Answer:
The price of the stock today is $13.58
Explanation:
Using the dividend discount model approach, we can calculate the price of the stock today. DDM bases the price of a stock on the present value of the expected future dividends from the stock. The dividends and the terminal value are discounted back to the present value using the required rate of return on the stock. The price per share today for this stock will be,
P0 = 0.75 / (1+0.17)^3 + 0.75 * (1+0.48) / (1+0.17)^4 +
0.75 * (1+0.48)^2 / (1+0.17)^5 +
[(0.75 * (1+0.48)^2 *(1+0.1) / (0.17 - 0.1)) / (1+0.17)^5 ]
P0 = $13.584 rounded off to $13.58
Answer:
$11.60
Explanation:
In ascertaining the parity price of the common stock, we need to ascertain the conversion ratio which is the par price of the preferred stock divided by the convertible price
The par value of the preferred stock=$100(since call price is $110)
convertible price=$10
conversion ratio=$100/$10=10
The parity price is the current market price of the preferred stock divided by the conversion ratio
Parity price=$116/10
Parity price=$11.60
Answer and Explanation:
The consequences of given transactions are as follows
a. Revenues rise by $3.2 million as the firm received an order
b. Earnings rise by $1.5 million as the firm received an order and it filled by an orders i,e ($3.2 - $1.7)
c. Receivables rise by $1.80 million as it determines the remaining balance which ultimately increased the receivable balance
d. Inventory declined by $1.7 million as the order is filled which ultimately declines the stock
e. The cash would rise by $1.4 million
= Earnings - receivable + inventory
= $1.5 million - $1.80 million + $1.7 million
= $1.4 million
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