation:
First find the return required.
= 10% of total assets
= 10% * 5,000,000
= $500,000
The total manufacturing costs are:
= 250,000 + 450,000
= $700,000
We need to know the amount to increase the manufacturing costs by so that it covers both the desired return and the admin costs:
= (Desired return + Admin costs) / Manufacturing costs * 100%
= (500,000 + 600,000 + 300,000) / 700,000 * 100%
= 200%