All categories

3 years ago

Far Side Corporation is expected to pay the following dividends over the next four years: $11, $8, $5, and $2.

Business

1 answer:

NeX [460]3 years ago

7 0

Answer:

Current price of share=40.1

Explanation:

The current value of a share is the present value of future dividends in perpetuity, discounted at the cost of equity (i.e. the return required by the providers of equity capital).

Based on the above discussion the share price shall be calculated as:

Present value of year 1 dividend=11(1+12%)^-1=9.82

Present value of year 2 dividend=8(1+12%)^-2=6.38

Present value of year 1 dividend=5(1+12%)^-3=3.56

Present value of year 1 dividend=2(1+12%)^-4=1.27

Present value of dividend after year 4=(d(1+g)/ke-g)(1+ke)^-4=(2(1+5%)/12%-5%)(1+12%)^-4=19.07

(Assuming that dividend growth rate is 5% after year 4)

Current price of share=40.1

(9.82+6.38+3.56+1.27+19.07)

You might be interested in

The eventual result in the U.S. v. Microsoft case was: a. Bill Gates was sentenced to one year in prison for violations of the S

liraira [26]

Answer: C. The court concluded that Microsoft violated the Sherman Act

Explanation: The case between United States v. Microsoft Corporation which took place at the

United States Court of Appeals for the District of Columbia Circuit during the period February 26–27, 2001 and was finally decided June 28, 2001.

It was decided by the District Court that Microsoft violated the Sharma Antitrust Act of 1890.

4 0

3 years ago

Tentacle Television Antenna Company provided the following manufacturing costs for the month of June. Direct labor cost Direct m

Temka [501]

Answer:

C. $65,800

Explanation:

Fixed csot: those which do not change for a relevant range with the production output. They aer constant.

Factory insurance 21,000

Factory insurance 13,000

Factory manager's salary 10,800

Janitor's salary 5,000

Property taxes: 16,000

Total Fixed Cost: 65,800

The direct materials and direct labor are variable cost as they drop to zero if no unit is produced.

Same goes with packaging cost, if no unit is produced then, no packagin is needed.

6 0

3 years ago

Gabe industries sells two products, basic models and deluxe models. Basic models sell for $44 per unit with variable costs of $2

Dima020 [189]

Answer:

See below

Explanation:

Basic models Deluxe models

Sales price $44 $54

Variable costs $25 $25

Contribution margin $9 $29

Sales mix 1 3

Total contribution margin $9 $87

Contribution margin per unit = $9 + $87 = $96

Weighted contribution margin= Total contribution margin / Units

= $96 / $4

= $24

Break even point = Total fixed costs / Weighted contribution margin

Break even point = $1,441 / $24

Break even point = 60 units

•Basic units = 60 × 63.33% = 38 units of basic

•Deluxe units = 60 × 43.33% = 26 units of Deluxe units

6 0

3 years ago

You recently sold 100 shares of Microsoft stock to your brother at a family reunion. At the reunion your brother gave you a chec

Hoochie [10]

Answer:

Option E

Explanation:

A direct transfer refers to the shift of funds from certain form or section of a tax deferred retirement savings plan to another. Direct payments are not deemed to be statutory dividends, and are therefore not taxed as profits or susceptible to premature payment charges. Now normally this form of transition happens digitally.

In simple terms, cash loans exist when a company sells its shares in return for money specifically to the savers. There is no financial institution involved in this procedure. Small firms typically use direct transfers, so very less money is generated during this phase.

6 0

4 years ago

Why Corporations Hedge?

trapecia [35]

Answer:

A hedge is an investment that is made with the intention of reducing the risk of adverse price movements in an asset. Managers hedge because they are undiversified

7 0

3 years ago