1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
skad [1K]
3 years ago
14

Hot Wings, Inc., has an odd dividend policy. The company has just paid a dividend of $5.85 per share and has announced that it w

ill increase the dividend by $10.75 per share for each of the next four years, and then never pay another dividend. If you require a return of 12 percent on the company’s stock, how much will you pay for a share today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Current share price $
Business
2 answers:
GalinKa [24]3 years ago
6 0

Answer:

The present intrinsic value of the share is 94.79 dollars

Explanation:

We need to discount the future dividends at the required rate of return

\left[\begin{array}{ccc}Year&Cashflow&Discounted\\0&5.85&\\1&16.6&14.82\\2&27.35&21.8\\3&38.1&27.12\\4&48.85&31.05\\TOTAL&&94.79\\\end{array}\right]

Each year is discount according to the lump sum formula

\frac{cashflow}{(1 + rate)^{time} } = PV

being rate 12% --> 0.12

\frac{16.6}{(1 + 0.12)^{1} } = 14.82

\frac{27.35}{(1 + 0.12)^{2} } = 21.8

and so on

Elodia [21]3 years ago
4 0

Answer: $94.79

Explanation:

Given the following ;

Current dividend = $5.85 per share

Yearly increment in dividend = $10.75 per share

Number of years = 4

Time (t) = 1-4

Internal rate of return = 12%

Calculate the present value of share given the above details

Cashflow over four years

Year1 = $5.85 + $10.75 =$16. 60

Year2 = $16.60 + $10.75 = $27.35

Year3 = $27.35 + $10.75 = $38.10

Year 4 = $38.10 + $10.75 = $48.85

Present value (PV) =

Cashflow÷(1+IRR) + cashflow÷(1+IRR)^t + cashflow÷(1+IRR)^t + cashflow÷(1+IRR)^t

Present value (PV) =

Year1÷(1+IRR) + year2÷(1+IRR)^2 + Year3÷(1+IRR)^3 + Year4÷(1+IRR)^4

PV = $16.60/(1.12) + ($27.35)/(1.12)^2+ $38.10/(1.12)^3 + $48.85/(1.12)^4 = $94.79

You might be interested in
Tony’s business has been struggling for a while his marketing strategy has not worked with the consumers his business has reache
Kisachek [45]

Answer:

selling

Explanation:

7 0
3 years ago
Which of the following is not a product cost?
Sedbober [7]

Explanation:

d indirect materials used in production hope it's right

6 0
3 years ago
Perform online research and find the formula for calculating compound interest. If Mr. John Chrystal invests $6,000 today (Prese
Murrr4er [49]

Answer:

It is 7,816.79

Explanation:

joemama10110101

7 0
3 years ago
Concord Company purchased equipment for $909000 on January 1, 2020, and will use the double-declining-balance method of deprecia
tankabanditka [31]

Answer:

$66,323.37

Explanation:

Depreciation expense under the double declining method = adjustment factor × net book value

Adjustment factor = 2 × (1/useful life )

2 × (1/3) = 0.67

Depreciation expense in 2020 = 0.67 ×  $909000 = $609,030

Net book value =  $909000 - $609,030=$299,970

Depreciation expense in 2021 = 0.67 × $299,970 = $200,979.90

Net book value = $299,970 - $200,979.90 = $98,990.10

Depreciation expense in 2022 = 0.67 × $98,990.10 = $66,323.37

3 0
3 years ago
Carla Vista Co. sells office equipment on July 31, 2017, for $21,240 cash. The office equipment originally cost $86,550 and as o
GenaCL600 [577]

Answer:

Explanation:

The journal entries are shown below:

a. Depreciation Expense A/c Dr $4,710

        To Accumulated Depreciation - Office equipment A/c  $4,710

(Being depreciation expense is recorded)

The depreciation expense is calculated for eight months (January - August)

b. Cash A/c Dr $21,240

   Accumulated Depreciation - Office equipment A/c Dr $40,180

   Loss  on Disposal of Office equipment A/c Dr $25,130

                 To Office equipment A/c $86,550                

(Being sale of machinery is recorded and the remaining balance is debited to the Loss on Disposal of Office equipment A/c)

The accumulated depreciation is computed below:

= $35,470 + $4,710

= $40,180

6 0
3 years ago
Other questions:
  • Walt has a $300,000 listing at 8% commission. An agent from another firm sold the listing. Walt has a 70% commission split with
    15·1 answer
  • Which non-verbal facial expression is not recognized worldwide?
    12·2 answers
  • How can the owners of Antoun Hair Salon determine whether they made a
    13·1 answer
  • Assume a firm in a competitive industry is producing 800 units of output, and it sells each unit for $6. Its average total cost
    11·1 answer
  • When one nation can produce a product at lower cost relative to another nation, it is said to have a(n) __________________ in pr
    15·1 answer
  • What are the reasons for having internal controls that facilitate ethical behavior?
    7·1 answer
  • On a backpacking trip through Europe, Troy spent 20 Swiss francs to stay one night in a youth hostel. If the foreign exchange ra
    7·1 answer
  • "The process through which consumers receive stimulation, transform it into meaningful information, store the information in mem
    12·1 answer
  • Moments of truth may be direct contacts with customer representatives or service personnel, or when customers read letters, invo
    13·1 answer
  • 20 points to the best one !!
    10·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!