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Stella [2.4K]
3 years ago
9

(Extra 1 point) 5. You are considering to buy stocks of a new firm NNN. The firm’s most recent dividend was $1 per share. The di

vidend payment is expected to increase by 20% in year 1, 10% in year 2 and year 3, afterwards 2% forever. Your required return is 10%. What is the maximum price you are willing to pay?
Business
2 answers:
galina1969 [7]3 years ago
5 0

Answer:

$17.18

Explanation:

D1=(1*1.2)=1.2

D2=(1.2*1.1)=1.32

D3=(1.32*1.1)=1.452

Value after year 3=(D3*Growth rate)/(Required rate-Growth rate)

=(1.452*1.02)/(0.1-0.02)

=18.513

Hence current value=Future dividend and value*Present value of discounting factor(rate%,time period)

=1.2/1.1+1.32/1.1^2+1.452/1.1^3+18.513/1.1^3

=$17.18(Approx).

zubka84 [21]3 years ago
4 0

Answer:

$17.18.

Explanation:

The Gordon Multi-stage Discount Model should be used here to calculate the maximum price that should be paid for the stock of NNN. This model assumes that the company goes through different growth stages, and there comes a time, when the growth rate of it becomes constant. Under this model, each dividend along with the terminal value is discounted using required return, and then the results are added to get the stock price.

<u>Year</u>          <u>Dividends</u>            <u>Discount Factor</u>                <u>Present value</u>  

1                $1.2 (1 * 1.2)           (1 + .1)^(-1) = .909                  $1.0909

2              1.32 (1.2 * 1.1)          (1 + .1)^(-2) = .826                   1.0909

3             1.452 (1.32 * 1.1)       (1 + .1)^(-3) = .751                    1.0909    

Terminal value:

[(1.452 * 1.02) / .1 - .02] = 1.48104 / .08 = $18.513.

Discount this calculated perpetuity for three years to get terminal value:

⇒ 18.513 * (1 + .1)^(-3) = 13.909.

Add-up all the present values with the terminal value, and the resultant value will be the stock price:

⇒ 1.0909 + 1.0909 + 1.0909 + 13.909 = $17.18.

The maximum price that an investor would be willing to pay is $17.18.

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Types of communication channels are:

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TelephoneTelevision

Radio

Face-to-face communication

Oral and written communication

Verbal and non-verbal communication.

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Poor communication skills: when an individual communication skill is weak, such individual lacks the confidence to communicate effectively in front of others.

Noise disturbance: Noise disturbance is a barrier that hampers the clarity of a message.

Language barriers: The language barrier occurs when there is diversity in an organization workforce. languages or accents differ fromLanguage to language same as cultures.

Perception differences: This occurs when the senders point of view and receivers doesn’t match up which results in lack of understanding.

Wrong pronunciation of words and poor usage of vocabulary: By not pronouncing words accurately and correctly, wrong message might be passed.

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Feedback: for a communication process to be complete the receiver must give a feedback.

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