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Igoryamba
4 years ago
10

The Shore Hotel just paid a dividend of $2 per share. The company will increase its dividend by 6 percent next year and will the

n reduce its dividend growth rate by 2 percentage points per year until it reaches the industry average of 2 percent dividend growth, after which the company will keep a constant growth rate forever. What is the price of this stock today given a required return of 12 percent
Business
1 answer:
SVETLANKA909090 [29]4 years ago
8 0

Answer:

The price of the stock today is $21.58

Explanation:

The dividend is growing by three different growth rates. Thus, the three stage growth model of DDM will be used to calculate the price of the share today. Under DDM approach, we discount the expected dividends by the required rate of return to estimate the fair value of the stock today. The terminal value is calculated when the dividend growth becomes constant forever. To calculate the price of the stock today, we use next period's dividend D1.

The price per share = D1 / (1+r)  +  D2 / (1+r)^2 + ... + [(Dn * (1+g) / r - g) / (1+r)^n]

Price per share = 2 * (1+0.06) / (1+0.12)  +  2 * (1+0.06) * (1+0.04) / (1+0.12)^2  +  [(2 * (1+0.06) * (1+0.04) * (1+0.02) / (0.12 - 0.02)  /  (1+0.12)^2]

Price of stock today = $21.578 rounded off to $21.58

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professor190 [17]

Answer:

your answer is Rs.200.

Explanation:

10/100^Rs.2000=Rs.200.

3 0
2 years ago
How LinkedIn’s weekly invite limits are affecting marketers?
grandymaker [24]

Answer:

B2B marketers and businesses who rely on LinkedIn for lead generation are greatly affected by these new limits. The growth of their business greatly depends on the outreach and 100 connection requests per week is just not enough.  

However, when there’s a problem, there’s always a solution.  

Here are some best ways to help you get beyond the new LinkedIn limits:

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  • USE INMAILS

LinkedIn’s new weekly limit has some benefits but a number of drawbacks for B2B marketers and business owners.

8 0
3 years ago
Starr Corporation loaned $600,000 to another corporation on December 1, 2020 and, in exchange, received a 3-month, 8% interest-b
prisoha [69]

Answer:

                          Adjusting entry

Date    Account Title                      Debit        Credit

           Interest receivables           $4,000

           ($600,000*8%*1/12)

                   Interest revenue                            $4,000

           (To record accrued interest on note)

3 0
3 years ago
What does it mean to set up an ""automatic deposit"" and why is this a good savings strategy?
Anna71 [15]

Answer:

It is an Eletronic Payment Method

Explanation:

An automatic deposit is a payment processing option where funds are deposited directly into the recipients' bank account. It is an electronic service applied in paychecks, tax refunds, and pensions. Individuals can set up such a service with their banks or employers.

As a saving strategy, an employee instructs the employer to make automatic payments to their savings account. The employee will decide the amount they want to save. The amount is deducted from their pay and send to their savings account. Business people can also instruct their bank to deduct a certain amount from the business account and send it to their savings account.

This strategy is suitable for saving because it's efficient. The amount meant for savings will not be available for other purposes. The automatic deposit system ensures the amount intended for saving is saved.

5 0
3 years ago
Bacchus Enterprises has $12B in book value of common stock selling at a book to market rate of 1.35 and a beta of 1.5. The combi
goldfiish [28.3K]

Answer: 16.3%

Explanation:

Given the details in the question, the cost of preferred capital can be calculated using the CAPM method.

Cost of preferred stock using the Capital Asset Pricing Model is:

= Risk free rate + Beta * ( Market return - Risk free rate)

= 4% + 1.23 * (14% - 4%)

= 16.3%

7 0
3 years ago
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