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Mashutka [201]
4 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]4 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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Answer:

See the explanation.

Explanation:

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Note: To record the merchandise sales on account. As the company used the periodic inventory system, we do not need to give the cost of goods sold journals.

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8 0
4 years ago
Monsters Incorporated (MI) in ready to launch a new product. Depending upon the success of this product, MI will have a value of
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A and then d i’m pretty sure
7 0
4 years ago
Mullineaux Corporation has a target capital structure of 70 percent common stock and 30 percent debt. Its cost of equity is 16 p
alexira [117]

Answer:

The company WACC is 13.30%

Explanation:

For computing the WACC, first we have to find the weight-age of both debt and equity.

Since in the question, the weightage of debt and equity is given which is equals to

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And, Equity or common stock = 70%

So, we can easily compute the WACC. The formula is shown below

= Weighted of debt × cost of debt × (1- tax rate) + Weighted of equity × cost of equity

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= 0.021 + 0.112

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6 0
3 years ago
Toyota, the giant global automaker, paid a heavy price for its ___________ emphasis on cost control. The resulting problems with
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Answer:

The options for this question are the following:

A. Minimal

B. Superficial

C. Low-budget

D. Excessive

The correct answer is D. Excessive.

Explanation:

In this case, it is useful to consider that cost control is the procedure that allows companies to carry out the regulatory and protection processes against what the client expects to receive. Toyota is a well-known brand, and poor cost management can have an impact on the inflation of its costs and therefore the price of its cars rises considerably. Excessive costs negatively influence the companies' results, and therefore their correct management influences optimal results for the operation.

8 0
3 years ago
Read 2 more answers
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Answer:

Location targeting

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3 years ago
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