Answer:
The stock A is most valuable as the fair value of Stock A is $100 which is more than the fair value of Stock B ( $83.33) and Stock C ($34.28).
Explanation:
to calculate the fair price of the stocks, we will use the DDM or dividend discount model. The DDM bases the value of a stock on the present value of the expected future dividends from the stock.
Let r be the discount rate which is 10%.
a.
The stock is like a perpetuity as it pays a constant dividend after equal intervals of time and for an indefinite period.
The price of this stock can be calculated as,
Price or P0 = Dividend / r
P0 = 10 / 0.1 = $100
b.
The constant growth model of DDM can be used to calculate the price of this stock as its dividends are growing at a constant rate forever.
P0 = D1 / r - g
Where,
- D1 is the dividend for the next period
- r is the cost of equity or discount rate
- g is the growth rate in dividends
P0 = 5 / (0.1 - 0.04)
P0 = $83.33
c.
The price of this stock can be calculated using the present of dividends.
P0 = 5 / (1+0.1) + 5 * (1+0.2) / (1+0.1)^2 + 5 * (1+0.2)^2 / (1+0.1)^3 +
5 * (1+0.2)^3 / (1+0.1)^4 + 5 * (1+0.2)^4 / (1+0.1)^5 + 5 * (1+0.2)^5 / (1+0.1)^6
P0 = $34.28
Answer:
The correct answer is option c.
Explanation:
If the demand for a product is elastic the tax burden will be borne by the producer. This is because elastic demand means that an increase in the price will lead to a more than proportionate reduction in the quantity demanded. So with the imposition of a tax, the sellers will not increase the price as it is likely to reduce demand.
If the demand is inelastic, it means that an increase in price will lead to less than a proportionate decrease in the demand. In this situation, after the imposition of tax, the tax burden can be shared between producer and buyer.
The answer is option B. The main challenge of career planning in changing times is that you need to revise your plans often.
The world we live in is dynamic. New inventions, new technology, new methods of doing things always come up with time.
Because of this, when making a career plan, one must be fully aware that the process is not static. That is, changes would occur and as such, you have to revise your plans often so that it is in line with what is obtainable at the time.
<em>Read more on career planning here: brainly.com/question/6457203?referrer=searchResults</em>
