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barxatty [35]
3 years ago
6

Schnusenberg Corporation just paid a dividend of D0 = $0.75 per share, and that dividend is expected to grow at a constant rate

of 6.50% per year in the future. The company's beta is 1.70, the required return on the market is 10.50%, and the risk-free rate is 4.50%. What is the company's current stock price?
Business
1 answer:
alisha [4.7K]3 years ago
8 0

Answer:

$9.7408

Explanation:

For computing the current stock price, first we have to determine the cost of equity which is shown below:

In this question, we apply the Capital Asset Pricing Model (CAPM) formula which is shown below

Cost of equity = Risk-free rate of return + Beta × (Market rate of return - Risk-free rate of return)

= 4.5% + 1.70 × (10.50% - 4.5%)

= 4.5% + 1.70 × 6%

= 4.5% + 10.2%

= 14.7%

Now the current stock price would be

Cost of equity = Next year dividend ÷ current stock price + growth rate

14.7% = $0.79875 ÷ current stock price + 6.5%

14.7% - 6.5% = $0.79875 ÷ current stock price

8.2% = $0.79875 ÷ current stock price

So, the current stock price would be

= $9.7408

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3 years ago
what ammendment isthisSixteen-year old Ryan is the captain of the football team. Before the Friday night game, he and his teamma
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The fourth amendment constitutes this.
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2 years ago
The total debits in the After-Closing Trial Balance will equal:______
Mnenie [13.5K]

Complete Question:

Shown below is a trial balance for Novelty Toys, Inc., on December 31,after adjusting entries:

                                         Novelty Toys, Inc.

                                  Trial Balance December 31

Cash                                                $7,750

Accounts Receivable                     $6,375

Office Equipment                           $11,250

Accumulated Depreciation                                      $3,000

Accounts Payable                                                     $3,875  

Capital Stock                                                             $11,250

Retained Earnings                                                     $0

Dividends                                                                   $3,750

Fees Earned                                                             $22,750

Salaries Expense                                                      $8,000

Advertising Expense                      $1,625  

Depreciation Expense                   <u>$2,125 </u>              <u>                </u>

                                                       $40,875             $40,875

The total debits in the After-Closing Trial Balance will equal:

Select one:

a. $25,375.

b. $29,125.

c. $40,875.

d. $18,125.

Answer:

$25,375

Explanation:

The After-Closing Trial Balance is prepared once the closing entries are posted. This results in closing of expense and income accounts for the year and the resulting balance taken forward to retained earnings. This means that After-Closing Trial Balance would contain only permanent general accounts which are balance sheet items. In the given scenario, the balance sheet debit balances are as under:

Cash                                                $7,750

Accounts Receivable                     $6,375

Office Equipment                           <u>$11,250 </u>

Total Debit Balance                      <u>$25,375</u>

Hence the option A is correct.

7 0
3 years ago
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Answer:

Land A/c Dr $3,360,000

   To Common stock A/c  $2,400,000

   To Additional paid in capital - in excess of par - common stock A/c $960,000

(Being the exchange transaction is recorded)

Explanation:

The journal entry is shown below:

Land A/c Dr $3,360,000

   To Common stock A/c  $2,400,000

   To Additional paid in capital - in excess of par - common stock A/c $960,000

(Being the exchange transaction is recorded)

The computation is shown below:

For land

= 30,000 shares × $112

= $3,360,000

For Common stock

= 30,000 shares × $80

= $2,4000,000

And, the remaining balance is credited to the additional paid in capital account

4 0
3 years ago
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