Using the Gordon Growth Model (a.k.a. Dividend Discount Model), the intrinsic value of a stock can be calculated, exclusive of current market conditions. In this model, the value of the stock is equated to the present value of the stock's future dividends.
<span>Value of stock (P0) = D1 / (k - g)
</span>where
D1<span> = </span><span>expected annual </span>dividend<span> per share in the following year </span>
<span>k = the investor's discount rate or required </span>rate of return
g = the expected dividend growth rate
<u>From the problem:</u>
The value of stock is $10.80
D1 is $0.40
g is 0.08
k is unknown
Solution:
Rearranging the equation for Gordon Growth Model to solve for k:
k = (D1/P0) + g
Substituting the variables with the given values,
k = (0.40/10.80) + 0.08
k = 0.1170
In percent form, this is
0.1170 * 100% = 11.70%.
Thus, the total rate of return on the stock is 11.70%.
Answer:
Future Value= $156,901.16
Explanation:
Giving the following information:
Assume Coronado Industries deposits $98000 with First National Bank in an account earning interest at 8% per annum, compounded semi-annually.
To calculate the future value of this investment, we need to use the following formula:
FV=PV*(1+i)^n
PV= 98,000
i= 0.08/2= 0.04
n= 6*2= 12
FV= 98,000*(1.04^12)= $156,901.16
Answer:
=$ 80, 200.00
Explanation:
selling price : $ 330,000.00
Commission 6 %:
Commissions paid = 6/100 x $ 330,000.00
=$19,800.00
Closing costs =: $ 5000.00
Mortgage paid : $ 225,000
Total payouts: $19,800 + $50,00+ $225,000
=$ 249, 800.00
Rusty Expects: $ 330,000.00- $ 249,800.00
=$ 80, 200.00
The first ad relies on the Central route to persuasion; the second, on the Peripheral route
.
<u>Explanation:
</u>
Advertising is a payment of the messages sent by those who send them to notify or affect the recipients, as defined by the British Advertising Association.
The central route to convincing takes place when the substance of a message persuades a person. The peripheral way to persuade takes place when a person is convinced by something other than the content of the post.
The peripheral route often occurs if a listener is convinced that there are many points in a text— but there is no ability or incentive to care about each one individually. In other terms, secondary data such as the identity of the source (credibility) or many claims in a single message is shortcut.
Answer:
a) Credit Balance R$1,000.00
Explanation:
The Duplicates Payable represents a Liability in Andorinha Ltd records.
When Andorinha Ltda paid a cash duplicate in the amount of R$500.000 the entries recorded will be :
Trade Payable-Duplicates R$500.000 (debit)
Cash R$500.000 (credit)
<em>Effect on Balance of Duplicates Payable</em>
Decrease in Duplicates Payable by $500,000
Remaining Balance is $100,000 (credit)