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Ray Of Light [21]
4 years ago
6

Portman Industries just paid a dividend of $1.68 per share. The company expects the coming year to be very profitable, and its d

ividend is expected to grow by 20.00% over the next year. After the next year, though, Portman's dividend is expected to grow at a constant rate of 4.00% per year The risk-free rate (Rr) is 5.00%, the market risk premium (RPM) is 6.00%, and Portman's beta is 0.90 Term Value Dividends one year from now (Di Horizon value (P1) Intrinsic value of Portman's stock Assuming that the market is in equilibrium, use the information just given to complete the table What is the expected dividend yield for Portman's stock today? a. 6.15% b. 5.12% c. 6.79% d. 6.40% Now let's apply the results of your calculations to the following situation: Portman has 500,000 shares outstanding, and Judy Davis, an investor, holds 7,500 shares at the current price (computed above). Suppose Portman is considering issuing 62,500 new shares at a price of $26.78 per share. If the new shares are sold to outside investors, by how much will Judy's investment in Portman Industries be diluted on a per-share basis? a. $0.52 per share b. $0.44 per share c. $0.64 per share d. $1.09 per share Thus, Judy's investment will be diluted, and Judy will experience a total:_____.
Business
1 answer:
alisha [4.7K]4 years ago
7 0

Answer:

What is the expected dividend yield for Portman's stock today?

d. 6.40%

Suppose Portman is considering issuing 62,500 new shares at a price of $26.78 per share. If the new shares are sold to outside investors, by how much will Judy's investment in Portman Industries be diluted on a per-share basis?

a. $0.52 per share

Thus, Judy's investment will be diluted, and Judy will experience a total loss of $0.52 x 7,500 = $3,900

Explanation:

cost of equity = Re = risk free rate of return + (Beta × market premium) = 5% + (0.90 x 6%) = 10.4%

dividend in one year = $1.68 x 120% = $2.016

intrinsic stock price = $2.016 / (10.4% - 4%) = $31.50

expected dividend yield = dividend / stock price = $2.016 / $31.50 = 6.4%

Judy's loss per share = ($31.50 - $26.78) x (62,500 / 562,500) = $0.5244

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3 years ago
Consider a 11-period binomial model with r=1.02r=1.02, s_0 = 100s
FromTheMoon [43]

The  value of a European call option on the stock with strike k=102k=102 is: 2.03529 and the amount of dollar to invest in the cash account is $28.694

<h3>European call option</h3>

Given:

R=1.02

S0 = 100

u=1/d= 1.05

Strike(k) = 102

First step

Upside Price = u × S0

Upside Price = 1.05 × 100

Upside Price = 105

Downside Price = S0/u

Downside Price= 100×1/1.05

Downside Price= 95.238

Upside Payoff = upside price - strike rate

Upside Payoff =(105 - 102)

Upside Payoff = 3

Second step

Upside probability=(r - q) / u - d

Upside probability=1.02- (1/1.05)÷ 1.05- (1/1.05)

Upside probability=0.0676190/0.0976190

Upside probability=0.692


Probability of downside = 1 - p(upside)

Probability of downside = 1 - 0.692

Probability of downside = 0.30731722

Third step

European call option=[0.692×3+0.30731722×0]×1/100

European call option=2.03529

Let B represent the Dollar to invest

105D -1.05B=3

95.238D-1.02B=0

Solving for B

B=$28.694

Therefore the  value of a European call option on the stock with strike k=102k=102 is: 2.03529 and the amount of dollar to invest in the cash account is $28.694

Learn more about European call option here:brainly.com/question/16998902

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4 0
2 years ago
When the investor's level of influence changes, it may be necessary to change to the equity method from another method. When the
muminat

Answer:

Carried over at the fair value that exists on date of transfer.

Explanation:

When the investor's level of influence changes, it may be necessary to change to the equity method from another method. When the level of ownership rises from less than 20% to a range of 20% to 50%, the equity method typically would become appropriate and the investment account balance should be carried over at the fair value that exists on date of transfer.

7 0
3 years ago
Shoeleather cost refers to:
deff fn [24]

Answer: Option a

             

Explanation: In simple words, the value of effort and time (or economic cost of effort and time) which individuals spend by keeping less money to offset the inflation tax they pay on cash holdings whenever higher inflation occurs is called shoe leather cost.

Increased cost of shoe-leather is one of the inflationary impacts. In a time of high inflation, individuals are discouraged from keeping large sums of money because their worth is rapidly deteriorating compared to the economy's increasing prices.

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3 years ago
The Smith family adopted a child. The adoption procedure took about three months, and the family incurred various expenses. Will
kodGreya [7K]

Answer:

E. They will receive several tax deductions

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Certain "reasonable and necessary" adoption related expenses are quantifiable for tax deductions, such as:

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