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ValentinkaMS [17]
3 years ago
6

The risk-free rate of return is 8%, the expected rate of return on the market portfolio is 15%, and the stock of Xyrong Corporat

ion has a beta coefficient of 1.2. Xyrong pays out 40% of its earnings in dividends, and the latest earnings announced were $10 per share. Dividends were just paid and are expected to be paid annually. You expect that Xyrong will earn an ROE of 20% per year on all reinvested earnings forever.
Business
1 answer:
koban [17]3 years ago
7 0

Answer:

Risk-free rate (Rf) = 8%

Return on market portfolio (Rm) = 15%

Beta (β) = 1.2

Ke = Rf + β(Rm - Rf)

Ke = 8 + 1.2(15 - 8)

Ke = 8 + 1.2(7)

Ke = 8 + 8.4

Ke = 16.40%

Earnings per share (EPS) = $10

Current dividend paid (Do) = 40% x $10 = $4

Retention rate (b) = &6/$10 x 100 = 60% = 0.6

ROE (r) = 20% = 0.2

Growth rate (g) = b x r

                         = 0.6 x 0.2

                         = 0.12 = 12%

Current market price (Po)

= Do<u>(1 + g) </u>  

        Ke - g

= $4<u>(1 + 0.12)</u>

     0.1640 - 0.12

= $4<u>(1.12)</u>

      0.044

= $101.82

             

Explanation:

First and foremost, we need to calculate the cost of equity based on capital asset pricing model. Then, we will determine the growth rate, which is a function of retention rate (b) and return on equity(r).

Finally, we will calculate the current market price, which is dividend paid, subject to growth, divided by the excess of cost of equity over growth rate.

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Nolte Co. has 4,800,000 shares of common stock outstanding on December 31, 2012. An additional 200,000 shares are issued on Apri
12345 [234]

Answer:

5,110,000 and 5,170,000.

Explanation:

earnings per share EPS = (net income - preferred dividends) / weighted average of outstanding shares

  • 4,800,000 at the beginning of the year
  • 200,000 issued April 1 = 200,000 x 9/12 = 150,000
  • 480,000 issued September 1 = 480,000 x 4/12 = 160,000

weighted average outstanding shares = 4,800,000 + 150,00 + 160,000 = 5,110,000

diluted shares = ($6,000,000 / $1,000) x 40 x 3/12 = 60,000

diluted EPS = (net income - preferred dividends) / (weighted average of outstanding shares + diluted shares)

weighted average of outstanding shares + diluted shares = 5,110,000 + 60,000 = 5,170,000 shares

4 0
3 years ago
Expenditures for consumer goods and services $4,565
krek1111 [17]

Answer:

a. $640 billion.

Explanation:

Net investment = $225

Gross investment = $865

Depreciation = Gross investment - Net investment = $865 - $225 = $640

Therefore, on the basis of Table, depreciation is  a. $640 billion.

5 0
3 years ago
A fruit packing plant usually shuts down for three months each year. during that period, what happens to its costs? its fixed co
VikaD [51]
During the three-month period, the plant is not able to produce anything because it shut down. Hence, its variable cost is equal to zero, however, during this period, the fixed cost is still greater than zero because of the process that needs to be done in order to ensure that once the plant is restarted. 

For the reason stated above, the most likely answer to this item is the first choice. 
7 0
3 years ago
A recent study conducted by Estelle Cosmetics Company showed that heavy users of Estelle's products comprise a small percentage
s344n2d4d5 [400]

Answer: Segmentation by usage

Explanation: Segmentation by usage splits customers according to how often they use a product. Using segmentation by usage, customers can be classified into non - users, who don't use the product at all, light and medium users, who can range from little usage of the product to average use of the product, and heavy users, who mostly use these products.

From thr first paragraph it is clear that usage segmentation is used to separate the user's into different classes based on their usage, and identify which class to target when it comes to sales. At Estelle Cosmetics Company, it was deduced that of this company's total sales, less than 7% of this market are heavy users. These users purchase nearly 71% of the company's products. This company will probably focus their marketing efforts on the heavy users, as they contribute to the majority of sales within their company.

7 0
3 years ago
Consider an economy that only produces two goods: DVDs and DVD players. Last year, 10 DVDs were sold at $20 each and 5 DVD playe
dangina [55]

Answer:

$4,000

Explanation:

Given that,

Last year:

DVDs sold = 10

Selling price of each DVD = $20

DVD players sold = 5

Selling price of each DVD player = $100

This year:

DVDs sold = 150

Selling price of each DVD = $10

DVD players sold = 10

Selling price of each DVD player = $60

Real GDP:

= (No. of DVDs sold this year × Selling price of each DVD last year) + (No. of DVD players sold this year × Selling price of each DVD player last year)

= (150 × $20) + (10 × $100 )

= 3,000 + 1,000

= $4,000.

3 0
3 years ago
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