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Mamont248 [21]
4 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]4 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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he St. Augustine Corporation originally budgeted for $360,000 of fixed overhead at 100% normal production capacity. Production w
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Answer:

$9000 (unfavorable).

Explanation:

Given: Budgeted fixed overhead= $360000.

          Actual fixed overhead=$ 360000.

          Actual production= 11,700 units.

         The variable overhead rate was $3 per hour.

         The standard hours for production were 5 hours per unit.

The fixed factory overhead volume variance is difference between actual production volume and budgeted production. It help in measuring the effecient use of fixed resources. It is termed as favourable if actual fixed overhead exceed the budgeted amount, however, it is unfavorable if the actual fixed overhead is less than budgeted amount.  

Now, lets calculate the Actual fixed overhead cost.

Actual fixed overhead cost= \textrm{actual fixed overhead}\times \frac{Actual\ production}{Budgeted\ production}

∴ Actual fixed overhead cost= \$ 360000\times \frac{11700}{12000} = \$ 351000.

Actual fixed overhead cost= $351000.

Next calculating the fixed factory overhead volume variance.

The fixed factory overhead volume variance= \textrm{Actual fixed overhead cost}-\textrm{budgeted fixed overhead}

We know, Budgeted fixed overhead= $360000 and Actual fixed overhead cost= $351000

∴ The fixed factory overhead volume variance= \$351000-\$360000= \$ 9000 (unfavorable)

The fixed factory overhead volume variance= $9000 (unfavorable)

6 0
3 years ago
Suppose that the reserve ratio is 10% when the Fed sells $25,000 of U.S. Treasury bills to the banking system. If the banking sy
andre [41]

Answer:

d $250,000; subtracted from

Explanation:

Sales of U.S. Treasury bills to the banking system by the Fed is a contractionary monetary policy that will reduce the money supply.

Based on the money supply multiplier, the amount of the reduction in money can be calculated as follows:

Amount of reduction in money supply = $25,000 / 10% = $250,000.

Therefore, if the banking system does NOT want to hold any excess reserves, <u>250,000</u> will be <u>substracted from</u> the money supply.

7 0
3 years ago
A normal job-order costing system is a system that uses:____
Maksim231197 [3]

Answer: 2. The actually cost for direct materials and direct labor and estimate cost of overhead.

Explanation: JOB ORDER COSTING or job costing is a system for assigning and accumulating manufacturing costs of individuals unit of output. This system is used when the various items produced are sufficiently different from each other and each having a significant cost. (Like when a company's output consists of continuous flows of identical, low-cost units, the process costing system is more appropriate.)

8 0
4 years ago
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has oversight responsibility for the servicing and repair of her company's fleet of cars, so she frequently calls the garage mec
Olegator [25]

Answer:

Variable-interval

Explanation:

she is likely to be reinforced with positive responses to her inquiries on a variable-interval schedule.

Variable-interval schedule is a schedule of reinforcement where a response is recompensed after an uncertain amount of time has passed, which is the opposite of a fixed-interval schedule.

8 0
3 years ago
Which of the following is not an advantage of the average rate of return method?
Rufina [12.5K]

Answer:

a. emphasizes accounting income

Explanation:

Average rate of return is calculated using annual returns, for the period for which the investment is made.

The formula to calculate so = \frac{Average return during the period}{Average investment}

Where average return during the period = total of return during the entire life of the investment divided into number of years, or tenure of investment.

Average investment = (Opening investment + Closing investment)/2.

Therefore it does not consider the accounting income, it takes into consideration, it considers total return from each particular investment.

Thus emphasizing on accounting income is not an advantage of average rate of return method.

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