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34kurt
3 years ago
12

Upper Crust Bakers just paid an annual dividend of $3.10 a share and is expected to increase that amount by 4 percent per year.

If you are planning to buy 1,000 shares of this stock next year, how much should you expect to pay per share if the market rate of return for this type of security is 12 percent at the time of your purchase?
Business
1 answer:
Minchanka [31]3 years ago
7 0

Answer:

$41.912

Explanation:

Data provided in the question;

Annual dividend paid = $3.10

expected growth rate, g = 4% = 0.04

Number of shares planning to buy = 1,000

Market Rate of return = 12% = 0.12

Now,

the current price of the share = \frac{\textup{D1}}{\textup{r-g}}

or

the current price of the share = \frac{\textup{3.10}\times(1+0.04)}{\textup{0.12-0.04}}

or

the current price of the share = $40.3

Therefore,

Price per share next year = current price of the share × (1 + g)

= $40.3 × (1 + 0.04)

= $41.912

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In companies using a fixed-order quantity model, a consistent inventory level is used as a trigger to order more product. This i
Zielflug [23.3K]

Answer:

Reorder point

Explanation:

A company or organization making use of fixed-order quantity model which is a model where the REORDER POINT has been fixed and has already been set automatic in which once it reach the minimum inventory level it will remind the company that inventory level has reach the limit for the company to restore the stock inventory or order more product, which is why this inventory level is called the REORDER POINT.

Therefore REORDER POINT can be defined as the point which serve as a reminder that the stock inventory level has dropped to the minimum reorder level and need to be replaced or reorder.

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3 years ago
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3 years ago
The market capitalization treasure on the stock of flex steel company is 12%. the expected ROE is 13% and the expected EPS are 3
VLD [36.1K]

Answer:

a. ROE (r) = 13% = 0.13

EPS = $3.60

Expected dividend (D1) = 50% x $3.60 = $1.80

Plowback ratio (b) = 50% = 0.50

Cost of equity (ke) = 12% = 0.12

Growth rate = r x b

Growth rate = 0.13 x 0.50 = 0.065

Po= D1/Ke-g

Po = $1.80/0.12-0.065

Po = $1.80/0.055

Po = $32.73

P/E ratio = <u>Current market price per share</u>

                  Earnings per share

P/E ratio = <u>$32.73</u>

                 $3.60

P/E ratio = 9.09        

b.  ER(S) = Rf + β(Rm - Rf)

    ER(S) = 5 + 1.2(13 - 5)

    ER(S) = 5 + 9.6

    ER(S) = 14.6%

                                                                                                                                                                                                                                                                                                                                                                                     

Explanation:

In the first part of the question, there is need to calculate the expected dividend, which is dividend pay-our ratio of 50% multiplied by earnings per share. We also need to calculate the growth rate, which is plowback ratio multiplied by ROE. Then, we will calculate the current market price, which equals expected dividend divided by the difference between return on stock (Ke) and growth rate. Finally, the price-earnings ratio is calculated as current market price per share divided by earnings per share.

In the second part of the question, Cost of equity (return on stock) is a function of risk-free rate plus beta multiplied by market risk-premium. Market risk premium is market return minus risk-free rate.

8 0
3 years ago
Tuition of $2200 is due when the spring term begins, in What amount should a student deposit today, at to have enough to pay tui
Angelina_Jolie [31]

Answer:

Since Interest Rate and Period is not given; we would assume the spring term begins in 4 months and

Explanation:

First we will require to use the compound interest formula.

It is not mentioned the compounding period in the question. However, many of the bank accounts today offer monthly compounding, and this will be used as the basis.

i=interest rate=7.62% p.a => 7.62/12=0.635% per month

FV=PV(1+i)^n

FV=future value = 2200

PV=present value, to be found

i=interest rate per compounding period (month)=0.00635

n=number of periods=4

2200=PV(1+0.00635)^4

PV=2200/(1.00635^4)

PV=$2144.99

In case interest is not compounded, we could apply the simple interest formula:

FV=PV(1+ni)

PV=2200/(1+4*0.00635)

PV=$2145.504

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3 years ago
A book on how to invest in collectibles spends several weeks on best seller lists. The paperback book was originally released fo
miskamm [114]

Answer:

inelastic demand

Explanation:

Price elasticity of demand (PED) measures the proportional change in quantity demanded when the price of a product or service changes:

  • when a 1% decrease in price, increases quantity demanded in a smaller proportion, the PED is said to be inelastic.
  • when a 1% decrease in price, increases quantity demanded in a larger proportion, the PED is said to be elastic.
  • when a 1% decrease in price, increases quantity demanded in the same proportion, the PED is said to be unit elastic.

In this case, the decrease in price (-2%) barely increased the quantity demanded, therefore, the PED is inelastic.

4 0
3 years ago
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