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swat32
3 years ago
14

Jessica's Pharmacy made two announcements concerning their common stock today. First, the company announced the next annual divi

dend will be $1.48 a share. Secondly, all dividends after that will increase by 2.5 percent annually. What is the maximum amount you should pay to purchase a share of this stock if your goal is to earn a 12 percent rate of return?
Business
1 answer:
Tcecarenko [31]3 years ago
8 0

Answer:

Explanation:

Next year's dividend (D1) = 1.48

Perpetual growth rate (g) =2.5% or 0.025 as a decimal

Rate of return or discount rate = 12% or 0.12 as a decimal

Since the dividends will be growing at a constant rate with no definite time period, it means that it will grow at that rate forever.

Use present value of growing perpetuity formula to calculate the price of this stock;

Price = D1 /(r-g)

Price = 1.48 / (0.12 - 0.025)

= 1.48/ 0.095

= 15.5789

Therefore the maximum amount you should pay is $15.58

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A sporting equipment store expects to purchase $7,800 of ski boots in October. The store had $3,800 of ski boots in merchandise
Maksim231197 [3]

Answer:

Cost of goods sold = $8,800

Explanation:

<em>The cost of goods is represents amount incurred to make available  what has been sold. It is computed as follows:</em>

<em>Cost of goods sold = opening stock + purchases - closing inventory</em>

It is useful to determine the cost of goods so as to calculate the gross profit margin. The gross profit is the sales revenue less cost of goods sold.

So we can compute same for the sporting equipment store as follows:

Cost of goods sold = 3,800 + 7,800 - 2,800

= $8,800

Cost of goods sold = $8,800

5 0
3 years ago
Borghia Pharmaceuticals has $1 million allocated for capital expenditures. a. Which of the following projects should the company
balu736 [363]

Answer:

Please refer below the answer in detail

Explanation:

a)

With a limited budget, the firm will first pursue projects with the highest return, and the allocate the remaining capital to the project with the second highest return, and so on until all capital is fully allocated. Based on the information, Project 6 has the highest return, followed by 1 and 3. These three projects together will cost:

350,000 + 300,000 + 250,000 = $900,000

After those three projects, the firm will have $100,000 left. The best out of remaining project is 7, but it costs 400,000, which the firm cannot afford. The best affordable project is 4, which offers a return of 12.1%. Hence, the firm should spend the remaining 100,000 on project 4.

b)

The budget limit constraints the firm to give up project 7, which offers a NPV of $48,000. The firm is forced to choose project 4, which has a NPV of $14,000.

Thus the lost in market value of the firm = 48,000 - 14,000 = $34,000.

4 0
3 years ago
Transactions that affect earnings do not necessarily affect cash. Identify the effect, if any, that each of the following transa
KengaRu [80]

Answer:

Kindly see attached organized table for clarity.

                                                                 Item cash      Net income

a  Purchase of Supplies of cash                 -$133                   -

b  Adjusting entry for use of supplies            -                     -$31

c  Made sales on account                               -                   $1,297

d Received cash from customer on acct   $865                  -

e  Purchased equipment for cash             -$2,528                -

f   Depreciation of building to be recorded     -                  -$610

4 0
3 years ago
Rina is training for a triathlon, a timed race that combines swimming, biking, and running. Consider the following sentence: Rin
White raven [17]

Answer:

The answer is: B) People face trade-offs

Explanation:

A trade-off happens when you have to balance two (or three in this case) opposing situations.

Rina has to decide how to divide the time she can spend training. If she chooses to do one activity, she can´t do the other. So she has to balance the time spent on each activity, probably depending on which sport she needs to train the most.

8 0
3 years ago
A group of teens in your town meet and agree to charge a flat fee of five dollars per hour for babysitting. They charge the same
swat32

Answer:

a monopoly

Explanation:

6 0
3 years ago
Read 2 more answers
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