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ahrayia [7]
3 years ago
7

The Delta Manufacturing Company has a marginal tax rate of 21 %. The last dividend paid by Delta was $2.60. The expected long-ru

n growth rate is 4%. If investors require 11% rate of return, what is the current price of the stock (P0)?
Business
1 answer:
Musya8 [376]3 years ago
5 0

Answer:

The stock price is 38.63

Explanation:

We use the gordon model to calculate the horizon value and with htat the value of the stock:

\frac{D_1}{r-g} = PV\\\frac{D_0(1+g)}{r-g} = PV\\

D1 = 2.60 x 1.04 = 2.704

rate of return 11% = 0.11

grow rate = 4% = 0.04

\frac{2.704}{0.11-0.04} = PV\\

P0 = 38.62857143

The taxes should be ignored as the gordon model do not include them in the calculations

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True

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3 years ago
If the market for corporate control were efficient as a governance device, then only __________ would be targets for takeovers.
CaHeK987 [17]

Answer:

The correct answer is c. poorly performing firms.

Explanation:

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The weakness shown by corporate governments of large organizations in the past has multiplied the demands for transparency, truthfulness, good practices and responsible business behavior on the part of investors, consumers and society in general, which not only pay attention anymore. to financial indicators, but they also want to know how those results have been achieved.

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The potential sales that will be generated by a customer if the customer remains loyal to that company for a lifetime are referr
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I hope it helped you!
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Grandin Inc. is evaluating its dividend policy. It has a capital budget of $625,000, and it wants to maintain a target capital s
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Answer:

47.37%

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The capital budget is $625,000 out of which 40% is equity and the rest 60% is debt. The company forecasts the net income for the year to be $475,000. Grandin Inc. follows residual dividend policy and pays out all the residual income to its shareholders as dividend.

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