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Mrac [35]
3 years ago
12

The FI Corporation’s dividends per share are expected to grow indefinitely by 5% per year. a. If this year’s year-end dividend i

s $8 and the market capitalization rate is 10% per year, what must the current stock price be according to the DDM? b. If the expected earnings per share are $12, what is the implied value of the ROE on future investment opportunities? c. How much is the market paying per share for growth opportunities (i.e., for an ROE on future investments that exceeds the market capitalization rate)?
Business
1 answer:
Andreyy893 years ago
6 0

Answer:

a)

P₀ = Div₁ / (Re - g)

  • P₀ = current stock price = ?
  • Div₁ = next dividend = $8
  • Re = equity cost = 10%
  • g = constant growth rate = 5%

P₀ = $8 / (10% - 5%) = $8 / 5% = $160

b)

EPS = $12

Return on equity (ROE) = g / b

b = retention rate = 1 - payout ratio = 1 - ($8/$12) = 0.333

g = 5%

ROE = 5% / 0.333 = 15%

c)

Present value of growth opportunity (PVGO) = P₀ - EPS/Re

  • P₀ = $160
  • EPS = $12
  • Re = 10%

PVGO = $160 - $12/10% = $160 - $120 = $40 per share

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Josiah emptied his piggy bank and discovered he had 35 coins consisting of dimes and nickels. If the total amount of money he ha
anastassius [24]

Answer:

d+n=35\\0.10d+0.05n=3.30

Explanation:

Multiple Choices aren't given, so I will just solve this.

Josiah had "d" dimes and "n" nickels.

There are a total of 35 coins, nickels and dimes.

The value of "d" dimes and "n" nickels is $3.30

Note: Value of nickels is 0.05 and dimes is 0.10 (in dollars)

The system of equations (2) we can use to solve this will be:

1) an equation involving total number of coins

2) an equation stating the value of each coin and total value

Equation 1:

d + n = 35

Equation 2:

0.10d+0.05n=3.30

These are the 2 equations that can be solved simulataneously to find the number of nickels and dimes.

4 0
3 years ago
To keep your business plan up-to-date, it should be revised every
Rufina [12.5K]

Answer:

A-month

Explanation:

by revising it monthly, it is the most up to date and can be consistently helpful to you as well as organized.

4 0
3 years ago
The following information is available for Baker Industries: Cost of goods manufactured $ 320,000 Beginning finished goods inven
schepotkina [342]

Answer:

Baker Industries

The Cost of goods sold for the period is:

= $330,000

Explanation:

a) Data and Calculations:

Cost of goods manufactured       $ 320,000

Beginning finished goods inventory 45,000

Ending finished goods inventory      35,000

Cost of goods sold:

Beginning finished goods inventory $45,000

Cost of goods manufactured            320,000

Ending finished goods inventory       (35,000)

Cost of goods sold =                       $330,000

4 0
3 years ago
In 2019, Felicity's business use of her vehicle fell to less than 50%. Regular MACRS depreciation had been used in prior years.
Flauer [41]

Answer:

(d) Straight-line method (SL), the same convention as used in the first year of depreciation, ADS recovery period

Explanation:

The straight line method is the best to use, the convention to be used is the same as what was used in the first year of depreciation and the recovery period in 2019 is the ADS recovery period.

To decrease annual deduction, it is standardized that ADL is used with straight line method with 31 plus years for a recovery period that is longer.

5 0
3 years ago
A company developed the following per-unit standards for its product: 2 pounds of direct materials at $4 per pound. Last month,
olga nikolaevna [1]

Answer:

Direct Material Price Variance = $300 Favorable

Explanation:

Direct Material Price Variance = (Standard Price - Actual Price) \times Actual Quantity

Standard Price = $4 per pound

Actual Price = \frac{Actual\ Cost}{Actual\ Units} = \frac{5,700}{1,500} = 3.8

Since the actual price is less than the standard price the variance will be favorable as the amount paid for actual use is less then the estimated standard cost.

Thus, direct material price variance = ($4 - $3.8) \times 1,500

= $300 Favorable

7 0
3 years ago
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