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erma4kov [3.2K]
2 years ago
9

Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However

, investors expect Simpkins to begin paying dividends, with the first dividend of $1.25 coming 3 years from today. The dividend should grow rapidly - at a rate of 80% per year - during Years 4 and 5. After Year 5, the company should grow at a constant rate of 6% per year. If the required return on the stock is 16%, what is the value of the stock today (assume the market is in equilibrium with the required return equal to the expected return)? Do not round intermediate calculations. Round your answer to the nearest cent.
Business
1 answer:
madreJ [45]2 years ago
6 0

Answer:

Answer is $50.94 or $50.9

Explanation:

The present value of a stock along with the continuous growth is one of the formulas that are being used in the dividend discount model, particularly as it relates to stocks that the speculation assumes will increase perpetually.

Please find the detailed answer as follows:

Current Value

= 1.25/(1+.12)^3 + 1.25*(1+75%)/(1+.12)^4 + 1.25*(1+75%)^2/(1+.12)^5 + 1.25*(1+75%)^2*(1+7%)/(1+.12)^5*(12%-7%) = $50.94 or $50.9

Answer is $50.94 or $50.9

Thanks.

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6 0
3 years ago
Heidi owns 400 shares of Boyd Enterprises stock, which is valued at $17 a share. Boyd Enterprises just declared a 10 percent sto
Leno4ka [110]

Answer:

After stock dividend, Heidi will own 440 shares at a price of $15.45 per share.

Explanation:

Heidi owns 400 shares.

The price of these shares is $17/per share.

The firm announces a 10% stock dividend.

The number of shares owned after dividend

=Current shares+10% of current shares

=400+10% of 400

=400+40 shares

=440 shares

Price per share after dividend

=Current value of shares/ number of shares after stock dividend

=\frac{400*17}{440}

=\frac{6800}{440}

=$15.45

4 0
3 years ago
What would you pay for a $110,000 debenture bond that matures in 15 years and pays $5,500 a year in interest if you wanted to ea
ladessa [460]

Question

What would you pay for a $110,000 debenture bond that matures in 15 years and pays $5,500 a year in interest if you wanted to earn a yield of 8%:

Answer:

Price of bond = $ 81,753.72

Explanation:

<em>The value of the bond is the present value(PV) of the future cash receipts expected from the bond. The value is equal to present values of interest payment plus the redemption value (RV).  </em>

Value of Bond = PV of interest + PV of RV

The price of the bond can be worked out as follows:  

Step 1  

<em>PV of interest payments  </em>

annul interest payment  = $5,500

Annual yield = 8%

Total period to maturity (in years)  = 15

PV of interest =  

5500 × (1- (1+0.08)^(-15)/)/0.08 =   47,077.13  

Step 2  

<em>PV of Redemption Value  </em>

= 110,000 × (1.08)^(-15) =  34,676.59  

Price of bond  

  47,077.13   +  34,676.59   =$ 81,753.72

Price of bond = $ 81,753.72

6 0
3 years ago
. Most trades on the NYSE are executed: Select one: a. by floor brokers on the exchange floor. b. by designated market makers of
Likurg_2 [28]

Answer:

Most trades on NYSE are executed electronically. Brokers can still make trades manually, but the majority of trades today are executed through the exchange's electronic systems.

Explanation:

A Floor trader is someone who who owns a trading license and buys and sells for his or her personal account, an individual on the floor of the NYSE.

A designated market maker is one who acts as a dealer in one or more securities on the floor of the NYSE.

A dealer is one who maintains an inventory from which he or she buys and sells securities.

A broker is an agent who arranges a transaction between a buyer and a seller of equity securities.

5 0
3 years ago
Read 2 more answers
13) In the following expression, Total: [Rate] * [Hours], "Total" is a(n) ________.
Leno4ka [110]

Answer:

B. Group By operator

Explanation:

Hope this helps and have a nice day :)

3 0
2 years ago
Read 2 more answers
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