Answer:
Original cost of the stock = $23.16
Explanation:
Original cost of the stock = Selling price of stock / ( 1 + r )^n
Original cost of the stock = $50 / (1+8%)^10
Original cost of the stock = $50 / (1.08)^10
Original cost of the stock = $23.16
Answer:
A) 5.0%
Explanation:
AEC Company expects to pay a dividend over the next year of $2 at a stock price of $20 per share, thus the dividend rate over next year = $2/ $20 = 10%
The WACC is 12%, the company is financed by 30% debt and 70% equity, and the cost of debt is 5%;
WACC 12%= 30% x cost of debt 5% + 70% x cost of equity
->Cost of equity = (12% -30%*5%)/70% = 15%
Thus expected growth rate of dividend = Cost of equity 15% - dividend rate over next year 10% = 5%
Answer:
a. 11,262.88
Explanation:
In this case we are using the formula of an annuity due which is an annuity that starts payment at the beginning of the period.
This formula is
PVannuity due = C * [(1 - ( 1 + i ) ^ {-n}/ i ] * (1 + i)
C = Payments $2,500
i = Interest rate 5.5%
n = Number of payments 5
PVannuity due = 2500 * [(1 - ( 1 + 0,05 ) ^ {-5}/ 0.05 ] * (1 + 0.05)
Answer:
D
Explanation:
Focus strategy is said to be pursued when a company recognizes a relatively narrow market segment or a particular buyer group where competition is weakest and then tailored its production and product offerings towards this niche in order to serve the particular target or niche extremely well with the aim of earning a huge return on investment.
Focus strategy is pursued when a company recognizes that the differences in need of one market segment to another and then produce or deliver goods and services that serve the needs and requirements of this particular competitive segment
Answer:
The cross price elasticity of salsa and guacamole is 0.2. The two goods are substitutes.
Explanation:
The price of guacamole is increased from $2 to $2.5.
Percentage change in price
= 
= 
= 25%
The demand for salsa rises by 5%.
The cross price elasticity will be
= 
= 
= 0.2
We see that the cross price elasticity is positive. This means that the two goods are substitutes. When price of one good will increase consumers will prefer the cheaper substitute, increasing its demand.
