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elena-s [515]
3 years ago
14

Universal Exports is expected to pay the following dividends over the next four years: $8, $4, $2, and $2. Afterwards the compan

y is not expected to pay anything ever again. If the required return is 15 percent, what is the maximum that you would be willing to pay for a stock of Universal today
Business
1 answer:
tester [92]3 years ago
4 0

Answer:

Maximum price to be paid for the stock = $12.43

Explanation:

The Dividend Valuation Model is a technique used to value the worth of an asset. According to this model, the worth of an asset is the sum of the present values of its future cash flows discounted at the required rate of return.

<em>Hence the value of the stock would be the present value of its future dividend discounted at 15%</em>

Year                                   PV of dividend

1                                          8  ×1.15^(-1)  

2                                           4 ×  1.15^(-2)  

3.                                              2 × 1.15^(-3)    

4                                                  2 × 1.15^(-4)    

PV of dividend =   (8 ×1.15^-1) +  (4 × 1.15^-2)  + (2 × 1.15^ -3) + (2× 1.15^-4) = 12.439

Maximum price to be paid for the stock = $12.43

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sashaice [31]

Answer:

About 2,900 gallons of milk per year according to the internet

7 0
2 years ago
Wainright Co. has identified an investment project with the following cash flows. Year Cash Flow 1 $ 850 2 1,190 3 1,450 4 1,600
Mashutka [201]

Answer:

 $4,238.05  

Explanation:

The computation of the present value is shown below:

Years  Cash flows   Discount factor @7%         Present value

1           $850.00  0.9345794393              $794.39  

2          $1,190.00  0.8734387283              $1,039.39  

3           $1,450.00  0.8162978769              $1,183.63  

4           $1,600.00  0.762895212              $1,220.63  

Total present value                               $4,238.05  

8 0
3 years ago
A portfolio has three stocks 110 shares of Yahoo (YHOO), 210 Shares of General Motors(GM), and 70 shares of Standard and Poorʹs
kobusy [5.1K]

Answer:

Option (D) is correct.

Explanation:

Value of Yahoo:

= Shares × Price

= 110 shares × $20

= $2,200

Value of General Motors(GM):

= Shares × Price

= 210 shares × $20

= $4,200

Value of Standard and Poorʹs Index Fund (SPY):

= Shares × Price

= 70 shares × $130

= $9,100

Total value = Value of Yahoo + Value of GM + Value of SPY

                   = $2,200 + $4,200 + $9,100

                   = $15,500

Therefore,

Portfolio weight of YHOO:

= Value of YAHOO ÷ Total value

= $2,200 ÷  $15,500

= 0.1419 or 14.19%

Portfolio weight of GM:

= Value of GM ÷ Total value

= $4,200 ÷  $15,500

= 0.2709 or 27.09%

Therefore, the portfolio weight of YHOO and GM are 14.2% (approx) and 27.1% (approx), respectively.

8 0
3 years ago
According to a 2002 article in USA Today that was discussed in chapter 5, a researcher has found that 11 of the 15 largest compa
lawyer [7]

Answer:

interlocking directorates

Explanation:

5 0
3 years ago
Barbara purchases only two goods, salads, and notepads. Both are normal goods for Barbara. Suppose the price of salad decreases.
damaskus [11]

Like Haley up here did^^^^^^^^

Answer:

B

Explanation:

8 0
3 years ago
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