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Sophie [7]
4 years ago
6

Farmco just paid its annual dividend of $.32 per share. The dividends are expected to grow at 25 percent annually for the next 4

years and then level off to an annual growth rate of 3 percent indefinitely. What is the price of this stock today given a required return of 15 percent?
Business
1 answer:
vitfil [10]4 years ago
6 0

Answer:

$5.73(Approx).

Explanation:

Given:

= 0.32

Growth rate = 25% = 0.25

Number of year = 4

Growth rate after 4 year = 3% = 0.03

Required rate of return = 15% = 0.15

Computation of divined in 4 year:

Annual\ dividend\ paid(1+growth\ rate)^n\\\\0.32(1+0.25)^4\\\\0.32(1.25)^4\\\\0.32(2.44140625)\\\\0.78125

Price of stock after year 4 = [Divined in 4 year × (1 + new growth)] /[Required rate of return - Growth rate after 4 year ]

Price of stock after year 4 = [0.78125 × (1+0.03)] / [0.15 - 0.03]  

Price of stock after year 4 = [0.8046875] / [0.12]  

Price of stock after year 4 = $6.70572917

Present value = Future value / (1+r)^n

 Present value = $6.70572917 / (1.15)^4

 Present value = $6.70572917 / (1.16985856)

$5.73(Approx).

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erica [24]

Answer: phishing

Explanation:

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8 0
3 years ago
. The kind of unemployment that exists when there is a mismatch between a worker's skills and the jobs or the location of jobs a
Anastaziya [24]

The answer is structural unemployment.

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4 0
2 years ago
Adriana Graphic Design receives $1,500 from a client billed in a previous month for services provided. What general journal entr
mario62 [17]

Answer:

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Cr Account Receivable $1,500

Explanation:

Based on the information given we were told that Adriana receives the amount of $1,500 from a client that was billed in a previous month for services provided which therefore means that the appropriate general journal entries that Adriana Graphic Design will make to record this transaction is:

Dr Cash $1,500

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4 0
3 years ago
1. Which of the following BEST defines a down payment?
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Answer:

3

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3 years ago
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