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ale4655 [162]
3 years ago
14

Newman Manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just​ completed, Grips earned ​$

3.58 per share and paid cash dividends of ​$1.88 per share ​(D0equals$ 1.88​). ​ Grips' earnings and dividends are expected to grow at 25​% per year for the next 3​ years, after which they are expected to grow 6​% per year to infinity. What is the maximum price per share that Newman should pay for Grips if it has a required return of 12​% on investments with risk characteristics similar to those of​ Grips?
Business
1 answer:
Vlada [557]3 years ago
6 0

Answer:

Explanation:

D0 = $1.88

D1 = 1.88*1.25 = $2.35

D2 = 2.35*1.25 = $2.94

D3 = 2.94*1.25 = $3.67

PV of Dividends:

r = 12%

1/(1.12)  = 0.89

PV of D1 = 2.35/0.89 = $2.64

PV of D2 = 2.94/0.797 = $3.69

PV of D3 = 3.67/0.71 = $5.17

Total PV = $11.5

Value after year 3:

(D3*Growth rate)/(Required rate - growth rate) = $3.67*1.06/(0.12-0.06) = $64.8

Pv of 64.8 is 64.8/(1.12)^3 = $46.3

So, the maximum price per share is 11.5+46.3 = $57.8

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Mrs. Eller's corporate employer has a cafeteria plan under which its employees can receive a $3,000 year-end Christmas bonus or
Alina [70]

Answer and Explanation:

a. The computation is shown below;

Cash bonus after tax is ($3,000 × (1 - 0.24) $2,280

And, non taxable fringe benefit is $2,300

So here he should use the nontaxable fringe benefit

b. Yes answer would be changed

Cash bonus after tax is ($3,000 × (1 - 0.12) $2,640

And, non taxable fringe benefit is $2,300

hence, the same is to be considered

4 0
3 years ago
The practice of creating a liability when a company incurs an expense that cannot be directly linked to a specific accounting pe
m_a_m_a [10]

The practice of creating a liability when a company incurs an expense that cannot be directly linked to a specific accounting period most likely refers to companies may recognize such expenses in periods during which profits are high, as they can afford to take the hit to income, with a view to reducing the liability (the reserve) in future periods during which the company may struggle.

A liability is something that an individual or company owes, usually a monetary amount. Liabilities are settled over time by the transfer of economic benefits, including money, goods, or services.

Current liabilities are short-term financial obligations of a company that matures within one year or within the normal business cycle. The operating cycle, also known as the cash conversion cycle, is the time it takes a company to purchase inventory and convert sales into cash.

In general, mitigating the risk of legal liability requires acting lawfully and taking clear responsibility for the well-being of others (groups that include customers or clients, competitors, and the general public).

Learn more about  Liability here brainly.com/question/25687338

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8 0
1 year ago
Low-income countries have cultures that value ________
victus00 [196]
Low-income countries have cultures that value economic survival. These type of countries do not have a lot of high paying jobs and the job market is very unstable, so citizens find it imperative to have enough income to survive. These types of countries do not have much in the way of entertainment culture or pop culture, due to people having so little extra money to spend on both.
8 0
3 years ago
Hemingway Corporation has 100,000 shares of common stock issued and outstanding. At the meeting of the board of directors on Dec
DaniilM [7]

Answer:

See the journal entry below

Explanation:

Retained earnings A/c Dr $500,000

Dividends payable A/c Cr $500,000

Here, cash dividend is being declared by the board on 100,000 shares hence the account of retained earnings is debited and account of dividends payable is credited.

NB.

Amount = Share × Price per share

Given that;

Share = 100,000

Price per share = $5

Amount

= 100,000 × $5

= $500,000

4 0
3 years ago
A _____ is an organizational group responsible for coordinating the project management function throughout an organization. a. P
kow [346]

Answer:

Project Management Office is the correct answer.

Explanation:

Project Management Office is a department that focuses on and maintains the quality and overview of project management throughout the organization.

The objective of the Project Management Office is to give a platform that supports all the project teams to achieve and improve the chances of successful outcomes.

5 0
3 years ago
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