Answer:
D. Allows the project manager to establish the overall objective of the project
Explanation:
Answer:
Horizon value is $22.59
Intrinsic value is $16.32
Explanation:
D3=1.5000
D4=1.5000*(1+7.8%)
D4=1.6170
D5=1.6170
*(1+7.8%)
D5=1.7431
D6=1.7431
*(1+3.42%)
D6=1.8027
horizon value is the same as the price of the stock(the terminal value) using the dividend in year 6
P=D5*(1+g)/(r-g)
D5=$1.7431
g is the constant growth rate of 3.42%
r is the required rate of return of 11.40%
P=$1.7431*(1+3.42%)/(11.40%-3.42%)
P=$1.8027/0.0798
=$22.59
Goodwill Technologies share price is $22.59
Current intrinsic value is the dividends payable in relevant years plus the horizon value discount to present value as follows:
Present value of D3 =1.5000/(1+11.40%)^3=$1.0850
present of value of D4 =1.6170
/(1+11.40%)^4=$1.0500
present value of D5 =1.7431
/(1+11.40%)^5=1.0160
present value of horizon value=$22.59/(1+11.40%)^5=13.1671
Total present values $16.32
Answer:
13.61 %
Explanation:
We have these information to answer the question
Risk free rate = 5.25
Beta = 0.88
Future return on market = 14.75
The formula for required rate of return
= Risk free rate + [ Beta * (future return on market - risk free rate)]
= 5.25 + [0.88(14.75-4.62)]
= 5.25 + (12.98-4.62)
= 5.25 + 8.36
= 13.61%
Therefore the firm's required rate of return = 13.61 %
Thank you!
The bottom one because equal is balanced
