1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
dusya [7]
3 years ago
6

"Parker Company stock is currently selling for $130.00 per share and the firm's dividends are expected to grow at 6 percent inde

finitely. Assuming Parker's most recent dividend was $5.50, what is the required rate of return on Parker's stock
Business
1 answer:
8_murik_8 [283]3 years ago
6 0

Answer:

Cost of equity = 10.7%

Explanation:

<em>We will work out the required rate of return using the the dividend valuation model. The model states that the value of a stock is the present value of the future divided discounted at the cost of equity. </em>

The model is given below:

P = D× (1+g)/(r-g)

P- price of stock, D- dividend payable now, g- growth rate in dividend, r- cost of equity

So we substitute  

130 = 5.50× (1+r)/(r-0.06)

cross multiplying

(r-0.06)× 130 = 5.50 × (1+r)

130 r- 7.8  = 5.50 + 5.50r

collecting like terms

130 r - 5.50r=5.50 + 7.8

124.5  r= 13.3

Divide both sides by 124.5

r =13.3 /124.5=  0.1068

r=0.1068 × 100=  10.7%

Cost of equity = 10.7%

You might be interested in
Which of the following is an example of investment (I) Group of answer choices a. new plants and equipment purchased by a firm.
Snowcat [4.5K]

Answer:

A. new plants and equipment purchased by a firm.

Explanation:

Option B is wrong because anything purchased by households cannot be the investment for a firm.

Option C is wrong because inventory is a current asset. Current assets cannot be an investment.

Option A is correct because if a company purchases any non-current assets like plant and equipment, its an investment for them.

3 0
3 years ago
Calculate the simple interest you would receive in one year on a savings account that earns 5% annual interest. your beginning b
cupoosta [38]
The simple interest formula:
I = P * r * t,
where:
I - interest,
P - investment,
r - interest rate,
t - time ( in years )
P = $255.19,  r = 5% = 0.05,  t = 1
I = $255.19 * 0.05 * 1 = $12.7595 ≈ $12.76
Answer: The simple interest you would receive in 1 year is $12.76.
8 0
3 years ago
Landhill Corporation is authorized to issue 49,000 shares of $5 par value common stock. During 2020, Sandhill took part in the f
spayn [35]

Answer: Please see answer in explanation column

Explanation:

1. Journal to record common stock issued

Account title                                             Debit               Credit

  Cash                                                 $210,400

Common stock                                                           $22,500

Paid in capital in excess of par                                  $187,900

common stock

Calculation:

Cash = 4,500 x $45 + $7900= $210,400

Common stock =4,500 x $5=$22,500

Paid in capital in excess of par common stock = Cash - Common stock =$210,400-$22,500=$187,900

 

2) To reccord Land purchased in exchange of common stock

Account title                                             Debit               Credit

  Land                                                     $50,600

Common stock                                                             $ 5,500

Paid in capital in excess of par                                     $45,100

common stock

Calculation:

Land= 1,100 x $46 = $50,600

Common stock =1,100 x $5=$5,500

Paid in capital in excess of par common stock = 1100 x (46-5)$41=45,100

3) To record purchase of treasury stock

Account title                                             Debit               Credit

  Treasury stock                                  $19,270                  

   Cash                                                                              $19,270

Calculation:

Treasury stock       =  470 shares x$41= $19,270

8 0
3 years ago
According to the _____, the most effective management theory or idea depends on the kinds of problems or situations that manager
german

Answer: The contingency approach

Explanation:

 The contingency approach is one of the type of management theory that helps in understanding the various types of principles in an organization and it is also refers as the situational approach.

The main objective of the contingency approach is that it provide manager the different types of ways to give reaction on the given issue and different types of situation.

 According to the question, the contingency approach helps in providing the different types of effective ideas to the manager where they facing different types of problems in an organization.  

 Therefore, contingency approach is the correct answer.

6 0
3 years ago
Eric and Chris run a non-regulated natural monopoly producing electricity for a small town. The barrier most likely preventing o
alexdok [17]

Answer:

increasing returns to scale

Explanation:

The biggest barrier for other firms are increasing returns to scale. This is because Eric and Chris have their company already established and also have their clientele all hooked up and using their service. This allows them to produce a much higher electrical output for their clients with a certain Income. Newer companies will need a much higher income just to be able to produce a similar electrical output in order to try and compete with Eric and Chris.

5 0
3 years ago
Other questions:
  • Those who study management will understand how to ___.
    8·2 answers
  • What steps can a nation take to achieve economic growth?
    11·2 answers
  • Where to get ged certificate if you took test in 2008?
    15·2 answers
  • Monetary policy has a​ ________ effect on aggregate demand in​ a(n) ________​ economy, and fiscal policy has a​ ________ effect
    15·1 answer
  • From 1994 to 1999, inflation in the United States was relatively constant at approximately 2.5 percent. When inflation is consta
    8·1 answer
  • Prime Inc. has come up with a new product development project for which the project manager forms a team. The team includes Cam,
    9·1 answer
  • Choose two consumer protection laws and, in about 500 words, describe the benefits they provide for consumers and the costs to s
    5·1 answer
  • Half yearly interest credited by bank ra.540​
    6·1 answer
  • On Monday, May 15, 2017, you bought (traded) the XZX, Inc. 8.25% corporate bonds with a trading value of $96.50 price. The coupo
    5·1 answer
  • A buying center whose members reach a decision based on a collective agreement is known as an autocratic buying center. True Fal
    5·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!