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Pie
3 years ago
15

Tre-Bien, Inc., is a fast-growing technology company. Management projects rapid growth of 30 percent for the next two years, the

n a growth rate of 17 percent for the following two years. After that, a constant-growth rate of 8 percent is expected. The firm expects to pay its first dividend of $2.45 a year from now. If dividends will grow at the same rate as the firm and the required rate of return on stocks with similar risk is 22 percent, what is the current value of the stock?
Business
1 answer:
nordsb [41]3 years ago
4 0

Answer:

Value = $23.35

Explanation:

First, find dividend per year using the growth rates given;

D1 = 2.45

D2 = 2.45 (1.30) = 3.185

D3 = 3.185 (1.17) = 3.7265

D4 = 3.7265 (1.17) = 4.3600

D5= 4.3600(1.08) = 4.7088

Next, find the PV of each dividend;

PV(D1) = 2.45 / (1.22) = 2.0082

PV(D2) = 3.185 /(1.22²) = 2.1399

PV(D3) = 3.7265/ (1.22³) = 2.0522

PV(D4) = 4.3600/ (1.22^4) = 1.9681

PV(D5) = \frac{\frac{4.7088}{0.22-0.08} }{1.22^{4} } =  15.1825

Next, sum up the present values to find the current value of the stock;

=2.0082+ 2.1399 + 2.0522 + 1.9681 + 15.1825

Value = $23.35

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A private university is made up of various "schools," such as the School of Journalism, the School of Business, the School of La
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Badgersize Company has the following information for its Forming Department for the month of August.
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Question Completion:

Costs incurred in August:

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Answer:

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a. Equivalent units              74,000          69,500

b. Cost per equivalent unit $3.162          $4.144

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a) Data and Calculations:

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Beginning WIP inventory   20,000       100%              20%

Units started  August        54,000

Total units available          74,000

Transferred out                 59,000

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Cost of beginning WIP                     $80,000          $24,000       $104,000

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Equivalent unit             Units      Materials      Conversion

Units transferred out  59,000     59,000          59,000

Ending WIP inventory  15,000      15,000           10,500

Equivalent units                            74,000          69,500

Cost per equivalent unit

Total production costs           $234,000      $288,000

Equivalent units                          74,000          69,500

Cost per equivalent unit         $3.162              $4.144

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