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SpyIntel [72]
3 years ago
14

You’ve recently learned that the company where you work is being sold for $300,000. The company’s income statement indicates cur

rent profits of $11,000, which have yet to be paid out as dividends. Assuming the company will remain a "going concern" indefinitely and that the interest rate will remain constant at 9 percent, at what constant rate does the owner believe that profits will grow? nstruction: Enter your response rounded to one decimal place.
Growth rate of: ___ percent.
Business
1 answer:
chubhunter [2.5K]3 years ago
7 0

Answer:

5%

Explanation:

Data provided in the question:

Present value of the company, PV = $300,000

Current Profits, π₀ = $11,000

Interest rate, i = 9% = 0.09

Now,          

we know,            

PV = \pi_0(\frac{1+i}{1-g})

here,

g is the growth rate        

on rearranging, we get          

g =  i - \frac{(1+i)\pi_0}{PV}

on substituting the respective values, we get

g = 0.09 - \frac{(1+0.09)\times11,000}{300,000}

or  

g = 0.05

or

g = 0.05 × 100%

= 5%

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Answer:

The amount of dividends paid to common stockholders in 2021 $18000.

Explanation:

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The common stock holders are paid after the preferred stockholders are paid.

The preferred stock dividend per year = 400000 * 0.06 = $24000 per year

As the cash dividends paid in 2019 and 2020 are $20000 each,

The dividend outstanding on preferred stocks for 2019 is = 24000 - 20000 = $4000

Similarly, the dividends outstanding on preferred stocks for 2020 is = 24000 - 20000 = $4000

The total dividends outstanding at start of 2021 = 4000 + 4000 = $8000

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4 0
3 years ago
Free Motion Enterprises paid a $2.20 per share annual dividend last week. Dividends are expected to increase by 3.75 percent ann
Tems11 [23]

Answer:

$20.29

Explanation:

The computation of the today share price is shown below:

= Next year dividend ÷ (Required rate of return - growth rate)

where,

Next year dividend

= $2.20 + $2.20 × 3.75%

= $2.20 + 0.0825

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So, the today price would be

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= $2.2825 ÷ 11.25%

= $20.29

6 0
3 years ago
Xthe diffusion of digital technologies into nearly every workplace, remaking the economy and the world of work is referred to as
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The diffusion of digital technologies into nearly every workplace, remaking the economy and the world of work is referred to as digitalization.

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In recent decades, the diffusion of digital technology into nearly every business and workplace has been remaking the economy and the world work more effectively.

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2 years ago
Brennan Manufacturing monitors the number of customer returns for each product model to attempt to track when the organization i
STALIN [3.7K]
Brennan Manufacturing monitors the number of customer returns for each product model to attempt to track when the organization is producing a large number of defective products. This is an example of: Feedback control.
4 0
3 years ago
How does supply and demand affect prices?
irakobra [83]
The higher the supply the lower the price will be and the higher the demand the higher the price will be. This means that they have an inverse relationship. In short, the more you need something the more you're willing to pay for it, and the less you need it the less you want to pay, and this is basically how the economy works when producing and selling.
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3 years ago
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