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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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Monopolistically competitive firms are not productively efficient because output is less than society's optimal level because a
hoa [83]

Answer:

average total cost per unit is not at its lowest possible cost

Explanation:

A monopolistic competition is defined as such a market where many different firms or companies sells various differentiated products. Here the firm has some control on the price of the product. It is a market structure of considerably no price competition.

The monopolistic firms are not productive enough because the output is very less than the optimum level of the society as the average total cost of the producer per unit is not at the lowest possible cost.

4 0
2 years ago
If we look at the equation for money demand from Irving Fisher, which of the following statements is true?
Juliette [100K]

Answer:

The correct answer is option D.

Explanation:

The money equation given by Irving fisher is popularly known as fisher's equation.

The equation is given as MV=PT

Here, M represents money supply, V is the velocity of money, P is the price level and T refers to the volume of transactions or output level.

The supply of money refers to the quantity of money in existence while the velocity of transactions shows the number of times, money changes hands.  Together they show the volume of money in circulation.

P is the average price level and T represents the expenditures on all transactions or, in other words, output level.  

Here, V and T are assumed to be constant. This means that the money supply directly affects the price level.  

There is no explicit mention of the interest rate in this equation.  

So, option D is the correct answer.

6 0
3 years ago
At the end of a recent​ year, Anderson Cleaning​ Service, a​ full-service house and office cleaning​ service, had total assets o
marysya [2.9K]

Answer:

Anderson Cleaning​ Service's liabilities were $2,160

Explanation:

Basing on accounting equation:

Total asset = Liabilities + Owner's (or Stockholders') Equity

Liabilities = Total asset - Owner's (or Stockholders') Equity

At the end of a recent​ year, Anderson Cleaning​ Service had total assets of $5,810 and equity of $3,650

Anderson Cleaning​ Service's liabilities = Total asset - Equity  = $5,810 - $3,650 = $2,160

7 0
2 years ago
Supply curves are created when the data from a
LiRa [457]
Supply curves are created when the data from a supply schedule is graphed. The correct answer is C. 
6 0
3 years ago
in 1998 fischer corp issued bonds with an 8 percent coupon rate and a 1000 face value. the bonds mature on marc 1, 2023. if an i
ArbitrLikvidat [17]

Answer:

approximate YTM = 7.48%

Explanation:

the approximate yield to maturity = {coupon + [(face value - market value)/n]} / [(face value + market value)/2]

approximate YTM = {$80 + [($1,000 - $1,050)/15]} / [($1,000 + $1,050)/2]

approximate YTM = ($80 - $3.33) / $1,025

approximate YTM = $76.67 / $1,025

approximate YTM = 0.0748 ≈ 7.48%

5 0
3 years ago
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