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m_a_m_a [10]
3 years ago
12

In what circumstances is it most important to use multistage dividend discount models rather than constant-growth models?

Business
1 answer:
patriot [66]3 years ago
5 0

Answer:

when valuing companies with temporarily high growth rates.

Explanation:

Discounted dividend models are methods to assess a company's share price based on the dividends that company will distribute in the future. Also known by its name in English dividend discount model (DDM).

These models are based on the theory that the price of a share must be equal to the price of the dividends that the company will deliver, discounted at its net present value.

If the price of the share in the market is lower than the result obtained by the discounted dividend model, the share is undervalued and therefore it is advisable to buy. If, on the contrary, the market price is higher than the model, it is understood that the share price is too high.

Multistage dividend growth models

It is very difficult for a company to experience the same growth every year as the Gordon model assumes, so multistage models assume different growths for each period.

The most common is to use two or three stage growths, where at first the growths are higher but then tend to stabilize at a smaller constant growth. As for example in early stage companies.

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Aces Inc., a manufacturer of tennis rackets, began operations this year. The company produced 6,000 rackets and sold 4,900. Each
Alexxx [7]

Answer:

Sales Revenue  = 441,000

COGS  4,900 x 38 = 186,000

Gross Profit 254.800

Selling variable 4,900 x 2 = 9,800

Selling and administrative 65,200

Net Income 179,800

Explanation:

Sales

4,900 x 90

COGS

Fixed 78,000/6,000 = 13

Variables 25

Unit cost 38

4,900 x 38 = 186,200

Selling variable

4,900 x 2 = 9800

5 0
3 years ago
Harvey is considering implementing team-building management in his company. He wants to start with teams that work on the produc
Sergeu [11.5K]

Answer:

Answer is all of the above.

Explanation:

Reasons:

1) Communicating his expectations more would eventually make his team understand clearly the goal setting

2) Work on developing his emotional intelligence as william would be able to get things done even when there is crisis through his intelligence

3) Adjust his leadership styles and behaviours so as to prevent unhappiness and dissension among the employees as if he is not rigid all the time and keeps on changing his thought process as per the needs, he can for sure get things done and make others employees happy.

4 0
3 years ago
The amount debited to wages expense when a payroll is recorded is the
kramer

I would say wages expense should be placed under labour expenses and it is important to remember that though labour is an expense it is also the main source of revenue since it it the workers ie the ones who run the machines that really create wealth.

3 0
3 years ago
Blue Company uses special strapping equipment in its packaging business. The equipment was purchased in January 2019 for $12,200
PtichkaEL [24]

Answer:

Journal Entry - Impairment

Debit : Impairment Loss, $854,000

Credit: Accumulated Impairment Loss, $854,000

Journal entry - Depreciation

Debit : Depreciation expense, $2,135,000

Credit : Accumulated Depreciation, $2,135,000

Explanation:

Impairment loss is the excess of the Carrying Amount of an Asset over its Recoverable Amount.

Carrying Amount

Carrying Amount = Cost - Accumulated Depreciation

Depreciation Calculation (Straight line) : (Cost - Salvage Value) / Number of Useful life

2019 = ($12,200,000 - $0) / 8

        = $1,525,000

2020 = $12,200,000 - $1,525,000 / 5

         = $2,135,000

Note the change in useful life is applied from beginning of the year hence (4+1) years.Also the adjustment is only made in 2019 not retrospectively.

Carrying Amount = $12,200,000 - $1,525,000 - $2,135,000

                            = $ 8,540,000

Recoverable Amount

Is the higher of :

  1. Fair Value less Cost to sell : $6,832,000 or,
  2. Value in use : $7,686,000

Therefore Recoverable amount is $7,686,000

Impairment test

Carrying Amount : $ 8,540,000 > Recoverable amount : $7,686,000

The equipment is impaired.

Impairment loss is $ 8,540,000 - $7,686,000 = $854,000

Journal Entry - Impairment

Debit : Impairment Loss, $854,000

Credit: Accumulated Impairment Loss, $854,000

Journal entry - Depreciation

Debit : Depreciation expense, $2,135,000

Credit : Accumulated Depreciation, $2,135,000

4 0
3 years ago
What was one direct effect of the assembly line on labor in the early 1900s?
Elanso [62]

Answer:

A. Workers were performing repetitive tasks.

Explanation:

This is doing the same thing over and over again.

3 0
3 years ago
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