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3 years ago

Which of the following assumptions is embodied in the AFN equation?

Business

1 answer:

aleksandr82 [10.1K]3 years ago

8 0

Answer:

d. Accounts payable and accruals are tied directly to sales.

Explanation:

Additional funds needed method determines the amount that the company needs to finance the increase in total sales.

In response to the increase in sales, the company has to increase its assets to achieve that goal. The increase in total assets is partly offset by an increase in liabilities and the other part is offset by an increase in retained earnings.

The only true statement of the AFN equation is the option d), and the other options are not right.

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3 years ago

A stock just paid an annual dividend of $1.8. The dividend is expected to grow by 8% per year for the next 3 years. The growth r

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Answer:

The current stock price is $28.71

The current stock price is $149.15

Explanation:

We need to calculate the present value of the dividends with each growth

First calculate the dividend each year

Year _________________________ Dividend

1 _____( $1.8 x ( 1 + 8% )^1__________ $1.9440

2_____( $1.8 x ( 1 + 8% )^2__________ $1.1664

3_____( $1.8 x ( 1 + 8% )^3__________ $2.2675

4_____( $2.2675 x ( 1 + 7% )________ $2.4262

5_____( $2.4262 x ( 1 + 6% )________ $2.5718

6_____( $2.5718 x ( 1 + 5% )_________ $2.7004

Calculate the present value of each years dividend

Year _________________________ present value

1 _____( $1.9440 / ( 1 + 12% )^1 __________ $2.1773

2_____$1.1664 / ( 1 + 12% )^2___________ $0.9298

3_____$2.2675 / ( 1 + 12% )^3___________$0.7118

4_____$2.4262 / ( 1 + 12% )^4___________$1.5419

5_____$2.5718 / ( 1 + 12% )^5___________ $1.4593

6_____$2.7004 / ( 12% - 5% ) / ( 1 + 12% )^5_$21.8897

Total _____________________________ $28.7098

Hence priec of the stock is $28.71

First calculate dividend of Year 6

Dividend = EPS x Payout ratio = 23 x 80% = $18.40

Present value = $18.4 / ( 12% - 5% ) / ( 1 + 12% )^5 = $149.15

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<h3>What is a decision-making process?</h3>

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The next step that is to be taken in the decision-making process is to analyze the resources that can be accessed by such person so that a conclusion is derived.

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