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Mashcka [7]
3 years ago
12

Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends.

However, investors expect Computech to begin paying dividends, beginning with a dividend of $1.25 coming 3 years from today. The dividend should grow rapidly - at a rate of 21% per year - during Years 4 and 5, but after Year 5, growth should be a constant 8% per year.
1. If the required return on Computech is 18%, what is the value of the stock today?
Business
1 answer:
zloy xaker [14]3 years ago
8 0

Answer:

$10.98

Explanation:

Dividend per year;

D1 to D2 = 0

D3 = 1.25

D4 = 1.25 (1.21) = 1.5125

D5 = 1.5125 (1.21) = 1.8301

D6 = 1.8301 (1.08) =1.9765

Find Present values of each dividend at 18% required return;

PV( D1 to D2) = 0

PV( D3) = 1.25/1.18³ = 0.7608

PV( D4) = 1.5125 / (1.18^4) = 0.7801

PV( D5) = 1.8301 / (1.18^5) = 0.8000

PV( D6 onwards) = \frac{\frac{1.9765}{(0.18-0.08)} }{1.18^{5} } \\ \\ =\frac{19.765}{2.2878}

PV( D6 onwards) = 8.6393

Next, sum up the PVs;

= 0 + 0.7608 + 0.7801 + 0.8000 + 8.6393

= 10.98

Therefore, this stock is valued at $10.98

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Kruka [31]

Answer:

Expected number of orders=31.6 orders per year

Explanation:

<em>The expected number of orders would be the Annual demand divided by the economic order quantity(EOQ).</em>

<em>The Economic Order Quantity (EOQ) is the order quantity that minimizes the balance of holding cost and ordering cost. At the EOQ, the holding cost is exactly the same as the ordering cost.</em>

It is calculated as follows:

EOQ = (2× Co D)/Ch)^(1/2)

Co- ordering cost Ch - holding cost, D- annual demand

EOQ = (2× 10 × 100000/2)^(1/2)= 3162.27 units

Number of orders = Annual Demand/EOQ

                              = 100,000/3,162.27= 31.62 orders

Expected number of orders=31.6 orders per year

7 0
2 years ago
United Machining's margin was 2% and turnover was 3.0 on sales of $60 million for the year. On the basis on this information____
Hunter-Best [27]

Answer:

B, net income for the year was $1,200,000, average assets were $20 million, ROI was 6%

Explanation:

net income is calculated by multiplying the percentage margin by the sales. We have,

(2 ÷ 100) × $60,000,000

= 0.02 × $60,000,000

= $1,200,000

To calculate the average assets, sales is divided by the turnover.

we have, ($60,000,000 ÷ 3.0)

= $20,000,000.

To calculate the ROI, margin and turnover are multiplied.

we have,

(2% × 3.0) = 6%

Cheers.

3 0
3 years ago
You receive five annual cash flows of $10,000 with the first cash flow being received today and the last cash flow occurring 4 y
ivanzaharov [21]

Answer:

FV= $75,437.02

Explanation:

Giving the following information:

Number of cash flows= 5

Cash flow= $10,000

Total number of periods= 10 years

Interest rate= 6% compounded annually

<u>First, we need to calculate the future value of the 5 cash flows in 5 years using the following formula:</u>

<u></u>

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

FV= {10,000*[(1.06^5) - 1]} / 0.06

FV= $56,370.93

<u>Now, the value at the end of 10 years:</u>

FV= PV*(1+i)^n

FV= 56,370.93*(1.06^5)

FV= $75,437.02

7 0
3 years ago
A company decides to close down its plastics division. It has on hand 20 tons of styrene monomer, a raw material that has a mark
Elena-2011 [213]

Answer:

$16,000

Explanation:

With regards to the above information, we are only concerned with calculating the value of 20 tons of styrene to the company, hence other information are not relevant.

The total value of the 20 tons of styrene monomer to the company would be ;

= 20 tons of styrene monomer × Market price of styrene monomer per ton

= 20 × $800

= $16,000

6 0
2 years ago
Companies can effectively market to teens by:
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<span>Teenagers and young adults are more likely to view social networks as a valuable source of information. additionally, making products modern and convenient makes marketing to teens much more effective.</span>
6 0
2 years ago
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