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
Aneli [31]
3 years ago
10

You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend of $1.50 a share at the end

of the year (D1 = $1.50) and has a beta of 0.9. The risk-free rate is 3.2%, and the market risk premium is 4.5%. Justus currently sells for $40.00 a share, and its dividend is expected to grow at some constant rate, g. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 3 years? (That is, what is ?) Round your answer to two decimal places. Do not round your intermediate calculation
Business
1 answer:
kkurt [141]3 years ago
5 0

Answer:

44.35

Explanation:

The stock will increase the grow rate of the company. We need to solve this.

The grow rate will be determinate using the Gordon dividend grow model

\frac{divends}{return-growth} = Intrinsic \: Value

we clear for g

return - \frac{divends}{stock} = grow

to find the return we use CAPM

Ke= r_f + \beta (r_m-r_f)  

risk free 0.032

market rate

premium market = (market rate - risk free) = 0.045

beta(non diversifiable risk) = 0.9

Ke= 0.032 + 0.9 (0.045)

Ke 0.07250

this will be the return we use in the formula for grow

g = 0.0725 - 1.5/40 = 0.03500

At this rate our dividends will grow and also our share price

the stock in 3 years will be the current price capitalized with the grow rate

Stock \: (1+ grow)^{time} = Stock_{3years}

Stock    40.00

time 3.00

rate         0.035

40 \: (1+ 0.035)^{3} = Stock_{3years}

Futue value in 3 years = 44.35

You might be interested in
Cumulative preferred stock carries the right to be paid both current and all prior periods' unpaid dividends before any dividend
alexgriva [62]

Answer: True

Explanation: Cumulative preferred shares of a company carries some special rights as per law. The holders of such stock must be paid any current or prior period accrued dividends before any payment of dividend to common shareholders. The dividends of such shareholders is fixed in nature.

Also in the event of liquidation they will be preferred before any common stock holders.

Thus, the given statement is true.

3 0
3 years ago
Which qualifications are most helpful for Foreign Service Careers? Check all that apply.
r-ruslan [8.4K]
The foreign languages are Brazilian and
4 0
3 years ago
Read 2 more answers
Organizations that assist in moving goods and services from producers to businesses (B2B) and from businesses to consumers (B2C)
klemol [59]

Organizations that assist in moving goods and services from producers to businesses (B2B) and from businesses to consumers (B2C) are called marketing intermediaries.

<h3>What is the purpose of marketing intermediaries?</h3>

marketing intermediaries are those organizations that stand in the gap to

make sure the goods from the producer get to the consumers.

They usually appears as wholesaler and they Organizations that assist in moving goods and services from producers to businesses.

Learn more about marketing intermediaries at:

brainly.com/question/14457086

#SPJ1

5 0
2 years ago
(c) Which of the following statements are true? (You may select more than one answer. Single click the box with the question mar
AysviL [449]

Answer:

Customer and Product Margin under Activity-based Costing and Traditional Costing

True Statements:

1. If a customer orders more frequently, but orders the same total number of units over the course of a year, the customer margin under activity based costing will decrease.

2. If a customer orders more frequently, but orders the same total number of units over the course of a year, the product margin under a traditional costing system will be unaffected.

Explanation:

Customer Margin is the difference between the total revenue generated from a customer minus the acquisition and service costs.   In the above instance, the customer margin decreases because of the costs of servicing the customer's frequent orders.  Customer service costs are usually higher with more frequent orders, when activity-based costing is employed because frequent orders increase the activity level and the associated costs.

Product Margin is the profit margin generated per product.   It is the markup on the cost of the product.  It shows the difference in amount between the selling price and the manufacturing cost.  Frequent orders cannot change the product margin under the traditional costing technique unlike it does with the activity-based costing technique.

6 0
3 years ago
(BRAINLIEST FOR WHO GETS IT CORRECT) Processing the message and providing some type of feedback is a(an)
arsen [322]

receipt of message. i think :) hope this helps

3 0
3 years ago
Other questions:
  • Dextra Computing sells merchandise for $6,000 cash on September 30 (cost of merchandise is $3,900). Dextra collects 5% sales tax
    5·1 answer
  • Next week, Super Discount Airlines has a fight from New York to Los Angeles that will be booked to capacity. The airline knows f
    11·1 answer
  • The Flintstone Construction Company delivers dirt and stone from local quarries to its construction sites. A new truck that was
    15·1 answer
  • One consequence of automation is that producers need fewer                                                      
    13·2 answers
  • Alpha Technology produces two products: a high end laptop under the label Excellent Laptops and an inexpensive desktop under the
    6·1 answer
  • In a small town of 100 people, there are 10 children under 16, 10 retired people, 60 people with full-time jobs, 3 people with p
    7·1 answer
  • Importance of completing client records correctly
    6·1 answer
  • A customer service manager at a retail clothing store has collected numerous customer complaints from the forms they fill out on
    15·1 answer
  • For purposes of estimating the firm's WACC, what are the weights of long-term debt, preferred stock, and equity given the follow
    7·1 answer
  • Responsibilities of a company's management in terms of<br> risks include:
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!