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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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Case Problem Analysis: Jurisdiction
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There are different kinds of cases. The answers to the questions are blow.

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  • Georgia and Florida have personal jurisdiction over the trucking firm?

Yes, Marya sue the trucking firm in Georgia and Florida state courts.

Miriam would likely NOT want to sue the trucking firm in Georgia because she would need to;

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Miriam would likely want to sue the trucking firm in Florida because:

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2.  She can better research for local lawyers

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<h3>What takes place in a court case?</h3>

In a  trial done in a court, lawyers often present evidence via witnesses who are known to testify about what they have seen or known.

After all the evidence had been presented, the lawyers will then give their closing arguments and lastly, the jury then decides if the defendant is guilty or not guilty.

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6 0
2 years ago
Read 2 more answers
Management is considering replacing its blending equipment. The annual costs of operating the old equipment are $250,000. The an
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Answer:

$250,000

Explanation:

Since the purchase cost of an old equipment is already incurred and it does not have any kind of impact in decision making so this cost would be considered as the sunk cost i.e. $250,000

The operating cost of old & new equipment would be relevant for calculating the annual cost savings and the current selling value of the old equipment would also be relevant as salvage value

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A company's December 31 work sheet for the current period appears below. Based on the information provided, what is net income f
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Answer:

Net income for the current period is $2,350.

Explanation:

Calculation of Net Income for the Current Period.

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Fees earned                                                             7,250

Less Expenses :

Rent expense                                           1,300

Salaries expense                                     2,300

Utilities expense                                         345

Insurance expense                                    650

Supplies expense                                        115

Depreciation expense—equipment          190   (4,900)

Net Income / (Loss)                                              2,350

3 0
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When writing goals, it is helpful to remember the acronym SMART. Different people associate different words with each of the let
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Answer:

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