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pishuonlain [190]
3 years ago
6

DAA's stock is selling for $15 per share. The firm's income, assets, and stock price have been growing at an annual 15 percent r

ate and are expected to continue to grow at this rate for 3 more years. No dividends have been declared as yet, but the firm intends to declare a dividend of D3 = $2.00 at the end of the last year of its supernormal growth. After that, dividends are expected to grow at the firm's normal growth rate of 6 percent. Will you buy this stock? Why?
Business
1 answer:
DaniilM [7]3 years ago
6 0

Answer:

This question is incomplete since the required return is not pasted here. I checked on the web and found similar question with the firm's required rate of return is 18 percent. You can use this to solve the question as follows.

Explanation:

Use Dividend Discount Model (DDM) to find the intrinsic value of the stock.

Find the present value of dividends

D3 = 2

PV(of D3) = 2/(1.18^3) = 1.2173

D4 = D3(1+g) = 2(1+0.06) = 2.12

PV(of D4) = \frac{\frac{2.12}{0.18-0.06} }{1.18^{3} }

PV (of D4) = 17.6667/ 1.6430 = 10.7527

Next, sum up the present values ;

= 1.2173 + 10.7527

= $11.97

Therefore, DAA's stock is currently overpriced ,so you should not buy it since it is only valued at $11.97 and not $15.

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Trowel Corp. has outstanding accounts receivable totaling $13,000,000 as of December 31 and sales on credit during the year of $
maksim [4K]

Answer:

$756,000

Explanation:

Allowance for Bad Debts opening        ($24,000)

Allowance for Bad Debts Closing         $780,000

(13,000,000)*6%

Allowance Bad  Debt Expense for the year  $756,000

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3 years ago
If a one-year bond has a face value of $5,000 and is sold for $4,500, what is the interest rate on the bond?
Arada [10]

Answer:

11.1%

Explanation:

The face value is $5000

It is sold for $4,500

Therefore the interest rate of this bond can be calculated as follows

$5000-$4500

= 500

500/4500 × 100

= 0.111 × 100

= 11.1%

Hence the interest rate is 11.1%

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Explanation:

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3 years ago
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The act of starting and creating a business on one's own is called?​
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Answer:

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For each of the following, compute the future value (Do not round intermediate calculations and round your final answers to 2 de
snow_lady [41]

Explanation:

The computation of the future value is shown below:

As we know that

Future value = Present value × (1 + interest rate)^number of years

In the first case,

Future value = $2,050 × (1 + 0.12)^12

                     = $2,050 × 3.895975993

                     = $7,986.75

In the second case,

Future value = $8,352 × (1 + 0.10)^6

                     = $8,352 × 1.771561

                     = $14,796.08

In the third case,

Future value =  $72,355× (1 + 0.11)^13

                     = $72,355 × 3.883280163

                     = $280,974.74

In the fourth case,

Future value = $179,796 × (1 + 0.07)^7

                     = $179,796 × 1.605781476

                     = $288,713.09

4 0
3 years ago
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