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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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A person invested $20,000 into two accounts that pays 2.5% and 3% simple interest annually, respectively. find the amount invest
denpristay [2]
Let:
x = amount in the account invested in 2.5%
20000 - x = amount in the account invested in 3%

Solution:
.025x + .03 (20000 - x) = 540
.025x + 600 - .03x = 540
-.005x + 600 = 540
-.005x = 540 - 600
-.005x = -60
x = 12000

Therefore, that person invests 12,000 at 2.5%
and
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Devon, an accounts manager at a large electronics firm, does not have any direct international responsibilities; however, Devon
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Answer:

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Hence, when Grande Communications offers a lower price to customers who subscribe to Grande television, telephone, and internet services all at once. This is an example of Price Bundling.

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brainly.com/question/21629547

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