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prisoha [69]
3 years ago
5

Harry Corporation's common stock currently sells for $179.85 per share. Harry paid a dividend of $10.18 yesterday, and dividends

are expected to grow at a constant rate of 6 percent forever. If the required rate of return is 12 percent, what will Harry Corporation's stock sell for one year from now, immediately after it pays its next dividend
Business
1 answer:
bixtya [17]3 years ago
3 0

Answer:

$190.64

Explanation:

In this question, we apply the Gordon model which is shown below:

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

where,

Current year dividend

For one year

= $10.18 + $10.18 × 6%

= $10.18 + 0.6108

= $10.7908

For next year

= $10.7908 + $10.7908 × 6%

=  $10.7908 + 0.647448

= 11.438248

The other items rate would remain same

Now put these values to the above formula  

So, the value would equal to

=  11.438248 ÷ (12% - 6%)

= $190.64

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Answer:

The answer is:

A. Yes

B. 3.6

C. 3.43

Explanation:

A. Yes, the warrants is dilutive because the average market price($15) is higher than option price($10).

B. Since there is no preferred shares or preferred dividends, the basic earnings per share is:

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C. First we need to find the incremental shares. The formula is:

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Total number of shares is now 105,000shares(100,000 shares + 5,000)

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