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
san4es73 [151]
3 years ago
12

Tropical Inc. has reported ROE of 0.07 and a dividend payout ratio of 0.6. Its expected earnings for the next year is $2.7 per s

hare, and the market capitalization rate is 0.15. What is Tropical's intrinsic value for today (t0)? Assume sustainable growth rate and constant growth DDM.
Business
2 answers:
kolbaska11 [484]3 years ago
8 0

Answer:

The Intrinsic value today is $13.28

Explanation:

Given ROE = 0.07, Payout ratio = 0.6, EPS  = $2.7, market cap = 0.15

MV = ?

Formula = D1/r-g

First need to find Dividends that are expected to be paid out

From what is given we will use the payout ratio formula

PR = DPS/EPS

0.6 = DPS/2.7

DPS/D1 = 0.6*2.7=$1.62

Also need to find g

g = ROE *retention ratio

    =0.07*(1-0.6)

    =0.028/2.8%

The market cap is rate that is commonly used as the approximation of the discount rate to calculate the present value of cash flows from a security

So sustituting to the formula

MV = 1.62/0.15-0.028

      =$13.28

Yanka [14]3 years ago
3 0

Answer:

Value per share today is $13.28

Explanation:

The sustainable growth rate can be calculated using the following formula,

Sustainable growth rate (g) = ROE * (1 - DividendPayout Ratio)

Where,

  • ROE is the return on equity
  • (1- dividend payout ratio) also known as retention ratio

Thus, g = 0.07 * (1-0.6) = 0.028 or 2.8%

The formula for price or intrinsic value per share is,

P0 or V = D1 / r-g

The earnings per share is Net income per share. Out of this net income, 60% will be paid out as dividends so dividend per share expected for next year is 2.7 * 0.6 = 1.62

Thus, value per share will be,

V = 1.62 / (0.15 - 0.028)   = $13.278 rounded off to 13.28

You might be interested in
In January 2012, one US dollar was worth 50 Indian rupees. Suppose that over the next year the value of the Indian rupee decreas
satela [25.4K]

Answer:

59% - a)increase - b)decrease

Explanation:

First of all, we should say that the real exchange rate is calculated by multiplying the nominal exchange rate for the price index and then divide it by the price index of the other country. In another language, using this case as the example, the first nominal exchange rate is 50, as you need 50 rupees to buy 1 dollar. So to calculate the real exchange rate you need to multiply 50 by 100 (the price index of USA) and then divide it by 100 (the price index of India). Note that both price indexes are 100, just a coincidence for making easier the question. Result: 50.

Then we calculate the next real exchange rate: multiply 60 (the new nominal exchange rate) by 106 (the new US price index) and divide by 80 (the new India price index). This throws a result of 79,5. We see a 29,5 increase, and 29,5 represents 59% of 50 (the initial real exchange rate).

Then both questions is more common sense than the reading of the results we just calculated. For example, nominal exchange rate changed from 50 to 60, so the people in India will now have to collect 10 more rupees to buy the same dollar. Let's suppose a pair of shoes in USA costs 40 dollars. Before, Indians needed 2000 rupees to buy it. Now they will need 2400 rupees... it will be more expensive. Plus, the prices of USA had gone up 6%, which means the pair of shoes will now cost 42,4 dollars... even more expensive! As products in USA are more expensive, we can expect that India's consumption of American goods will decrease (law of demand).

With the American consumption of Indian goods happens the opposite, the goods in India became cheaper (price index has fallen), and for the Americans, the same dollars they had will buy more rupees when the exchange rate changed to 60.

3 0
3 years ago
what is the supply chain function that receives inputs from the demand plan to procure materials, equipment, and services?
Salsk061 [2.6K]

Procurement  is the supply chain function that receives inputs from the demand plan to procure materials, equipment, and services.

The process of organizing the many tasks necessary to create and distribute goods and services to a company's clients is known as supply chain management. The transfer of raw materials from the supplier to the producer to the final delivery to the customer is all included in the supply chain. Designing, farming, manufacturing, packaging, and transportation are a few examples of supply chain operations. A supply chain is the entire process of getting a finished good or service to the client. It may be necessary to obtain raw materials, convey them to the production facility, and then deliver the finished products to a customer.

Learn more about supply chain from

brainly.com/question/25160870

#SPJ4

4 0
1 year ago
A company's 2013 year-end balance sheet included the following: Jan. 1 Dec. 31 Accounts Receivable $80,000 $100,000Inventory $60
denis-greek [22]

Answer:

B. $170,000.

Explanation:

X company

statement of cash flow

For the year ended

Net income (balancing) (Note - 1)                                   $170,000

Cash flow from operating activities                      

Depreciation expense                                   $25,000

Increase in account receivable                     $(20,000)

Increase in inventory                                     $(10,000)

decrease in Prepaid Expenses                     $25,000

Decrease in Accounts Payable                     $(20,000)

Increase in Deferred Revenue                      $30,000

<u>Cash flow                                                                                $30,000</u>

Net cash flow from operating activities                              $200,000

Note 1:

Net cash flow from operating activities - Total changes in working capital=                        $200,000-$30,000 = $170,000.

3 0
3 years ago
the financial system consists of financial _____, such as commercial banks, and financial markets, such as the stock market.
vazorg [7]

The financial system consists of financial intermediaries, such as commercial banks, and financial markets, such as the stock market. This is further explained below.

<h3>What are financial intermediaries?</h3>

Generally, financial intermediaries are simply defined as Banks, building societies, and unit-trust companies are all examples of financial intermediaries.

In conclusion, Institutions like commercial banks and marketplaces for trading financial instruments like stocks and bonds make up the financial system.

Read more about financial intermediaries

brainly.com/question/2494552

#SPJ12

5 0
2 years ago
In 1895, the winner of a competition was paid $150. In 2006, the winner's prize was $70,000. What will the winner's prize be in
Jobisdone [24]

Answer:

the price will grow to $ 507,571.77 If it continues with the same grow rate

Explanation:

first we solve for the rate:

2006 - 1895 = 111 years

Nominal (1+r)^{n} = FV\\150 (1+r)^{111} = 70,000\\\\r = \sqrt[111]{70,000 / 150 } -1

r =  0.06  

Now we apply this rate for the year 2040:

2040 - 2006 = 34 years

Principal \: (1+ r)^{time} = Amount

Principal 70,000.00

time 34.00

rate 0.06000

70000 \: (1+ 0.06)^{34} = Amount

Amount 507,571.77

6 0
3 years ago
Other questions:
  • Xavier, a recent college graduate, is thinking of investing in a home health care business. he believes this will be a profitabl
    13·1 answer
  • What seems to be the overall result of government laws on wages?
    10·1 answer
  • Complete the following sentence. ​If, as the price of orange juice decreases​, the quantity of grapefruit juice that people buy
    10·1 answer
  • Support this statement using complete sentences: “Constructive criticism is offered in a way that encourages growth and learning
    13·1 answer
  • BP's expansion plans were reduced, and its ability to compete with other large multinational oil companies like____ became limit
    6·1 answer
  • When Karin’s supervisor asks about her work load she says it is fine. In actuality, she spends much of her time on personal call
    7·2 answers
  • Stone Co. began operations in year 3 and reported $225,000 in income before income taxes for the year. Stone's year 3 tax deprec
    14·1 answer
  • Click to review the online content. Then answer the question(s) below, using complete sentences. Scroll down to view additional
    8·2 answers
  • In cultures that are high in uncertainty avoidance,————-
    8·1 answer
  • Ursa Major Solar uses Opportunity to track sales of solar energy products. The company has two separate sales teams that focus o
    8·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!