1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
4vir4ik [10]
3 years ago
13

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 $1.00 coming 3 years from today. The dividend should grow rapidly - at a rate of 17% per year - during Years 4 and 5, but after Year 5, growth should be a constant 7% per year. If the required return on Computech is 16%, what is the value of the stock today
Business
1 answer:
sertanlavr [38]3 years ago
8 0

Answer:

$9.687

Explanation:

Given:

Year 3 dividend = $1.00

Year4&5 growth rate = 17%

Constant rate = 7%

Required return rate = 16%

Year 4 dividend wil be:

D4 = 1.00 * 1+growth rate

= 1.00 * (1+0.17)

= $1.17

Year 5 dividend=

D5 = $1.17 * (1+0.17)

= $1.3689

Value of stock after year 5 will be given as:

\frac{D5 * (1+growth rate)}{required return - growth rate}

= \frac{1.3689*(1+0.07)}{0.16-0.07}

= $16.2747

For the current value of stock, we have:

Cv= Fd* Pv of discounting factor

Where Cv = current value of stock

Fd = future dividend

Pv = Present value of discounting factor

Therefore,

C_v = \frac{1.00}{1.16^3} + \frac{1.17}{1.16^4} + \frac{1.3689}{1.16^5} + \frac{16.2746}{1.16^5}

=$9.6871382455

≈ $9.687

The value of stock today =

$9.687

You might be interested in
What do students buy when they pay tuition
poizon [28]

Answer: on edge it's B the right to attend classes at a school...

Explanation:

3 0
3 years ago
Read 2 more answers
ABC Manufacturing has total fixed costs of $460,000. A unit of product sells for $20 and variable costs per unit are $11. Prepar
labwork [276]

Answer:

Net Income (Loss) = $440,000

Explanation:

Total Fixed Cost = $460000

Total Variable Cost =  $11 * 100,000 unit =  $1100000

Total Revenue = $20 * 100,ooo unit = $2000000

Contribution Margin =  TR- TVC = ($200,000 - $1,100,000)  = -$900,000

Net Income = Contribution margin - Total Fixed cost

Net Income (Loss) = $900,000 - $460,000

= $440,000

3 0
3 years ago
Red Carpet Inc. is a small apparel store started by an aspiring designer. The store needs to compete against larger, well-establ
KatRina [158]

Answer:

The answer is: Red Carpet should try to focus on niche market segments.

Explanation:

A niche market is part of a greater market, but its focus is set on very specific products. The niche market has very specific market needs that need to be targeted by very specific products.

Usually niche markets are targeted by high priced products since normal broad range products or services will not satisfy their specific needs. For example, vegan restaurants are more expensive than McDonald's or Pizza Hut.

Since niche markets are small, usually big multinational corporations don't pay attention to them.

5 0
2 years ago
A steering committee identifies and assesses all possible systems development projects that the organization could undertake.
Mashcka [7]
The appropriate response is Information Systems Planning. It is the procedure whereby a senior chief, a business gathering, an IS administrator or a controlling board distinguishes and evaluates every single conceivable framework improvement extends that an association could embrace.
6 0
3 years ago
Choose and describe a business that you would expect to have highly liquid assets and share a photo of that business (or company
Slav-nsk [51]

Answer:

I have chosen Apple Inc.

Explanation:

Apple Inc is a tech giant and manufactures innovative and most differentiated telecommunication products, music products, computer products, application services, etc which is highly valued among its customers. That's the reason why Apple is one of the most highly valued company in the world with almost $137 billion cash balance. This cash balance has been increased by $20 billion in the last three years which shows its higher profitability and that its inventory is highly liquid asset because it is quickly converted into cash. Furthermore, the greater demand of product and customer loyalty has strengthen its position all because of unmatched innovation introduced in each of its product every year. The greater cash balance shows that the company has greater sales and has higher profit margin on its unmatched product.

The picture of Apple headquarter and of its logo are given below:

6 0
3 years ago
Other questions:
  • What two task does a public affairs officer do?
    10·1 answer
  • How do Equal Employment Opportunity laws protect job applicants?
    5·1 answer
  • Gfci circuitry continuously checks for a difference in current between the ___________.
    6·1 answer
  • Nish Corporation has provided the following data for the month of April:
    6·1 answer
  • New Seasons Market, a locally owned and operated one-stop grocery store based in Portland, Oregon is committed to providing loca
    9·1 answer
  • Andy's business is not able to pay its debts, and the prospects for its finances to improve are slim. Andy decides not to contin
    5·1 answer
  • Who is the preaident of India​
    7·1 answer
  • what is the policy that requires a student to maintain a 2.0 gpa and earn 67% of the total hours they attempt?
    10·1 answer
  • Explain about New product pricing strategy
    13·1 answer
  • Five fundamental economic problems​
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!