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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

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Yes, It would be advantageous for wynn manufacturing corporation if the cranston division makes the investment under consideration.

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2 years ago
For most normal goods the income effect and the substitution effect work in the same direction; so when the price of a good fall
bezimeni [28]

Answer:

The income effect and substitution effect work in opposite directions and income effect is dominant.

Explanation:

In case of a normal good, both the income effect as well as substitution effect work in the same direction. A fall in the price of a product will increase the purchasing power of the consumer so its quantity demanded will increase.  

The consumers will also prefer the cheaper good so the substitution effect will cause the quantity demanded to increase.  

In case of an inferior good, however, income elasticity is negative. The income effect and substitution effect work in opposite directions.  

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Answer:

d. Both Ted and Kate are entitled to the dividend.

Explanation:

There are 3 important dates when a corporation declares a dividend:

  1. The declaration date: in this case June 20th. It is the date when the corporation declares that it will pay a certain cash dividend.
  2. The date of record: the date of record is one day after the ex-dividend date, which means that the stockholders that the stock until the ex-dividend date will be entitled to receive the dividend. The stockholders that purchase the stock on the record date or any date after the ex-dividend date, will not be entitled to receive the dividend. In this case, the ex-dividend date was July 11th, and both Ted and Kate purchased the stocks before that date.
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Answer:

<u>Sales Dialogue.</u>

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Encouraging the buyer to provide feedback is an effective sales dialogue strategy, which focuses on creating value for the buyer, as creating value for a customer is related to the customer's ability to exercise his opinion about the product or the purchasing process, in addition to feeling valued and improving the perception of the company, which values ​​the feedback of its customers.

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