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bezimeni [28]
3 years ago
6

Juggernaut Satellite Corporation earned $18.5 million for the fiscal year ending yesterday. The firm also paid out 40 percent of

its earnings as dividends yesterday. The firm will continue to pay out 40 percent of its earnings as annual, end-of-year dividends. The remaining 60 percent of earnings is retained by the company for use in projects. The company has 2 million shares of common stock outstanding. The current stock price is $80. The historical return on equity (ROE) of 14 percent is expected to continue in the future.
What is the required rate of return on the stock?
Business
1 answer:
Stella [2.4K]3 years ago
6 0

Answer:

13.41%

Explanation:

Last Year:  Earnings = $18,500,000

Shares Outstanding = 2,000,000

Earnings per share = Earnings / Shares Outstanding

= $18,500,000 / 2,000,000

= $9.25

Dividend per share, D0 = Earnings per share * Payout Ratio

Dividend per share, D0 = $9.25 * 40%

Dividend per share, D0 = $3.70

Retention Ratio  = 60%

Return on Equity = 14%

Growth Rate, g = Return on Equity  * Retention ratio

Growth Rate, g = 14% * 0.60

Growth Rate, g = 8.40%

Current Price, P0 = $80.00

Next Year:  Dividend per share, D1 = D0 * (1 + g)

Dividend per share, D1 = $3.70 * (1 + 8.40%)

Dividend per share, D1 = $3.70 * 1.084

Dividend per share, D1 = $4.0108

Required Rate of Return = D1 / P0 + g

= $4.0108 / $80.00 + 0.0840

= 0.0501 + 0.0840

= 0.1341

= 13.41%

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In organizations functioning with reciprocal interdependence, the various departments have to form strong interwoven relationship to increase effectiveness and productivity.

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Explanation:

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6 0
3 years ago
$82 Using the incremental method, what amount of revenue will be allocated to Math Fun in the package that contains all three pr
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Answer:

$28.62

Explanation:

Calculation to determine what amount of revenue will be allocated to Math Fun in the package that contains all three products

First step is to calculate the Total revenue of three product if sold individually

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Now let calculate the allocation of revenue to Math fun based on revenue proportion

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