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Mamont248 [21]
3 years ago
12

The last dividend paid by Klein Company was $1.00. The stock’s dividend growth rate is expected to be a constant 5 percent for 2

years, after which dividends are expected to grow at a constant rate of 10 percent. Klein’s required rate of return on equity (rs) is 12 percent. Based on the above, what is the intrinsic value (price) of Klein’s common stock?
Business
1 answer:
charle [14.2K]3 years ago
6 0

Answer:

The intrinsic value per share today is $50.16

Explanation:

The two stage growth model of DDM is used to calculate the price of a stock whose dividends are growing by two different rates and the second rate is the one where the dividend growth becomes constant. The formula for price today under this model is,

P0 =   D0 * (1+g1) / (1+r)  +  D0 * (1+g1)² / (1+r)²  +

[ (D0 *(1+g1)² * (1+g2) / (r - g2))  /  (1+r)² ]

Where,

  • g1 is the growth rate in the first period i.e. 5%
  • g2 is the growth rate that is sustainable growth rate i.e. 10%
  • D0 is the dividend today

P0 = 1 * (1+0.05) / (1+0.12)  +  1 * (1+0.05)² / (1+0.12)²  +

[ (1 * (1+0.05)² * (1+0.1)  /  (0.12 - 0.1))  /  (1+0.12)² ]

P0 = $50.156 rounded off to $50.16

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They are called revenues.
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3 years ago
Broker Joe has a listing for a distressed seller. He finds a buyer for the property who enters into a contract for purchase. Ten
cluponka [151]

In this situation when the seller has filed for bankruptcy then Broker Joe has to terminate the contract. Therefore, Option B is the correct statement.

<h3>What do you mean by contract?</h3>

A legally enforceable agreement that creates, defines, and regulates mutual rights and obligations between its parties is called a contract.

An agreement usually involves the exchange of goods, services, money, or the promise to change any of these at a later date.

Therefore, Option B is the correct statement.

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8 0
2 years ago
Just as depository institutions differ from non-depository Institutions, there are also differences between the structure and ac
bezimeni [28]

Answer: A. True

B. True

C. False

Explanation:

A. Both Mutual Savings Banks and Credit Unions are owned by the their depositors. Credit Unions are owned and operated by members for the purpose of creating banking services for themselves at a cheaper cost.

Mutual Savings Banks are also owned by members who felt that traditional banks did not favour them.

B. Demand Deposit accounts exist in both commercial banks and Credit Unions but with different names. In Commercial banks they are known as Checking accounts for the most part but Credit Unions call them Share Draft Accounts and members of the Union can use these accounts by writing drafts like Commercial banks allow cheques.

C. While Credit Unions were formed usually for people in the same organisations or people with a common bond, Mutual Savings Banks were generally meant to uplift the lower economic classes so they did not share a common bond as Credit Union members do.

5 0
3 years ago
Blake Company has $15,000 cash at the beginning of June and anticipates $50,000 in cash receipts and $34, 500 in cash disburseme
rodikova [14]

Answer:

balance of the loan  = $4500

correct option is d. $4, 500

Explanation:

given data

cash at the beginning = $15,000

cash receipts = $50,000

cash disbursements = $34, 500

minimum cash balance = $10,000

maintains = $20,000

company owes = $15,000

to find out

balance of the loan

solution

we get here first excess that is

excess = $15,000 + $50,000 - $34, 500

excess = $30500

so used to loan replay will be here as

used to loan replay  = $30500 - $20,000

used to loan replay  = $10500

so balance of loan will be here

balance of the loan  = $15,000 - $10500

balance of the loan  = $4500

correct option is d. $4, 500

6 0
3 years ago
On september 1, knack company signed a $50,000, 90-day, 5% note payable with central savings bank. what is the journal entry tha
shepuryov [24]
<span>The Journal entry upon the 90 days (1/4 using 360 days a year) maturity at 5% rate should be $50,000 plus the Interest (I). Let Journal Entry upon Maturity be J Where J = Initial Signed Note + Initial Signed Note * Rate * Time Which is also written as J = Initial signed Note (1 + Rate * Time) Therefore J = 50,000 (1+5/100*1/4) = 50,625</span>
5 0
3 years ago
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