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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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Three years ago American Insulation Corporation issued 10%, $800,000, 10-year bonds for $770,000. American Insulation exercised
My name is Ann [436]

Answer:

Explanation:

Dr Bond Payable $800,000

Dr Loss on early extinguishment $11,000

     Cr Discount on bonds $21,000 (7/10 x $30,000)

     Cr Cash $790,000

Supporting calculations:

*Unamortized discount calculation:

Face value of the bond 800,000

Less: issue price of the bond 770,000

Discount on bonds payable 30,000 (800,000-770,000)

Amortization of discount on bonds payable per year under straight line method             (30,000/10)  3,000  

Unamortized discount for the remaingg 7 years is 21,000 (7*3,000)

*Loss on early extinguishment calculation:

Face value of the bond 800,000

Less: Unamortized discount for the remaingg 7 years  21,000

Carrying value of the bonds (800,000-21,000) 779,000

Retirement price of the bonds 790,000

Loss on early extinguishment -11,000

5 0
3 years ago
The most successful job candidates seek to transform themselves from unknown into known quantities through?
MrRa [10]

The most successful job candidates seek to transform themselves from the unknown into known quantities through networking.

<h3>What is meant by networking?</h3>

Networking, usually referred to as computer networking, is the process of moving data between nodes in an information system through a common media.

The most successful job hopefuls aim to use networking to go from being unknown to becoming a known quantity.

A computer network consists of two or more computers connected through cables (wired) or WiFi (wireless) for the transfer, exchange, or sharing of information and resources.

The goal of networking is to meet new people friends, acquaintances in related fields, and perhaps business partners. You can advance swiftly in your profession with these new connections. It becomes obvious why networking is such a great tool, not only for extroverts, when you put it that way.

To learn more about networking refer to:

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4 0
1 year ago
Use AD/AS model to explain how Canadian economy saw 4% Real GDP with very little inflation. Select one: a. Canada's Aggregate de
Marianna [84]

Answer:

The Correct Answer is "D"

Explanation:

When aggregate demand moves to the right; there is an enhancement in the general cost level just as the genuine GDP. When there is a rightward move of the aggregate supply, genuine GDP increments yet broad value level reductions. It might happen that the size of the two movements is same with the goal that cost level stays unaltered pretty much however genuine GDP increments.

5 0
3 years ago
Regency Inn leased a rental office in the lobby of its hotel to Americar, a car rental agency. Wagner rented a car from Americar
WINSTONCH [101]

Answer:

The court ruled against both Americar and Regency Inn, and then Regency Inn won its case against Americar. The nuisance case itself is pretty unpleasant, so it's not worth referring to it.

The fundamentals for the ruling against Americar were that they themselves had drafted the lease agreement and that the clause included in the lease agreement by which they agreed to indemnify Regency Inn was valid. The original lease term had already expired, but Americar continued to lease the offices on a monthly basis. Since they never left the place, the clauses in the original agreement were still valid even though the lease changed to a monthly basis. I.e. if you sign a lease contract and after the original contract is over, you continue to lease the same place, then the clauses from the original contract still apply.

The clause stated that Americar was liable for damages that took place on the leased premises or in their proximity, i.e. the area near their offices. The parking lot was considered to be in the proximity of Americar's offices.

3 0
3 years ago
Destiny Corporation is preparing its statement of cash flows by the indirect method. Destiny has the following items for you to
Semenov [28]

Answer:

O+ a. Increase in accounts payable

F- b. Payment of dividends

O- c. Decrease in accrued liabilities

F+ d. Issuance of common stock

O- e. Gain on sale of building

O+ f. Loss on sale of land

O+ g. Depreciation expense

O- h. Increase in merchandise inventory

O+ i. Decrease in accounts receivable

I- j. Purchase of equipment

Explanation:

The requirement of the question is to indicate whether each of the items is an addition to addition to net income (O+) or subtraction (O-) under operating activities section, investing activity (cash inflow I+), (cash outflow I-),financing activity (cash inflow F+), (cash outflow F-) and activity not used to prepare the cash flows.

All the signs above are correct.

5 0
4 years ago
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