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Lelechka [254]
3 years ago
11

City Foods, is a firm that is experiencing rapid growth. The firm just paid a dividend of $2.00 yesterday. They expect to see th

eir dividend grow at a twenty percent rate for the next two years and then level out at a continuous six percent growth rate. City Food's required rate of return is twelve percent. What is the most you would pay for City Foods' common stock now
Business
1 answer:
slega [8]3 years ago
5 0

Answer:

The maximum that should be paid for the stock today is $45 per share.

Explanation:

To calculate the current share price or the maximum that should be paid for the stock today, we will use the dividend discount model approach.

The dividend discount model (DDM) estimates the value of a share/stock based on the present value of the expected future dividends from the stock. We will use the two stage growth model of DDM here as the growth in dividends of the stock is divided into two stages.

The formula for current price under two stage growth model is,

P0 = D0 * (1+g1) / (1+r)  +  D0 * (1+g1)^2 / (1+r)^2 + ... + D0 * (1+g1)^n / (1+r)^n  +

[( D0 * (1+g1)^n * (1+g2)) / (r - g2)] / (1+r)^n

Where,

g1 is initial growth rate

g2 is the constant growth rate

r is the required rate of return

So, the price of the stock today will be,

P0 = 2 * (1+0.20) / (1+0.12)  +  2 * (1+0.20)^2 / (1+0.12)^2  +    

[( 2 * (1+0.20)^2 * (1+0.06)) / (0.12 - 0.06)] / (1+0.12)^2

P0 = $45

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nikdorinn [45]

Answer:

3.69%

Explanation:

The formula to compute the required rate of return is shown below:

=  (Annual dividend per year) ÷ (Current selling price per share) × 100

= ($2.85) ÷ ($77.32) × 100

= 3.69%

We simply divide the annual dividend per year with the current selling price per share and then multiply it by  percentage, so that the required rate of return can come in percentage

7 0
3 years ago
Marginal cost is the: a. rate of change in total fixed cost that results from producing one more unit of output. b. change in to
poizon [28]

Answer:

b. change in total cost that results from producing one more unit of output.

Explanation:

<em>Marginal cost is the increase in in total cost as a result of producing one more additional unit. It is the extra cost incurred when an additional unit of a product is produced.</em>

5 0
3 years ago
Read 2 more answers
A registered representative sells 1,000 shares of ABC for a customer at $30 per share, the current market price, with instructio
den301095 [7]

Answer:

is right and the registered representative must reimburse the total proceeds from the transaction.

Explanation:

The customer's 1,000 shares "multiplied" to 1,500 shares since ABC split its stock. For every 2 ABC stocks, the stockholders received 3, and the customer should receive (1,000 / 2) x 3 = 1,500. The total value of the customer's stock didn't change since each stock instead of selling at $30, is now worth $20. The problem is that the RR paid the customer only for the original 1,000 stocks, not the 1,500.

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Which best describes an investor’s primary goal?
tigry1 [53]
An investors primary goal is to make money. More specifically, money that is greater than the sum amount initially invested.
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For a new Madden video game, EA Sports decides to have Patrick Mahomes on the cover and run an ad campaign on ESPN. After the ad
Masteriza [31]

The process that EA Sports carried out with the cover of the Madden video game was Perception Marketing.

<h3>What is perception marketing?</h3>

Perception marketing is an economic term that refers to the set of marketing strategies focused on the consumer's perception of a specific product.

In general, perception marketing is responsible for modifying the image of the product so that it is the one that looks best compared to its competitors and thus generates a good perception in consumers.

According to the above, EA Sports used the image of a famous person so that consumers had a positive perception of their video game.

Learn more about marketing in: brainly.com/question/13414268

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6 0
2 years ago
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