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eduard
3 years ago
12

You are valuing a common stock that just paid a dividend of $1.25 per share. You are expecting the stock to grow at the rate of

4% annually, and the stock to give you a return of 9%. What should be the price of the stock
Business
1 answer:
Agata [3.3K]3 years ago
4 0

Answer:

Price of stock- $26

Explanation:

<em>Using te dividend valuation model, the price of a stock is the present value of the future cash flows expected from the stock discounted at the required rate of return.</em>

Where a stock is expected  to pay dividend growing at a specific rate, the price of the stock can be dertermined as follows:

Price = D(1+g)/(ke-g)

D -dividend payable now,

Ke-required rate of return,

g - growth rate in dividend

So we can work out the price as follows:

Price = 1.25( 1+0.04)/(0.09-0.04)

      = $26

Price =$26

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D. Slide transition I believe.
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2 years ago
Cavincare has 50 years remaining on a service contract with Martin, Inc. Today, Martin paid $120,000 for services received last
Leokris [45]

Answer:

$980,879

Explanation:

Recall that

PVAn = (CF1 / (i - g)) × [1 - ((1+g)n/ (1+i))n]

Where

CFI = 120000 × 2.5%

= 123000

i = 15%

g = 2.5%

n = 50

Thus

PVAn = ($123,000 / (15% - 2.50%)) × [1 - ((1+2.5%)50 / (1+15%))50]

= 984000 × 1 - (51.25)/(57.5)

= 984000 × 0.996828

= 980,878.752

= $980, 879

5 0
2 years ago
digby's product manager is considering lowering the price of the don product by $2.50 and wants to know what the impact will be
Zarrin [17]

Rigby's product manager is considering lowering the price of the don product by $2.50 and wants to know what the impact will be on the product’s contribution margin. Assuming no inventory carry costs, Don's contribution margin, if the price is lowered, will be 4.00%

“Contribution margin suggests you the mixture quantity of sales to be had after variable expenses to cowl fixed prices and provide earnings to the organization,” Knight says. you would possibly think about this as the part of income that allows offsetting fixed costs.

Contribution Margin = Net Revenue - Variable Expenses

Material Cost = 604 * 14.36 = 8673.44

Labor Cost = 604 * 7.09 = 4282.36

Current price = $35

Price is lowered by $2.5 ,then new price will be = $35 - $2.5 = $32.50

Therrefore, New Sales = 604 * 32.5 = $19630

Variable expenses = 8673.44 + 4282.36 = 12955.8

Contribution margin = 19630 - 12955.8 = 6674.2

Contrinution margin ratio = contribution margin / net sales

New Contribution margin = 6674.2/19630 = 34.00%

The contribution margin is beneficial for figuring out how income, variable costs, and fixed expenses all affect operating profit. It offers enterprise owners a manner of assessing how numerous income degrees will affect profitability.

Learn more about contribution margin here   brainly.com/question/24881206

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6 0
11 months ago
AA Tours is comparing two capital structures to determine how to best finance its operations. The first option consists of all e
-Dominant- [34]

Answer:

d.select the unlevered option since the expected EBIT is less than the break-even level

Explanation:

Unlevered option comprises of more equity than the  debt, and is thus less risky. While an option leveraged is even more debt than equity, which brings additional risk. Since the estimated EBIT is below the break-even point, it would be safer to go for an unlevered (less riskier) option.

Hence, the correct option is d.

8 0
3 years ago
When doubles and decreases by half:____.
kompoz [17]

Answer:

A. y increases and c increases

<h3>Explanation:</h3>
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to brainly.com/question/25311149

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5 0
1 year ago
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