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Elan Coil [88]
3 years ago
7

Investors require an 8% rate of return on Mather Company’s stock (i.e., rs 5 8%). a. What is its value if the previous dividend

was D0 5 $1.25 and investors expect divi- dends to grow at a constant annual rate of (1) 22%, (2) 0%, (3) 3%, or (4) 5%? b. Using data from part a, what would the Gordon (constant growth) model value be if the required rate of return was 8% and the expected growth rate was (1) 8% or (2) 12%? Are these reasonable results? Explain. c. Is it reasonable to think that a constant growth stock could have g . rs? Why or why not?
Business
1 answer:
frutty [35]3 years ago
3 0

Answer:

1. 12.25

2. 15.625

3. 25.75

4. 43.75

Explanation:

Po = Do (1 + g) /( Ke - g)

(1) Po = Do (1 + g) /(Ke - g)

Where = Ke = 8% , g= -2%

Po = 1.25(1 - 2%) / ( 8% + 2%)

= 1.225 / 10%

= $12.25

(2). Po =  Do (1 + g) /( Ke - g)

Where = Ke = 8% , g= 0%

Po = 1.25(1 + 0) / ( 8% - 0)

= 1.25 / 8%

= $15.625

(3). Po =  Do (1 + g) /( Ke - g)

Where = Ke = 8% , g= 3%

Po = 1.25 (1 + 3%) / (8% - 3%)

= 1.2875 / 5%

= $25.75

(4) Po =  Do (1 + g) /( Ke - g)

Where = Ke = 8% , g= 5%

Po = 1.25 ( 1 + 5%) / (8% - 5%)

= 1.3125 / 3%

= $43.75

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Answer:

During the first year, the marginal cost equals approximately the minimum EUAC cost. This is why the minimum cost of EUAC to maintain the defender throughout the year is $21,000. Since the minimum EUAC cost to maintain the defender the first year is less than the minimum EUAC cost to the challenger, the defender should not be substituted. This means, it is not economically feasible to make the replacement at this time.

Explanation:

According to the exercise, it is necessary to evaluate to know if it is economic to replace the defender by the challenger. For the calculation, the defender's information is: the defender's market value up to $3000. The expenses are $20000. The information regarding the challenger is: the installation cost $30000, the annual expenses $ 16000, the surrender value $ 2000, the economic life is 12 years, and the interest rate before taxes is 15%.

The minimum EUAC for the challenger is equal to:

M_{EUAC} =installation-cost(A/P,i,n)+annual-expenses-salvage-value(A/F,i,n)\\M_{EUAC}=30000(A/P,15percent,12)+16000-2000(A/F,15percent,12)\\M_{EUAC}=(30000*0.1845)+16000-(2000*0.0345)=21466

The minimal cost is equal to:

M_{cost} =loss-in-marker-value-during-first-year+expenses-during-first-year\\M_{cost}=1000+20000=21000

3 0
3 years ago
A company's product is taking market share from another product in the same company. this process is known as:_________
kirza4 [7]

A company's product is taking market share from another product in the same company. this process is known as Cannibalization.

<h3>What is Cannibalization in business?</h3>

In business, the phenomenon of Cannibalization occurs when a product that a company makes ends up taking the market share of another product that the same company makes.

The product that does the taking of market share is often a new product that has better qualities and so is sought after by the customers of the same company.

Find out more on product cannibalization at brainly.com/question/17772125

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5 0
2 years ago
Hurwitz and Padden formed a two-person law firm as a partnership without a written agreement. They shared all proceeds on a fift
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Options:

a. not entitled to more than 50 percent of the profits, because the parties historically had divided the profits fifty-fifty.

b. not entitled to more than 50 percent of the profits, because it was appropriate to apply partnership principles to an LLC when there was no operating agreement.

c. entitled to more than 50 percent of the profits, because Hurwitz would be unjustly enriched if he received 50 percent of the profits.

d. entitled to more than 50 percent of the profits, because it was the parties' intent to compensate Padden to a greater extent than Hurwitz

Answer:

B

Explanation:

Since neither the partnership nor the limited liability company had any partnership agreement that stated how Hurwitz and Padden would share the profits generated by the business, then the general rule of partnerships should apply, i.e. profits and losses must be divided equally among all the partners.

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6 0
4 years ago
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