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lidiya [134]
3 years ago
15

A high growth software company will pay its first dividend of S0.30 next year. This dividend of . After that, the growth will $0

.30 will grow at a rate of 10% for four years until the end of year 5 slow down to 5% forever. The required rate of return is 15%. What is the price of the stock today?
A. $3.49
B. $3.57
C. $3.65
D. $3.81
E. $4.02
Business
1 answer:
bija089 [108]3 years ago
3 0

Answer:

The price of the stock today is $3.49. The right answer is A.

Explanation:

In order to calculate the price of the stock today, we need to calculate first Value after year 5 with the following formula:

Value after year 5=(D5*Growth Rate)/(Required return-Growth Rate)

To find D5 we need to make the following calculations:

IF D1=0.3 , hence D2=(0.3*1.1)=0.33 , D3=(0.33*1.1)=0.363 , D4=(0.363*1.1)=0.3993 and D5=(0.3993*1.1)=0.43923

Therefore, Value after year 5=(0.43923*1.05)/(0.15-0.05) =$4.611915

Therefore, now we can calculate the the price of the stock today with the following formula:

current price=Future dividends and value*Present value of discounting factor(rate%,time period)

=0.3/1.15+0.33/1.15^2+0.363/1.15^3+0.3993/1.15^4+0.43923/1.15^5+$4.611915/1.15^5

=$3.49

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Answer:

The answer to this question is given below in the explanation section.

Explanation:

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So, the correct answer to this question is given below:

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While other options are not correct because the four traits of constructive criticism are starting from positivity, solution-oriented, specific, and private.

8 0
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Answer:

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Explanation:

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Answer:

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Monetary growth rule is a theory that was proposed by Friedman and it states that the Federal Reserve System (Fed) should be required to set or target the money supply growth rate to be equal to the growth rate of Real gross domestic product (GDP) each year and leaving the price level of goods and services unchanged.

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