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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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Two roadway designs are under consideration for access to a permanent suspension bridge. Design 1A will cost $1.7 million to bui
Vladimir79 [104]

Answer and Explanation:

A. Given that Design 1A will cost $1.7 million to build and $175,000 per year to maintain

Given that Design 1B will cost $3.6 million to build and $40,000 per year to maintain

Both designs are assumed to be permanent

To find ROR using AW based rate of return equation, we find present value of each design and equate them:

Each design is permanent so

Present value of perpetuity:

Design 1A= 1700000+175000/r

Design 1B = 3600000+40000/r

=1700000+175000/r=3600000+40000/r

135000/r=1900000

Cross multiply

r=135000/1900000

r= 0.0710

r=7.10%

B Given that ROR=7.10% and MARR is 25%

MARR>ROR

Hence we reject both designs

5 0
3 years ago
Was it smart of Cedric to avoid writing about his embarrassing lunchtime incident and wacky grandma?
LekaFEV [45]
Yes, because harassing grandma is unnecessary and rude.
5 0
3 years ago
At what rate per cent per annum will 4000 yield an interest of 410 in 2 years?​
andrey2020 [161]

Answer:

5%

Explanation:

The applicable formula is A = P( 1 + r) ^ n

where A= amount: P is the principal, r, interest rate, n time

In this case,

A = principal + interest = Rs 410 { Rs 4000 + Rs410}

P= Rs 4000

r= ?

n= 2

r is?

4410 = 4000(1 + r) ^2

(1 + i)^ 2 = 4410/4000

(1 + i)^ 2 = 1.1025

1 + i = √1.1025

1 + i = 1.05

i = 1.05 - 1

i = 0.05

0.05 × 100 = 5%

5 0
3 years ago
State, in brief, with reasoning, whether following statement is correct/incorrect: “One cannot be everything to everyone, but ca
Olenka [21]

Answer:

Yes the statement is correct.

Explanation:

The statement is given by Matt Cheuvrant. In business the statement is absolutely correct that you can not satisfy the need of all the customers. A business cannot offer a product at less than its cost if a customer cannot afford it. Also an organization cannot start manufacturing a product because one customer demands it. If the company decides to satisfy all his customers by offering a large variety of products it may result in establishing in-house competition resulting in declining profits from both the products. If the company tries to give everything to every one this enhances its risk of failure resulting nothing in its own hands.

Businesses should focus on a single product and try to create a niche market. The product should be unique and its features should be extensively different from the other competitive products available in the market. This creates heavy switching cost to customers which ensures the business that customers will retain loyal to it. You can everything for few customers. They will not want to leave you because of your product specific features that are not available in the market.

8 0
3 years ago
In 2016, the Neverland had a population of 8,200 and real GDP of 210,500. Neverland had 5% growth in real GDP per person. In 201
igomit [66]

Answer:

c.226,416

Explanation:

Calculation for what was real GDP in the Neverland in 2019

First step is to calculate real GDP per capital

Real GDP per capital=210,500/8,200

Real GDP per capital=25.6707

Second Step is to calculate Real GDP per person

Real GDP per person=(1+0.05)*25.6707

Real GDP per person=1.05*25.6707

Real GDP per person=26.954235

Last step is to calculate the real GDP in the Neverland in 2019

Using this formula

Real GDP in the Neverland in 2019=Real GDP per person* Population

Let plug in the formula

Real GDP in the Neverland in 2019=26.954235*8,400

Real GDP in the Neverland in 2019=226,416

Therefore the real GDP in the Neverland in 2019 will be 226,416

6 0
3 years ago
Read 2 more answers
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