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SCORPION-xisa [38]
3 years ago
10

Castles in the Sand generates a rate of return of 12% on its investments and maintains a plowback ratio of .40. Its earnings thi

s year will be $3 per share. Investors expect a 10% rate of return on the stock. a) Find the price and P/E ratio of the firm. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Price $ P/E ratio b) Find the price and P/E ratio of the firm of the plowback ratio is reduced to .30. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Price $ P/E ratio
Business
1 answer:
tangare [24]3 years ago
7 0

Answer:

(a) $34.61; 11.54

(b) $32.81; 10.94

Explanation:

(a) Stock Price = D ÷ (Ke – G)

Where,

D is dividend next year,

Ke is required rate of return on equity

G is growth rate

Growth rate = ROE × plow-back ratio

                    = 0.12 × 0.40

                    = 0.048 or 4.8%

Dividend = Current EPS × (1 - plow back ratio)

               = $3 × 0.6

               = $1.8

Stock Price:

= $1.8 ÷ (0.10 - 0.048)

= $34.61

P/E Ratio = Stock Price ÷ EPS

               = $34.61 ÷ $3

               = 11.54

(b) New growth rate = 0.12 × 0.30

                                  = 0.036 or 3.6%

Dividend = Current EPS × (1 - plow back ratio)

               = $3 × 0.7

               = $2.1

Stock Price = $2.1 ÷ (0.10 - 0.036)

                   = $32.81

P/E Ratio = Stock Price ÷ EPS

               = $32.81 ÷ $3

               = 10.94

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Wewaii [24]

I will use one the technology to boast my work output so that i can be more efficient in my business dealings and boast productivity.

<h3>What is the role of technology?</h3>

The use of technology is one that has helped a lot of business professionals to be more and more efficient in their work output.

Therefore, I will use one the technology to boast my work output so that i can be more efficient in my business dealings and boast productivity as it also helps to  keep employee information safe.

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5 0
2 years ago
A stock has an average expected return of 9.7 percent for the next year. The beta of the stock is 1.34. The T-Bill rate is 5.2%
givi [52]

Answer:

3.4%

Explanation:

According to the capital asset price model: Expected rate of return = risk free + beta x (market rate of return - risk free rate of return)

9.7 = 5.2 + 1.34(x - 5.2)

9.7 - 5.2 =  1.34(x - 5.2)

3.35 = x - 5.2

4 0
3 years ago
Monte inherited 1,000 shares of Corporation Zero stock from his father who died on March 4, 2020. His father paid $44 per share
Marina86 [1]

Answer:

$6,000 LTCG

Explanation:

Calculation to determine the amount and character of the gain or loss that Monte recognizes

Using this formula

Recognized gain or loss =Amount realized -Basis

Let plug in the formula

Recognized gain or loss=(1,000 Shares*$54 per share)-(1,000shares*$48 per share)

Recognized gain or loss=$54,000-$48,000

Recognized gain or loss=$6,000 LTCG

Therefore the amount and character of the gain or loss that Monte recognizes is $6,000 LTCG reason been the any gain Amount on the sales of property that was inherited are often tend to be LTCG

6 0
2 years ago
Harriet Marcus is concerned about the financing of a home. She saw a small cottage that sells for $39,000. Assuming that she put
Leokris [45]

Incomplete question. Here's the remaining part that completes question;

<em>(Use the Table 15.1(a) and Table 15.1(b)). (Round intermediate calculations and your final answers to the nearest cent.)</em>

<em />

<em>Monthly payment </em>

<em>a. 25 Years, 10.5%  </em>

<em>b. 25 Years, 11.5%  </em>

<em>c. 25 Years, 12.5%  </em>

<em>d. 25 Years, 14.0%</em>

<u>Answer:</u>

<u>Monthly payment is $104 for each assumption</u>

<u>Total interest cost</u>

<u>a. $3,276</u>

<u>b. $3,588</u>

<u>c. $3,900</u>

<u>d. $4,368</u>

<u>Explanation:</u>

Total balance left = $39,000-$7800 (20% of Cost of cottage)=$31,200

a) For monthly payment

$31,200/300 months (equivalent For 25 years) = $104

Total cost of Interest= monthly Interest% x monthly payment x 300 months= 10.5% x $104 x 300 months = $3,276.

b) For monthly payment

$31,200/300 months (equivalent For 25 years) = $104

Total cost of Interest= monthly Interest% x monthly payment x 300 months= 11.5% x $104 x 300 months = $3,588.

c) For monthly payment

$31,200/300 months (equivalent For 25 years) = $104

Total cost of Interest= monthly Interest% x monthly payment x 300 months= 12.5% x $104 x 300 months = $3,900.

d) For monthly payment

$31,200/300 months (equivalent For 25 years) = $104

Total cost of Interest= monthly Interest% x monthly payment x 300 months= 14% x $104 x 300 months = $4,368.

7 0
3 years ago
A market might have an upward-sloping long-run supply curve if A. firms have different costs. B. consumers exercise market power
____ [38]

Answer:

Option A is correct

Firms have different costs.

Explanation:

Option A is correct

Long run supply curve is upward sloping or constant horizontal line depends on the industry whether it is variable cost industry (increasing production cost)  or a constant cost industry respectively. Option A is correct because if firms have different production cost and it is increasing as the output is increasing then it is upward Sloping long-run supply curve.

4 0
4 years ago
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