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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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What is the duty of the designated rbs certified person at a non-profit organization's temporary alcohol event?
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4 0
2 years ago
The ending inventory of finished goods for each quarter should equal 25% of the next quarter's budgeted sales in units. The fini
saveliy_v [14]

Answer:

Production for 2nd Quarter = 15,000  units

Explanation:

given data

ending inventory of finished goods = 25 %

finished goods inventory at year start =  4,000 units

so we consider here Quarter sales in unit  

1 = 12,000

2 = 14,000

3 = 18,000

4 = 16,000

solution

we get here Production for 2nd Quarter  that is

Production for 2nd Quarter = Quarter 2 sale + Desired Q2 ending inventory - Beginning Q2 inventory  ...................1

so it will be as

Production for 2nd Quarter = Quarter 2 sale + (25% of Q3 Sale) - (25% of Q2 sale)

put here value

Production for 2nd Quarter = 14000 + (18000 × 25%) - (14000 × 25%)

Production for 2nd Quarter = 14000 + 4500 - 3500

Production for 2nd Quarter = 15,000  units

3 0
3 years ago
Almaden Hardware Store sells two product categories, tools and paint products. Information pertaining to its 2021 year-end inven
docker41 [41]

Answer:

Product category        units           cost          NRV   year-end inventory

Tools:

  • Hammers             120            <u>$5.50</u>        $6.00            $660
  • Saws                    250           $10.50       <u>$9.50</u>          $2,375
  • Screwdrivers       350            <u>$2.50</u>        $3.10             $875

Paint products:

  • 1-gallon cans       550            $6.50        <u>$5.50</u>         $3,025
  • Paint brushes      120             <u>$4.50</u>        $5.00            $540

1) carrying value of year-end inventory:

Tools:                        

  • Hammers               $660
  • Saws                    $2,375
  • Screwdrivers          $875
  • sub-total               $3,910

Paint products:        

  • 1-gallon cans      $3,025
  • Paint brushes        $540
  • sub-total             $3,565

Total                            $7,475

2) adjustment to tools:

Dr Cost of goods sold 250

    Cr Inventory: tools 250

adjustment to paint products:

Dr Cost of goods sold 550

    Cr Inventory: paint products 550

or total adjustment to inventory account:

Dr Cost of goods sold 800

    Cr Inventory 800

5 0
3 years ago
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