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Mashutka [201]
2 years ago
11

You wish to earn a return of 11% on each of two stocks, A and B. Stock A is expected to pay a dividend of $3 in the upcoming yea

r while stock B is expected to pay a dividend of $2 in the upcoming year. The expected growth rate of dividends for both stocks is 4%. Using the constant growth DDM, the intrinsic value of stock A ____________.a. will be higher than the intrinsic value of stock B
b. will be the same as the intrinsic value of stock B
c. will be less than the intrinsic value of stock B
d. more information is necessary to answer this question
Business
1 answer:
Anarel [89]2 years ago
6 0

Answer:

The intrinsic value of A -$44.57 is higher than that of B- $ 29.71

Explanation:

<em>The intrinsic value is the present value of he expected future dividend discounted at he required rate of return.</em>

<em>So, we would work out the intrinsic value of the two stocks using the the formula below:</em>

Intrinsic value  = D× (1+r)/(k-g)

Intrinsic value of stock A

D-3, r-11%, g-4%

= 3 ×(1.04)/(0.11-0.04)

=$44.57

Intrinsic value of stock B

D-2, r-11%, g-4%

= 2 ×(1.04)/(0.11-0.04)

= $29.71

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Answer:

the question is incomplete, so I looked for a similar one:

<em>Alex Karev has taken out a ​$180,000 loan with an annual rate of 11% compounded monthly to pay off hospital bills from his wife​ Izzy's illness. If the most Alex can afford to pay is ​$3,500 per​ month, how long will it take to pay off the​ loan? How long will it take for him to pay off the loan if he can pay $4,000 per​ month?</em>

PVIFA = $180,000 / $3,500 = 51.42857

PVIFA = [1 - 1/(1 + i)ⁿ ] / i = [1 - 1/(1 + 0.11/12)ⁿ] / 0.11/12

51.42857 x 0.11/12 = 1 - 1/(1 + 0.11/12)ⁿ

0.47143 = 1 - 1/(1 + 0.11/12)ⁿ

1/(1 + 0.11/12)ⁿ = 1 - 0.47143 = 0.52857

1 / 0.52857 = (1 + 0.11/12)ⁿ

1.89189 = 1.009167ⁿ

n = log 1.89189 / log 1.009167 = 0.2769 / 0.003963 = 69.87

n = 69.87 months

PVIFA = $180,000 / $4,000 = 45

PVIFA = [1 - 1/(1 + i)ⁿ ] / i = [1 - 1/(1 + 0.11/12)ⁿ] / 0.11/12

45 x 0.11/12 = 1 - 1/(1 + 0.11/12)ⁿ

0.4125 = 1 - 1/(1 + 0.11/12)ⁿ

1/(1 + 0.11/12)ⁿ = 1 - 0.4125 = 0.5875

1 / 0.5875 = (1 + 0.11/12)ⁿ

1.70213 = 1.009167ⁿ

n = log 1.70213 / log 1.009167 = 0.23099 / 0.003963 = 58.29

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4 0
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3. Frontal Lobe

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Based on the information provided within the question it can be said that in this scenario the client is diagnosed with brain tumor which the nurse indicates as being located in the Frontal Lobe. The nurse knows this immediately due to the fact that the Frontal Lobe is the part of the brain that concerns personality, behavior, emotions, and intellectual function. Since the client has undergone personality changes then it can be deduced that the tumor is located in the Frontal Lobe.

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3 years ago
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Answer:

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net income = $320,000 x 34% = $108,800

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An extensive market research and a "successful" marketing campaign are generally expensive. Even if the marketing campaign is really successful in increasing sales, costs would also increase. So the equation may or may not change, depending if the contribution margin of the additional units sold will be able to cover the expenses of a complex marketing campaign. If you spend $100 to earn $100 more, your situation hasn't changed at all. Which means that net income may or may not increase, therefore, the profit margin, ROI and asset turnover may not change.

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3 years ago
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