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Verizon [17]
3 years ago
15

Dyer Furniture is expected to pay a dividend of D1 = $1.25 per share at the end of the year, and that dividend is expected to gr

ow at a constant rate of 6.00% per year in the future. The company's beta is 1.15, the market risk premium is 5.50%, and the risk-free rate is 4.00%. What is Dyer's current stock price?
Business
1 answer:
zmey [24]3 years ago
8 0

Answer:

Market price: 28.90

Explanation:

We will calculate the stock price using the gordon dividend grow model:

\frac{divends}{return-growth} = Intrinsic \: Value

D1 = 1.25

grow = g = 6% = 6/100 = 0.06

return= for the return, based on the information give, we will calculate it using the CAPM model:

Ke= r_f + \beta (r_m-r_f)  

risk free = 0.04

premium market=(market rate - risk free)= 0.055

beta(non diversifiable risk)= 1.15    

Ke= 0.04 + 1.15 (0.055)  

Ke =cost of capital = return in the dividend grow formula = 0.10325  

Now, we calculate the stock price:

\frac{1.25}{0.10325-0.04} = Intrinsic \: Value

Stock: 28.9017341

Market price: 28.90

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7 0
3 years ago
A consultant works for $200 per hour. She likes to grow vegetables, but is not very good at it. Why does it make more economic s
galina1969 [7]

Answer:

It is provided that the consultant works for $200 per hour.

Since, for the exchange of her services as a consultant she gets to be paid through $200 monetary benefit, such benefit will not arise in case of growing of vegetables.

Currently she grows vegetables only for her needs, thus, she do not sell them commercially, and also as provided she is not good ion growing vegetables,

The chances of earnings through sale of vegetables is less, as the quality and quantity both served will be low.

Also for exchange of money $200 she can buy all the resources she needs to live, but as she will not be able to earn this much from sale of vegetables, she will not find the economic equilibrium from such sale.

Therefore, she should continue to work as a consultant.

3 0
3 years ago
A __________ is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a co
Fittoniya [83]

A Strategy is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage..

<h3>What is Strategy? </h3>
  • A strategy is a broad plan to accomplish one or more long-term or overall goals in the face of uncertainty.
  • The phrase was first used in the 6th century C.E. in terms of the "art of the general," which covered a number of subsets of talents such as military tactics, siegecraft, logistics, etc. It was only in the 18th century that the term was translated into Western vernacular languages.
  • The term "strategy" was then used to refer to "a comprehensive manner to try to attain political aims, including the threat or actual use of force, in a dialectic of wills" in a military war, in which both opponents engage.

To learn more about Strategy with the given link

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7 0
2 years ago
5 years ago, Barton Industries issued 25-year noncallable, semiannual bonds with a $1,000 face value and a 12% coupon, semiannua
Leona [35]

Answer:

10.77%

Explanation:

FV: $1000

PV: $845.87

PMT: $60

Nper: 40 = (25 years - 5 years ago)* 2 for semi-annual payment

We use excel to calculate semi-annual discount rate by formula Rate(Nper,PMT,-PV,FV)

= rate(40,$60,-$845.87,$1000) = 7.18%

⇒ annual rate = semi-annual rate * 2 = 7.18% * 2 = 14.36%

after-tax cost of debt = 14.36% * (1 - 25%) = 10.77%

<em>Please see excel attached for the calculation</em>

Download xlsx
6 0
3 years ago
Steven's Co. provides the following sales forecast for the next three months: July August September Sales units 5,000 5,700 5,56
Ipatiy [6.2K]

Answer:

d. 5,175 units.

Explanation:

The computation of the budgeted production units for July is shown below:

= Sale units + ending inventory units - beginning inventory units

where,  

Sale units is 5,000 units

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Now put these units to the above formula  

So, the units would equal to  

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3 years ago
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