1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Harlamova29_29 [7]
3 years ago
13

A firm pays a current dividend of $1, which is expected to grow at a rate of 5% indefinitely. If the current value of the firm’s

shares is $35, what is the required return applicable to the investment based on the constant-growth dividend discount model (DDM)? (Do not round intermediate calculations.)
Business
1 answer:
ArbitrLikvidat [17]3 years ago
6 0

Answer:

Required rate of return = 8%

Explanation:

<em>The price of a stock using the dividend valuation model is the present value of the the future dividend expected from the stock discounted at the required rate of return. </em>

This model is represented as follows

D(1+g)/(r-g) = P

Price, D- dividend payable in now, ke- required rate of return, g- growth rate

35 = 1×(1.05)/ke-0.05

35 × (ke-0.05) = 1.05

35ke - 1.75 = 1.05

35Ke = 1.05 + 1.75

35ke = 2.8

ke= 2.8/35= 0.08

Ke = 0.08× 100 = 8%

Required rate of return = 8%

You might be interested in
What is your credit score based on
GalinKa [24]

Answer:

FICO Scores are calculated using many different pieces of credit data in your credit report. This data is grouped into five categories: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and credit mix (10%).

7 0
3 years ago
Read 2 more answers
Pollution control equipment for a pulverized coal cyclone furnace is expected to cost $190,000 two years from now and another $1
alexandr1967 [171]

Answer:

$212,882.75

Explanation:

Cost from 2 years now = $190,000

Cost from 9 years now = $120,000

Interest rate = 9% Quarterly

Present Worth = Cost from 2 years now*[1/(1+interest/m)^nm] * Cost from 2 years now*[1/(1+interest/m)^nm]

Present Worth = 190,000*[1/(1+0.09/4)^2*4] + 120,000*[1/(1+0.09/4)^9*4]

Present Worth = 190,000*[1/(1.0225)^8] + 120,000*[1/(1.0225)^36]

Present Worth = 190,000*[1/1.19483] + 120,000*[1/2.22782]

Present Worth = 190,000*0.83693915 + 120,000*0.4488693

Present Worth = 159018.4385 + 53864.316

Present Worth = 212882.7545

Present Worth = $212,882.75

Thus, the amount to invest to cover these cost is $212,882.75

5 0
2 years ago
Shelley’s Salsa produces and sells organic salsa. Last year it sold 3 million tubs of salsa at a price of $3 per tub. For last y
Murrr4er [49]

Answer: Option B

Explanation:

A. Explicit cost are the cost paid to others in return of their service. Hence Option A is incorrect.

B. Revenue is the total amount of earnings a company have before deducting for expenses. Hence Option B is correct.

C. Accounting profit means (Revenue - explicit cost) . Hence Option C is incorrect.

D. Economic profit means (Revenue - explicit cost - implicit cost) . Hence Option  D is incorrect.

6 0
3 years ago
on june 19, a u.s. company sold and delivered merchandise on a 30-day account to a german corporation for 190,000 euros. on july
Lesechka [4]

On June 19 the accounts receivable should be recorded at the spot rate: $228,190 ($190,000 Euros * $1.201), which is the rate at which the Euro and the US Dollar were being exchanged at the time.

Many US-based enterprises sell goods to companies abroad. Depending on the discussions and the circumstances surrounding the sale, these sales may be made in US dollars or in another currency. If the sale is made in a foreign currency, the US-based company will be responsible for any fluctuations in the exchange rate from the time the sale and receivable are recorded until the time the foreign currency is paid for the related foreign currency-related receivable.

The accounts receivable should be recorded (converted from Euros to US Dollars) at the spot rate on June 19: 190,000 Euros * $1.201, which is the exchange rate at that time between the Euro and the US Dollar, equals $228,190.

To learn more about Accounts Receivables, refer to this link:

brainly.com/question/14032135

#SPJ4

8 0
1 year ago
When countries sell off state-owned enterprises and privatize them, it usually results in a(n)A. continuing drain on future natu
babymother [125]

Answer:

C. increase in modernization by new investors.

Explanation:

Privatization is the transfer of ownership of property or business owned by government to a private entity.

Privatization generates capital to be invested in strategic areas and help to reduce the continuing drain on future natural resources. The new private investors causes economic growth by modernizing the acquired property or business from the government.

5 0
3 years ago
Other questions:
  • Outsourcing is:
    6·1 answer
  • Eaton Tool Company has fixed costs of $340,400, sells its units for $80, and has variable costs of $43 per unit. a. Compute the
    12·1 answer
  • Organizations can become "bad barrels" because ​ a. they do not allow employees to pursue their own individual values. b. the pr
    8·1 answer
  • Moody Corporation uses a job-order costing system with a plantwide predetermined overhead rate based on machine-hours. At the be
    7·1 answer
  • Explain one way an entrepreneur might identify a new business idea
    15·1 answer
  • As the supply of Blu-Ray players has increased over the years and the price of Blu-Ray players has dropped, the _____.
    7·1 answer
  • If you purchase a straddle on euros, this implies that you: A) finance the purchase of a call option by selling a put option in
    6·1 answer
  • How does the mode of collaborating (e.g., strategic alliance, joint venture, licensing, outsourcing, collective research organiz
    10·1 answer
  • For the backpack buyer, note the importance of each of the five main characteristics under PREFERENCES and consider each in term
    10·1 answer
  • How are disruptive technologies driving the face of entrepreneurship?
    5·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!