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Vedmedyk [2.9K]
2 years ago
8

Duff Inc. paid a 2.34 dollar dividend today. If the dividend is expected to grow at a constant 1 percent rate and the required r

ate of return is 11 percent, what would you expect Duff's stock price to be 4 years from now?
Business
1 answer:
Akimi4 [234]2 years ago
8 0

Answer:

$24.60

Explanation:

The computation of the price for 4 years from now is shown below:

Price = Dividend ÷(Required rate of return - growth rate)

where,

Dividend is

= Dividend × (1 + growth rate)^number of years

= $2.34 × (1 + 0.01)^5

= $2.46

All the other items would remain the same

So, the price is

= $2.46 ÷ (11% - 1%)

= $24.60

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Answer:

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= $20 million

a. Assume you invest w in 5-year bond and 1-w in 25-year bond such that the duration of the portfolio is 6.71

6.71 = w x 4 + (1 - w) x 16

w = (16 - 6.71) / (16 - 4)

w = 77% in 5-year bond

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N = 25, I/Y = 17.5%, PMT = 9, FV = 100

Price = Present Value (25,17.5%, 9 ,100)

Price = 52.29042644

Price = $52.30

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Par Value of 25 year bond = $4.6 million / 50.83%

Par Value of 25 year bond = $9,049,774

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Answer and Explanation:

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           To Sales Revenue $367,000

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(Being account receivable is recorded)

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