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
morpeh [17]
3 years ago
6

Microsoft presently pays no dividend. You anticipate Microsoft will pay an annual dividend of $0.60 per share two years from tod

ay and you expect dividends to grow by 4% per year thereafter. IF Microsoft's equity cost of capital is 12%, then the value of a share of Microosfoft today is:
Business
2 answers:
Scorpion4ik [409]3 years ago
7 0

Answer:

The value of this stock today should be $6.22

Explanation:

The company will start paying dividends 2 years from today that is at t=2. The dividends received 2 years from today can be denoted as D2. The constant growth model of DDM will be used to calculate the price of this stock at t=2 as the growth rate in dividends is constant forever.

The price at t=2 will then be discounted back to its present value today to calculate the price of this stock today.

The price of this stock at t=2 will be,

P2 = D2 * (1+g) / (r - g)

P2 = 0.6 * (1+0.04)  /  (0.12 - 0.04)

P2 = $7.8

The value of this stock today should be,

P0 = 7.8 / (1+0.12)^2

P0 = $6.218 ROUNDED OFF TO $6.22

LuckyWell [14K]3 years ago
3 0

Answer:

Price of share = $ 0.6696

Explanation:

<em>According to the dividend valuation model , the current price of a stock is the present value of the expected future dividends discounted at the required rate of return</em>

This principle can be applied as follows:

Year 2  0.60× 1.12^(-2) = $0.04783

PV of year of year 3 onward

This will  done in two steps:

Step 1

Calculate the PV of dividend in year 2 terms

= 0.60× 1.04 /(0.12-0.04) = $0.78

Step 2

Re-discount the PV (in year 2) to year 0

0.78 × 1.12 ^(-2) = 0.621811224

Price of share

=0.04783 +0.621811

=$ 0.6696

You might be interested in
Karen is designing a process for issuing checks and decides that one group of users will have the authority to create new payees
Nataly [62]

Answer:

D. Separation of Duties

Explanation:

Separation of duties also know as segregation of duties refuses that one person he responsible of acquisition of assets, their custody and related record keeping. The process in which Karen is using to prevent fund by separating individuals who as the authority to issue checks is known as separation of duties. It is a form of internal control aimed at reducing risk of errors and frauds.

4 0
3 years ago
One Chicago has just introduced a new single stock futures contract on the stock of Brandex, a company that currently pays no di
bekas [8.4K]

Answer:

A: $127.2

B: $123.384, $3.816 per share and $3,816 per contract

C: 9.43%

Explanation:

A: Futures price

F° = S° (1 + rₙ) = $120 x 1.06

= $127.20

B: Change in Future Price and Investor Margin account:

New Spot = $120 (1 – 0.03)

= $120 x 0.97

= $116.40

New Futures = $116.40 (1.06)

= $123.384

The long investor loses = $127.20 - $123.384

= $3.816 per share

or $3.816 (1,000) = $3,816 per contract

C: Percentage return on the investor’s position:

Percentage return = $12,000 / $127,200

= 9.43%

5 0
3 years ago
An asset has had an arithmetic return of 10.3 percent and a geometric return of 8.3 percent over the last 90 years. What return
Art [367]

Answer:

Blume's formula combines the geometric and arithmetic means of an asset to be able to predict its returns in a given period.

The formula is;

<em>= Geometric Mean*(T-1)/(N-1) + Arithmatic Mean *(N-T)/(N-1) </em>

Where;

T = Period in question

N = Total period

10 years

= 8.3%*(10-1)/(90-1) + 10.3%*(90-10)/(90-1)

= 10.1 %

25 years

= 8.3%*(25-1)/(90-1) + 10.3%*(90-25)/(90-1)

= 9.76%

30 years

= 8.3%*(30-1)/(90-1) + 10.3%*(90-30)/(90-1)

= 9.65%

4 0
3 years ago
What is an exclusive right of a person or company to reproduce, publish, or sell a creative work?
marshall27 [118]
The answer is copyright
6 0
3 years ago
Read 2 more answers
13. The primary difference between GDP and Real GDP is
professor190 [17]

Answer:

I think option D is correct

3 0
3 years ago
Other questions:
  • Buildtron inc., a construction firm, is in need of a construction superintendent, whose primary responsibilities involve organiz
    15·1 answer
  • Assume the United States can use a given amount of its resources to produce either 20 airplanes or 8 automobiles and Japan can e
    6·1 answer
  • Florida Berry Basket harvests early-season strawberries for shipment throughout the eastern United States in March. The strawber
    14·1 answer
  • an invesment adviser i slooking to offer advisory services to new clients. which statement is true regarding delivery of form ad
    12·1 answer
  • A local pizzeria sells 500 large pepperoni pizzas per week at a price of $20 each. Suppose the owner of the pizzeria tells you t
    8·1 answer
  • Riverside Ranch is a horse breeding facility. Dynasty Stables is a customer looking for a new stallion for its breeding program.
    5·1 answer
  • Explain the limitations of statistics
    7·1 answer
  • Name at least four consumer rights.Does a homeowner's insurance policy cover the damage done from a house fire?
    7·2 answers
  • Typical insurance plans that companies offer to their employees and sometimes pay a significant portion of the monthly costs are
    5·1 answer
  • What is the npv of the following cash flows if the required rate of return is 0.14? year 0 1 2 3 4 cf -4,506 3,099 531 3,560 2,7
    9·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!