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]
4 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]4 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]4 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
Page 576 14.3. Recent Changes in Capitalism This animation explores different reasons why people work long hours even when their
kondaur [170]

Answer:

The summary including its perceived task is demonstrated in the following segment on the interpretation.

Explanation:

  • The further you pay, then you pass up to make a change from generating income. This would be called opportunity cost since taking a short break is losing the chance to go somewhere else (i.e. gain further extra cash).
  • This is much less the continuation of something like a withheld opportunity than that of the recovery on the alternative you picked.
6 0
3 years ago
Select the correct answer from the drop-down menu
iragen [17]

Answer:

What to produce?

Explanation:

A society has to make choices in order to meet the diverse needs of its members. The resources available in all economies are insufficient to meet all needs. Because of this scarcity, a society has to make informed decisions on what to produce at any given.  

Societies make choices on what to produce with the available resource. In every decision, there is a sacrifice to be made.

8 0
3 years ago
The mass culture theory results from viewing cinema as a(n)? economic institution. social institution. technological institution
Vadim26 [7]

The mass culture theory result from viewing cinema as a social institution.

Films that are widely disseminated and accessible can readily reach popular culture or mass culture.

Institutions in the theater or, more broadly, the arts have traditionally been on the front lines of managing societal crises or revolutions. Theatres serve as first responders, metaphorically, by providing locations and settings for enlarged depictions of the risks and challenges that society faces.

MASS CULTURE: Typically, the term "mass culture" refers to a culture that results from the centralized production methods used by the mass media.

The mass culture theory result from viewing cinema as a social institution.

To learn more about mass culture as a social institution, visit the following link:

brainly.com/question/16273365

#SPJ4

7 0
2 years ago
For insight into a government agency's understanding of the laws it administers, one should consult:
AfilCa [17]

Answer:

The agency's interpretive rules.

Explanation:

An interpretive rule can be defined as a document issued by an agency so as to help expound or clarify existing administrative laws, regulations and statutes in the public domain.

Basically, an interpretive rule is not required to meet the minimum requirements or criteria specified by the Administrative Procedure Act (APA). Also, an interpretive rule is not considered as a force of law because it is not binding on the general public.

Hence, for insight into a government agency's understanding of the laws it administers, one should consult the agency's interpretive rules for an explanation on the law and regulations it promulgated,

4 0
3 years ago
Abc company is hesitant about entering ukraine, because the country has been experiencing social unrest in recent years. Based o
AysviL [449]

The answer is<u> "political risk".</u>


Political risk is among the most critical hazard factors confronting international investors. In many rising and frontier markets, the political circumstance is altogether less steady than the United States with the potential for across the board extortion and defilement.  

Political risks  are those related with changes that jump out at a nation's approaches administering organizations, and additionally outside elements that could influence organizations.

7 0
3 years ago
Other questions:
  • In an agreement between a supplier and a customer, the supplier must ensure that all parts are within tolerance before shipment
    9·1 answer
  • Iota Inc. has a freewheeling culture, whereas Axiom Inc. has a culture based on structure and discipline. The merger of these tw
    11·1 answer
  • Assume that the nominal spot exchange rate (USD/EUR) increases by 7.5%, the eurozone price level decreases by 4%, and the US pri
    10·1 answer
  • Item 7Item 7 Orange Inc. offers a discount on an extended warranty on its oPhone when the warranty is purchased at the time the
    9·1 answer
  • Cortez Company sells chairs that are used at computer stations. Its beginning inventory of chairs was 100 units at $60 per unit.
    11·1 answer
  • Brianna is giving a speech on job specialization for her business class. She will most likely tell the class that one of the rea
    15·1 answer
  • Mara and Jade are part of a team at Citrus Inc. The team has an eight-hour work shift, and the team members have to report to th
    5·1 answer
  • A project activity has an earliest completion time of 5, an activity time of 3, and a latest completion time of 6. What is the s
    9·1 answer
  • The following information is available for the Johnson Corporation:
    5·1 answer
  • Earnings per share (EPS) equals ______ divided by the average shares of common stock outstanding. (Assume no preferred stock has
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!