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ikadub [295]
3 years ago
13

Hi-Tek is a young start-up company. No dividends will be paid on the stock over the next 15 years, because the firm needs to plo

w back its earnings to fuel growth. The company plans to pay a $6 per share dividend in 16 years and will increase the dividend by 4 percent per year thereafter. What is the current share price if the required return on this stock is 16 percent?
A. $5.62.
B. $8.59.
C. $5.40.
D. $50.00.
Business
1 answer:
Zolol [24]3 years ago
4 0

Answer:

current share price = $5.40

so correct option is C. $5.40

Explanation:

given data

dividends paid = 15 years

pay = $6 per share

increase = 4%

to find out

current share price

solution

we know that Value after year 15 will be = ( D15 × Growth rate) ÷ (required return - growth rate)     ......................1

put here value

Value after year 15 = \frac{6*(1+0.4)}{0.16 - 0.04}

Value after year 15 = $52

so here  current share price will be

current share price  = Future dividends × Present value of discounting factor

current share price = \frac{6}{(1+0.16)^{16}}+\frac{52}{(1+0.16)^{16}}

current share price = $5.40

so correct option is C. $5.40

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7 0
2 years ago
A stock is expected to return 8% in a normal economy, 12% if the economy booms, and lose 3% if the economy moves into a recessio
JulijaS [17]

Answer: 6.91%

Explanation:

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= (56% * 8%) + (12% * 25%) + (19% * -3%)

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8 0
3 years ago
The right to sell a good or service within an exclusive market is a _____.
dem82 [27]

Answer:

franchise

Explanation:

The right to sell a good or service within an exclusive market is a _____.

 

franchise

 

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3 0
2 years ago
A __________ inventory system is a small, wheeled container used in a just-in-time inventory system to move component parts from
STatiana [176]

Answer:

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Explanation:

Kanban inventory system -

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The Kanban system enables to give indication for reordering or rearrange the stock  .

Hence , from the given information of the question ,

The correct answer is Kanban inventory system .

7 0
3 years ago
"A new issue corporate bond with dated date of June 1st is bought from the underwriter with settlement occurring on Monday, June
Tema [17]

Answer:

27 days

Explanation:

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4 0
3 years ago
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