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Lerok [7]
3 years ago
11

Summerdahl Resort’s common stock is currently trading at $36 a share. The stock is expect- ed to pay a dividend of $3.00 a share

at the end of the year (D1 5 $3.00), and the dividend is expected to grow at a constant rate of 5% a year. What is its cost of common equity?
Business
2 answers:
Zigmanuir [339]3 years ago
6 0

Answer:

<u>Cost of common equity is 0.1333 or 13.3%</u>

Explanation:

P= D1/(r-g)

D1=3.00

g= 0.05

P=36

Here we have ,

3.00/(r-0.05) = 36

r-0.05= 3/36= 0.08333

r= 0.1333= 13.33%

masya89 [10]3 years ago
5 0

Answer:

The cost of common equity is 13.33%

Explanation:

The price of a stock whose dividends are growing at a constant rate can be calculated using the constant growth model of Dividend Discount Model approach. The formula for price today under this model is,

P0 = D1 / r - g

Where,

  • D1 is the dividend expected for the next period
  • r is the required rate of return
  • g is the growth rate in dividends

As we know the D1, the price today and the growth rate, we can plug in these values in the formula to calculate the required rate of return or the cost of equity.

36 = 3 / (r - 0.05)

36 * (r- 0.05) = 3

36r - 1.8  =  3

36r = 3 + 1.8

r = 4.8 / 36

r = 0.1333 or 13.33%

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Explanation:

The computation is shown below:

1.  For Predetermined overhead rate

Predetermined overhead rate = (Total estimated manufacturing overhead for 4 months) ÷ (Total number of units)

where,

Total estimated direct manufacturing cost is

= $166,400 × 4 months

= $665,600

And, the total number of units is

= 4,700 units + 8,700 units + 4,300 units + 7,900 units

= 25,600 units

So, the predetermined overhead rate is

= $665,600 ÷ 25,600 units

= $26 per unit

2. Now the allocated cost for each month is shown below:

For January

= 4,700 units × $26

= $122,200

For February

= 8,700 units × $26

= $226,200

For March

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For April

= 7,900 units × $26

= $205,400

c. Now the total cost per unit is

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5 0
3 years ago
Adams Company has employed a bookkeeper who is inexperienced. On December 28, after reviewing the records for the year, you disc
adell [148]

Answer:

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Trade payable                 $300

Cash                                                           $300                              

Explanation:

First we have to reverse the wrong journal entry which has been made by the inexperienced bookkeeper in the Adams Company accounts:

                                      Debit                  Credit

Trade payable                 $300

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Now we have to record the correct journal entry in the accounts of Adam Company in respect of account settlement with supplier which is given as follow:

                                      Debit                  Credit

Trade payable                 $300

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6 0
3 years ago
Read 2 more answers
Differentiate between the short run and Long run?​
kramer

Answer:

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Explanation:

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Answer:

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Before analyzing data, it is important to first clearly understand for whom and for what purpose you are conducting the analysis. ... Therefore, conducting the analysis to produce the best results for the decisions to be made is an important part of the process, as is appropriately presenting the results.

now i hope this helps you

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