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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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Tanya [424]

Answer:B. She is entitled to recover the damages if she can show that Roland agreed to pay such damages in his contract with her.

Explanation:

The non payment of the N500 installment by Roland constitute a breach of the sales contract, However an evidence of a commitment to be liable for additional cost that will be incurred will make it possible for Selina to recover the damages.

7 0
3 years ago
Your company has spent $290,000 on research to develop a new computer game. The firm is planning to spend $49,000 on a machine t
Maslowich

Answer:

$132,745.82

Explanation:

required investment = $290,000 + $49,000 + $5,900 + $59,000 =  $403,900

depreciable amount = $49,000 + $5,900 = $54,900

Research and development costs are expensed, they cannot be capitalized. Increase in net working capital cannot be capitalized either.

MACRS depreciation expense for year 1 under 8 year class life = 14.29%

depreciation expense year 1 = $54,900 x 14.29% = $7,845.21

net cash flow year 1 = [($390,000 - $190,000 - $7,845.21) x (1 - 35%)] + $7,845.21 = ($192,154.79 x 0.65) + $7,845.21 = $124,900.61 + $7,845.21 = $132,745.82

5 0
3 years ago
Cook Company processes and packages frozen seafood. The year just ended was Cook's first year of business and they are preparing
lys-0071 [83]

Answer:

Cook Company

a. The direct labor price variance and the direct labor efficiency variance for the year:

Direct labor price variance =  (Actual rate - Standard rate) * Actual hours

= $247,000 Favorable

Efficiency variance = (Actual hours - Standard hours) * Standard rate

= $94,500 Unfavorable

b. If all variances are written off to the Cost of Goods Sold:

Journal Entries:

Debit Work in Process $247,000

Credit Direct labor variance $247,000

To record the favorable direct labor price variance.

Debit Direct labor variance $94,500

Credit Work in Process $94,500

To record the unfavorable direct labor efficiency variance.

Debit Direct labor variance $152,500

Credit Cost of Goods Sold $152,500

To close the direct labor price variance.

c. The appropriate accounts are not indicated, though they should be Raw materials, Work in Process, and Cost of Goods Sold.  However, the ratios are not given for prorating.

Explanation:

a) Data and Calculations:

Standard direct labor hours per unit = 2

Standard rate per direct labor hour = $27

Production units = 60,000

Ending Finished goods = 4,800

Cost of goods sold units = 55,200

Actual direct labor hours used = 123,500

Standard hours = 120,000 (2 * 60,000)

Actual direct labor costs = $3,087,500

Actual direct labor price = $25 ($3,087,500/123,500)

Standard direct labor costs = $3,240,000 (120,000 * $27)

a. The direct labor price variance and the direct labor efficiency variance for the year:

Direct labor price variance =  (Actual rate - Standard rate) * Actual hours

= ($25 - $27) * 123,500

= $247,000 Favorable

Efficiency variance = (Actual hours - Standard hours) * Standard rate

= (123,500 - 120,000) * $27

= $94,500 Unfavorable

b. If all variances are written off to the Cost of Goods Sold:

Analysis of Journal Entries:

Work in Process $247,000 Direct labor variance $247,000

Direct labor variance $94,500 Work in Process $94,500

Direct labor variance $152,500 Cost of Goods Sold $152,500

($247,000 - $94,500)

5 0
3 years ago
If you buy fewer than 10 pairs of UVex Clear UVExtreme safety eyewear for your employees, the cost is $7.40. But if you buy 10 o
juin [17]

Answer:

quantity discount

Explanation:

A quantity discount is a stimulus rendered to a buyer that brings about a decrease in cost per unit of goods or materials when purchased in greater numbers. A quantity discount is often rendered by sellers to attract customers to purchase in larger quantities.  

The seller is able to sell off more goods or materials, and the buyer gets a more better pricing for them. At the consumer level, a quantity discount can appear as a BOGO (buy one, get one discount) or other incentives, such as buy two, get one free.

7 0
3 years ago
Lito works for a business that is part of a large corporation with many diverse business lines that operate autonomously. Lito’s
irinina [24]

Answer: Conglomerate structure

                           

Explanation: In simple words, conglomerate structure refers to the structure under which many entities operate in different industries under a single corporation. In other words, it is a different name for parent subsidiary relationship.

In the given case, Lito group owns different firms in different industries. Hence from the above we can conclude that the group uses conglomerate structure.

4 0
3 years ago
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