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
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

You might be interested in
Cybernet Systems is a​ start-up company that makes connectors for​ high-speed Internet connections. The company has budgeted
Sophie [7]

Answer:

$10,950 Unfavorable

Explanation:

For computation of flexible budget variance for total costs first we need to find out the standard cost which is shown below:-

Standard cost = (Sold connectors × budgeted variable costs) + Fixed costs per month

= (77 × $150) + $5,500

= $11,550 + $5,500

= $17,050

Flexible budget variance for total costs = Actual cost - Standard cost

= $28,000 - $17,050

= $10,950 Unfavorable

8 0
3 years ago
Gabriel applies for a home loan and, mark signs the agreement promising to pay off the debt in case gabriel fails to do so. in t
Gemiola [76]
The answer is letter a, cosigner. Mark is a cosigner is someone who is in charged of the other person's debt when that person he's in signed with wasn't able to meet the requirements or fail to pay or comply. That is why Mark is considered to be a cosigner of Gabriel if Gabriel fails to comply to pay the loan and Mark is in charged to settle it if Gabriel fails to do so.
6 0
3 years ago
What is likely to lead to a decrease in the price of a company's stock?
rodikova [14]
If the company's annual profits decrease (the amount of cash they make per year) then that would lead to a decrease in the price of a company's stock.
4 0
3 years ago
A centralized database management is subject to a problem such as
Soloha48 [4]
<span>a growing number of remote locations</span>
6 0
3 years ago
Read 2 more answers
The current price of the Volkswagen ADR (VWAGY) is 35.50. You purchase 50 shares on margin. You finance half of the purchase you
Zinaida [17]

Answer:

33.77%

Explanation:

In one year, you are going to receive ($42 x 100) + ($0.56 x 100) = $4,256

you must return ($35.50 x 50) = $1,775

plus interests = $1,775 x 6% = $106.50

total return = $4,256 - $1,775 - $106.50 = $2,374.50

you invested $1,775

return on your investment = ($2,374.50 / $1,775) - 1 = 33.77%

5 0
2 years ago
Other questions:
  • Selected operating data for two divisions of Outback Brewing, Ltd., of Australia are given below: Division Queensland New South
    14·1 answer
  • The benefits of belonging to professional organizations include the development of professional contacts and the opportunity to
    11·2 answers
  • Bob Burgers allocates manufacturing overhead to jobs based on direct labor hours. The company has the following estimated costs
    11·1 answer
  • Wickland Company installs a manufacturing machine in its production facility at the beginning of the year at a cost of $87,000.
    8·1 answer
  • Leo is a welfare recipient who qualifies for two means-tested cash benefit programs. If he does not earn any income, he receives
    13·1 answer
  • U.S. sugar import quotas have existed for more than 50 years and preserve about half of the U.S. sugar market for domestic produ
    9·1 answer
  • In the circular flow of funds, what is the role of banks?
    10·1 answer
  • How many step in the double entry bookkeeping? *
    6·1 answer
  • Throughout human history we know that Group of answer choices all countries will eventually return to very low levels of real GD
    6·1 answer
  • On July 31, 2017, Crane Company had a cash balance per books of $6, 245.00. The statement from Dakota State Bank on that date sh
    15·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!