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Alina [70]
4 years ago
9

Fire Hydrant Pet Supply just paid its first annual dividend of $0.75 a share. The firm plans to increase the dividend by 2.9 per

cent per year indefinitely. What is the firm's cost of equity if the current stock price is $16.90 per share
Business
1 answer:
AleksandrR [38]4 years ago
8 0

Answer:

Cost of equity =  7.47%

Explanation:

<em>The Discounted Cash flow (DCF) Model; This is a technique used to value the worth of an asset. According to this model, the value of an asset is the sum of the present values of the future cash flows that would arise from the asset discounted at the required rate of return. </em>

Using this model,  the required rate of return is the cost of equity. It is given below as follows:

Cost of equity (Ke) =( D(1+g)/P) + g

Div in year 0, P= ex-div market price, g= growth rate in div.

D- 0.75 , g- 2.9%, P-16.90

For this question,

Ke= ( 0.75×(1+0.029)/16.90 ) + 0.029

=0.0746 × 100  

= 7.47%

Cost of equity =  7.47%

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3 years ago
Suppose you have a two-stock portfolio consisting of Apple and Tesla stock. The portfolio weight of Apple is 25% and the rest is
iren [92.7K]

Answer:

Standard deviation = 47.69% (Approx)

Explanation:

Given:

Portfolio of Apple stock w1 = 25% = 0.25

Portfolio of Tesla stock w2 = 75% = 0.75

Standard deviation return Apple σ1 = 35% = 0.35

Standard deviation return Tesla σ2 = 60% = 0.60

Correlation coefficient ρ12 = 0.22

Find:

Standard deviation

Computation:

Standard deviation = √w1²σ1² + w2²σ2² + 2w1σ1w2σ2ρ12

Standard deviation = 0.4769

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4 0
3 years ago
Kubin company’s relevant range of production is 20,000 to 23,000 units. when it produces and sells 21,500 units, its average cos
Afina-wow [57]
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6 0
4 years ago
Logistics Company had the following items listed in its trial balance at 12/31/2018: Balance in checking account, Bank of the Ea
Elena L [17]

Answer: $352,000

Explanation:

The information needed to calculate the cash and cash equivalent are:

Balance in checking account, Bank of the East = $ 382,000

The restricted cash included in the checking account = $49,000

Treasury bills = $19,000

We subtract the restricted cash from the balance in the checking account and then add it to the treasury bills. This will be:

= ($382,000 - $49,000) + $19,000

= $333,000 + $19,000

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4 0
3 years ago
Hiring decisions at Maarja's Razors are made by Maimu Maarja, the Director of Human Resources. Pay rates are approved by the Vic
barxatty [35]

Answer:

Effective

Explanation:

Segregation of duties (SOD) is an essential part of the effectiveness of internal controls for any business. This integral separation ensures that key processes are performed by more than one person to prevent fraud or financial misstatement. While technology continues to become more sophisticated, the time is now to implement controls that segregate key functions within processes such as cash disbursements, investments, payroll, and many other areas.

Maarja's Razors is implementing effectively the segregation of duties. Key processes are performed by more than one person, and this helps in flexibility of operations.

4 0
3 years ago
Read 2 more answers
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