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Mashutka [201]
3 years ago
15

XYZ Company has expected earnings of $3.00 for next year and usually retains 40 percent for future growth. Its dividends are exp

ected to grow at a rate of 10 percent indefinitely. If an investor has a required rate of return of 15%, what price would he be willing to pay for XYZ stock?a. $12.50 b. $25.00 c. $30.00 d. $40.00
Business
1 answer:
Verizon [17]3 years ago
6 0

Answer:

Price of stock  = $40

Explanation:

According to the dividend growth model, the price of a stock is the present value of expected dividend discounted at the required rate of return.

This is done as follows:

Price of a stock = D×(1+r)/(r-g)

D(1+g) - Dividend for next year = 100%-40%× $3 = $1.8

g- growth rate - 10%

r- required rate of return - 15%

Price of stock = 1.8× (1.1)/(0.15-0.1)

                    = $40

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3 years ago
A company settles a long-term note payable plus interest by paying $68,000 cash toward the principal amount and Page 565 $5,440
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$68,000

Explanation:

The long-term note payable is a debt that is formally established through a written agreement. An example of long-term note payable is a bank loan.

When the principal and the interests of a long-term note are paid, they represent Cash outflows from the business and are recorded in the Cashflow Statement. However, their treatments are different. Another way to put it is that they bring a reduction in the cash of the organisation.

The $68,000 principal amount paid is an outflow from the company that is recorded in the financing activity section of the Cash Flow Statement

The Interest of $5,440 is also an outflow from the business but it is reported in the operating activity section of the Cash Flow Statement. The reason for its report is that it is actually reported in the Organisation's Statement of Income as an expense for the year. It, therefore, qualifies as an operating activity expense or outflow.

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Each​ Friday, Laferty pays employees for the current​ week's work. The amount of the weekly payroll is $ 5, 000for a​ five-day w
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Answer:

1  

Db Salaries expenses__4000  

Cr Accrued salaries__________4000

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Accrued salaries refers to the amount of liability remaining at the end of a reporting period for salaries that have been earned by employees but not yet paid to them.

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