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
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

You might be interested in
WriteOn Stationery is new in the market. They have hired a specialized agency to promote their products in the market. Which typ
Brrunno [24]

Answer: Marketing service

Explanation: Marketing services can be defined as those services involving activities like advertising and market research etc. The main focus of marketing is not on advertising the products but to make a demand in the market for the product offered.

In the given case writeon is new in the market hence they need promotion and customer base for selling the product. The advertising objectives that writeon needs can be achieved with the help of marketing activities.

8 0
2 years ago
Suppose there are only two producers of aircraft in the world, AirCraft in the United States and AirEurope in the European Union
Jlenok [28]

Answer:

1. AirEurope should produce if it wants to maximize its profit.

2.  False

Explanation:

New payoffs after subsidy:

Aircraft/ AirEurope               Produce     Not Produce

Produce                                 -3 , <u>6</u>              75 , 0

Not Produce                          0 , 74              0 , 0

With a $9 million subsidy, regardless of whether Aircraft produces or not, AirEurope should<u> produce</u> if it wants to maximize its profit.

The statement is false (Aircraft would earn a negative payoff if it enters).

8 0
2 years ago
An entrepreneur borrows $500,000 today. The interest rate is 11.5%. If the entrepreneur makes annual payments of $70,000 per yea
love history [14]

Answer:

After 18.44 year loan will be paid

Explanation:

We have given an entrepreneur borrows $500,000 today.

So total amount is $500000

Annual payment is of $70000

Rate of interest r = 11.5 %

We have to find the time period

We know that total amount is given by

A=P(1+\frac{r}{100})^n, here A is total amount , P is yearly paid amount, r is rate of interest and n is time period

So 500000=70000\times (1+\frac{11.25}{100})^n

7.142=1.1125^n

Taking log both side

log7.142=nlog1.1125

n\times 0.0463=0.8538

n = 18.44 year

So after 18.44 year loan will be paid

6 0
3 years ago
Which is the largest component of Aggregate Expenditures?
Lisa [10]

Answer:

gever distribution

Explanation:

fasho

7 0
2 years ago
What is the YTM of a bond if it is sold for $1,029.33, pays a semi-annual coupon of $40, and matures in 15 years? Round to the n
galben [10]

Answer:

The YTM of a bond is 7.67%

Explanation:

From a financial calculator, plug the following figures:

PV = -1029.33

PMT = 40

N = 15*2

   =30

FV = 1000

CPT I/Y =3.834%

Then:

YTM = 3.834*2

        = 7.67%

Therefore, The YTM of a bond is 7.67%

3 0
3 years ago
Other questions:
  • Personnel at a decision point in their careers can receive an overview of their veteran's benefits from what source?
    9·1 answer
  • An investment offers a total return of 17 percent over the coming year. janice yellen thinks the total real return on this inves
    13·1 answer
  • The people pane shows social media information available for any people who were included in the header of a message in the ____
    9·1 answer
  • Depreciation expense on factory equipment is part of factory overhead cost.<br> A. True<br> B. False
    10·1 answer
  • The first federal retirement benefits were give to veterans of
    12·2 answers
  • Gideon Company uses the allowance method of accounting for uncollectible accounts. On May 3, the Gideon Company wrote off the $2
    13·1 answer
  • Some of the transactions of Torres Company during August are listed below. Torres uses the periodic inventory method.
    10·1 answer
  • Borland, Inc. issues 25-year semi-annual bonds that have a face value of $1,000 and a coupon rate of 7.5%. The current market pr
    14·1 answer
  • Define uncertainty. What are some of the basic causes of uncertainty in engineering economy studies?
    14·1 answer
  • Why would a construction manager require fall guards to be installed in a high-rise construction project?
    13·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!