1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
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

You might be interested in
A property seller empowers an agent to market and sell a property on his behalf. what is this an example of
aev [14]
It is an example of special agency. It enables the bond of the broker and the principle in which they have a contract of having little control of each other and responsibility. These agency are hired by the seller to be able to reach out for others in selling the seller's property, allowing them to do what they are capable of but the seller has only little control of the broker.
3 0
3 years ago
What are some of the major complexities encountered in developing cooperative strategies such as strategic alliances and joint v
____ [38]

Strategic alliances are generally meant to increase the business strength. Most of the cooperative strategies aim at drawing upon the individual strengths of partners to be more competitive as a single unified unit.

There are a lot of  challenges in getting cooperative strategies to work as envisaged during the planning phases. When corporate companies seek cooperation strategies, the hindsight which comes is that most of them compete against each other).

Hence, it is  natural that such companies will seek to fulfill their interests first before considering the interests of their partnerships. Then, some companies seek cooperative partnerships with partners who are already having other collaborators.

It  also follows that such cooperation lacks commitment. There is also a lack of detailing the operational structure by which operational strategy will be a great success.

To know more about Strategic alliance here:

brainly.com/question/14014533

#SPJ4

5 0
1 year ago
Aaron is proud of the traits associated with his countrymen. They are generally perceived as adventurous with a pronounced incli
bonufazy [111]

Answer:e) uncertainty avoidance

Explanation:

Uncertainty Avoidance refers to how people of different cultures respond to changes or the unknown based on their level of tolerance.

People of different cultures respond or reacts differently when unplanned situations occurs.

Uncertainty Avoidance relates to the level to which individuals of a particular community are comfortable with uncertainty and the unknown.

People who belong to cultures with high uncertainty avoidance try to reduce the occurrence of unknown circumstances and to proceed with careful changes step by step by planning and by implementing rules and regulations. They have very low tolerance for change WHILE people who belong to low uncertainty avoidance culture accept and feel comfortable in unplanned situations and try to have as few rules as possible. They have high tolerance for change.

6 0
3 years ago
Write an essay about the effects of poverty
pishuonlain [190]
Cold heartedness and inner generosity
3 0
2 years ago
You are choosing between these four investments and you want to be​ 95% certain that you do not lose more than 8.00 % on your in
MakcuM [25]

Answer:

option B

Explanation:

In other to know how return fluctuation can be predicted with for instance, x%, predictability, one has to look at the normal distribution curve of return (average returns) to standard deviation of those returns. (check the attached file for additional details).

Hence, to be 95% sure that investment losses are less than 8% one needs to look at 95% of all returns which infact Mean return plos or minus 20. If the lower bound of this interval is less than 8% then the investment needs to be selected

check attached file for additional details

8 0
3 years ago
Other questions:
  • How do jellyfish move
    10·2 answers
  • One year ago Lerner and Luckmann Co. issued 15-year, noncallable, 7.5% annual coupon bonds at their par value of $1,000. Today,
    8·1 answer
  • Carlita began 2014 with an interest payable account balance of $13,000. during 2014, it paid $5,000 in interest to its lenders.
    12·2 answers
  • Mama's Pizza Shoppe borrowed $7,200 at 12% interest on May 1, 2021, with principal and interest due on October 31, 2022. The com
    12·1 answer
  • Raj has been reviewing copies of medical records of patients from his clinic to see if he can identify any opportunities for qua
    8·1 answer
  • Spectacular Corporation began the year with accounts​receivable, inventory, and prepaid expenses totaling $67,000. At the end of
    12·1 answer
  • Farmer Brian has 3 acres of land which he farms efficiently. Each acre can support 10 apple trees. However the 3 acres differ in
    7·1 answer
  • Which of the following statements is not accurate descriptions of the business market? Mrs. Phillip, a retail buyer for Blooming
    9·1 answer
  • 2. What are the ways of forecasting cost of sales?
    5·1 answer
  • The opportunity cost of buying a ticket to a major league baseball game and then going to the game is:________
    5·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!