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pav-90 [236]
3 years ago
15

Cullumber Corp. paid a dividend of $2.44 yesterday. The company’s dividend is expected to grow at a steady rate of 5 percent for

the foreseeable future. If investors in stocks of companies like Cullumber require a rate of return of 25 percent, what should be the market price of Cullumber stock? (Round dividend to 3 decimal places, e.g. 3.756 and round final answer to 2 decimal places, e.g. 15.25.)
Business
2 answers:
Y_Kistochka [10]3 years ago
8 0

Answer:

The market price is $12.81 per share.

Explanation:

The price of the stock today can be calculated using the constant growth model of DDM as the dividends are expected to grow at a constant rate. The formula to calculate the price of the stock under constant growth model is,

P0 = D1 / r-g

Where,

  • D1 is the Dividend for the next period or D0 * (1+g)
  • r is the required rate of return
  • g is the growth rate in dividends

P0 = 2.44 * (1+0.05)  /  (0.25 - 0.05)

P0 = $12.81

solong [7]3 years ago
4 0

Answer:

The market price of Cullumber stock should be $12.81.

Explanation:

To calculate the market price of Cullumber stock, we use the dividend discount model (DDM) formula stated as follows:

P = Next year dividend ÷ (r - g) ................................ (1)

Where,

P = stock market price = ?

Next year dividend = Do × (1 + 0.05) = $2.44  × 1.05 = $2.562

r = required return = 25% = 0.25

g = dividend growth rate = 5% = 0.05

These above values are now substituted into equation (1) as follows:

P = $2.562 ÷ (0.25 - 0.05) = $2.562 ÷ 0.20 = $12.81

Therefore, the market price of Cullumber stock should be $12.81.

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Explanation:

It is given that in the market there are four equal-sized firms that produce similar products. The market is saturated such that 10% industry-wide price rise would lead to 18% decline in units sold by all firms in the industry. Going further, there is a proposed legislation that imposes a tariff on a key input used by the industry, which on realization would result in the increase in marginal cost by $2.

This means that the market elasticity of demand is:

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3 years ago
Students who choose to attend a technical school will likely go to work in
Nana76 [90]

Most time, the students who choose to attend a technical school will likely go to work in the trade.

<h3>What is a technical school?</h3>

This refers to the schools are also known as technical colleges or institutes and offer an education that prepares students for a specific trade or career.

Most time, its issues a certification after studying a course that teaches certain education courses based on an occupational skill.

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5 0
1 year ago
Tanner-UNF Corporation acquired as a long-term investment $170 million of 6% bonds, dated July 1, on July 1, 2013. Company manag
Neporo4naja [7]

Answer:

1) The Investment would be classified as Held-to-maturity securities

2) Journal Entries (in millions)

Debit Investment $170 Credit Bank $140 Credit Discount on investment $30

3) Debit Bank $5.1 Debit Discount on investment $0.5 Credit Interest Income $5.6

4) Debit Fair Value loss $20 Credit Investment $20

5) The investment will be reported at the fair value of $150,000

6) Debit Bank $120 Debit Discount on Investment $29.5 Loss on Investment $0.5 Credit Investment $150,000  

Explanation:

Interest = investment * semiannual interest

6%/2 = 3%

8%/2 = 4%

Bank = $170,000,000*3% = $5,100,000

Interest income = $140,000,000*4%= $5,600,000

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4 0
2 years ago
When using a subsidiary ledger, the accounts receivable account in the general ledger is called the _______ account?
vazorg [7]
Its not receveable for sure already to the test and got it wrong
7 0
3 years ago
Read 2 more answers
A bond has a Duration (not Modified) of 4.2 years and is priced at 99.50. Its yield is 3%. How much will its price change if the
saw5 [17]

Answer:

1.22%

Explanation:

The modified duration of the bond gives an indication of change in price due to a 1% change in the yield to maturity,hence, the bond modified duration is computed using the formula below:

modified duration=Macaulay Duration/(1+YTM)

Macaulay Duration=4.2

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That for 1% change in yield to maturity price would change 4.08%

0.3% change in yield(3.3%-3%)= 4.08%*0.3%=1.22%

4 0
2 years ago
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