Answer:
The stock A is most valuable as the fair value of Stock A is $100 which is more than the fair value of Stock B ( $83.33) and Stock C ($34.28).
Explanation:
to calculate the fair price of the stocks, we will use the DDM or dividend discount model. The DDM bases the value of a stock on the present value of the expected future dividends from the stock.
Let r be the discount rate which is 10%.
a.
The stock is like a perpetuity as it pays a constant dividend after equal intervals of time and for an indefinite period.
The price of this stock can be calculated as,
Price or P0 = Dividend / r
P0 = 10 / 0.1 = $100
b.
The constant growth model of DDM can be used to calculate the price of this stock as its dividends are growing at a constant rate forever.
P0 = D1 / r - g
Where,
- D1 is the dividend for the next period
- r is the cost of equity or discount rate
- g is the growth rate in dividends
P0 = 5 / (0.1 - 0.04)
P0 = $83.33
c.
The price of this stock can be calculated using the present of dividends.
P0 = 5 / (1+0.1) + 5 * (1+0.2) / (1+0.1)^2 + 5 * (1+0.2)^2 / (1+0.1)^3 +
5 * (1+0.2)^3 / (1+0.1)^4 + 5 * (1+0.2)^4 / (1+0.1)^5 + 5 * (1+0.2)^5 / (1+0.1)^6
P0 = $34.28
Answer: A : Faithful representation results when different companies use the same accounting principles and methods.<u> Is INCORRECT.</u>
Explanation: All statements are correct except for A because Faithful representation means that information is complete, unbiased, and free of error regardless of the accounting methods used. Faithful representation means that the numbers reflect reality.
She will most likely have to use Microsoft word if not she will have to look it up
Answer:
$54,000
Explanation:
If we Consider two cars manufactured by Chevrolet in 2007.
That would be output to be considered in Gross Domestic Product calculation, irrespective of whether they are sold or not.
Since the first one of the two cars had a value for $24,000.
and The second automobile, with a market value of $30,000,
The transactions just described contribute $54,000 (which is a summation of the total output of both cars) to GDP for 2007.
B clothing, entertainment, and health care