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Alina [70]
3 years ago
14

Presently, Stock A pays a dividend of $2.00 a share, and you expect the dividend to grow rapidly for the next four years at 20 p

ercent. Thus the dividend payments will be Year Dividend 1 $1.20 2 1.44 3 1.73 4 2.07 After this initial period of super growth, the rate of increase in the dividend should decline to 8 percent. If you want to earn 12 percent on investments in common stock, what is the maximum you should pay for this stock?
Business
1 answer:
Flura [38]3 years ago
3 0

Answer:

In order to find the price of a stock which has different growth rate at different periods, we need to find the price at a time when the growth rate slows down after the initial burst of growth and is stable, in this case its in the 4th period.

Year 4 dividend = 2.07

Growth rate (G)= 8%

Required return (R)= 12%

DDM formula for stock price = D*(1+G)/R-G

2.07*(1+0.08)/0.04

=55.89

The maximum that you should be willing to pay for the stock 4 years from now is $55.89 but in order to find out what the maximum we should pay for the stock now, we need to discount this price 4 years back to the present value using the required return of 12 %

so 55.89/1.12^4=35.52

The maximum that you should be willing to pay for the stock now is $35.52

Explanation:

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Mnenie [13.5K]

Answer:

well the sign on the left showes a coffee and on the right they said twi dollars for the brewed coffee

4 0
2 years ago
ABC Corporation distributes property to its sole shareholder, Andre. The property has a fair market value of $350,000, an adjust
saul85 [17]

Answer:

ABC has a gain of $145,000 and Andre's dividend income is $130,000

Explanation:

Property ABC issued, has the following:

fair market value = $350,000

Adjusted basis = $205,000

Liability = $220,000

Calculate ABC's Corporation gain:

Gain = market value - Adjusted basis

= $350,000 - $205,000

= $145,000

ABC has a gain of $145,000

Calculate Andre's dividend income since he is the sole shareholder:

Dividend earnings = fair market value - liability

= $350,000 - $220,000

= $130,000

Andre's dividend income is $130,000

Correct option is D.

With respect to distribution, ABC has a gain of $145,000 and Andre's dividend income is $130,000

8 0
3 years ago
(16-25) more questions:)
lys-0071 [83]

Answer:

16. d?

17. probably b

18. a

19. hmmmmmmmmmm c?

20. b

21. d

22. d

23. c

24. c

25. a

Explanation:

Should all be right? a few im iffy on.... it's been a while

8 0
3 years ago
Zoe Corporation has the following information for the month of March: Purchases $92,000 Materials inventory, March 1 6,000 Mater
Delvig [45]

Answer:

Zoe Company

a) Statement of Cost of Goods Manufactured:

Direct materials cost                 $90,000

Direct labor                                  25,000

Factory overhead                        37,000

Work in process, March 1           22,000

Work in process, March 31        (23,500)

Cost of goods manufactured $150,500

b) Income Statement for the month ended March 31:

Sales                                                                    $257,000

Finished goods inventory, March 1    $21,000

Cost of goods manufactured             150,500

Finished goods inventory, March 31  (30,000)

Cost of goods sold                                              $141,500

Gross profit                                                          $115,500

Sales and administrative expenses                      79,000

Net Income                                                          $36,500

c) Inventory Section of the Balance Sheet as of March 31:

Current Assets:

Inventory:

Materials inventory, March 31              $8,000

Work in process, March 31                   23,500

Finished goods inventory, March 31   30,000

Total inventory                                    $61,500

Explanation:

a) Data and Calculations:

Purchases     $92,000

Materials inventory, March 1 6,000

Materials inventory, March 31 8,000

Direct labor 25,000

Factory overhead 37,000

Work in process, March 1 22,000

Work in process, March 31 23,500

Finished goods inventory, March 1 21,000

Finished goods inventory, March 31 30,000

Sales 257,000

Sales and administrative expenses 79,000

b) Materials inventory, March 1   $6,000

Purchases                                    92,000

Materials inventory, March 31       8,000

Direct materials cost                 $90,000

4 0
3 years ago
Mountain High Ice Cream Company transferred $72,000 of accounts receivable to the Prudential Bank. The transfer was made with re
docker41 [41]

Answer:

Journal Entry

Explanation:

Cash Dr,                                      $63,360

Loss on sale receivable Dr,       $6,640

Receivable from factor Dr,         $6,200

         To resource liability                      $4,200

          To Accounts receivable               $72,000

(Being transfer on the books of Mountain High is recorded)

Working Note :-

2% × $72,000 = $1,440

Cash = ($72,000 × 0.90) - ($72,000 × 0.02)

= $64,800 - $1,440

= $63,360

Loss on sale receivable = ($4,200 + $72,000) - ($63,360 + $6,200)

= $76,200 - $69,560

= $6,640

8 0
3 years ago
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