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s344n2d4d5 [400]
3 years ago
13

Burton Corp. is growing quickly. Dividends are expected to grow at a rate of 28 percent for the next three years, with the growt

h rate falling off to a constant 7.4 percent thereafter. If the required return is 16 percent and the company just paid a dividend of $3.45, what is the current share price
Business
1 answer:
horrorfan [7]3 years ago
4 0

Answer:

current share price = $70.53

Explanation:

Share Price:

A share price is the amount it would cost to buy one share in a company.

Formula:

share price = future dividends * Present value of discount factor(16%, time period)

As the company just paid a dividend of $3.45 and dividends are expected to grow at a rate of 28 percent for the next three years so

Dividend for 1st year = (3.45*1.28) = $4.416

Dividend for 2nd year = (4.416*1.28) = $5.65248

Dividend for 3rd year = (5.65248*1.28) = $7.2351744

Now we need to calculate the value for 3rd year.

Formula:

Value after 3rd year = (Dividend for year 3*growth rate) / (required rate-growth rate)

Therefore by putting the values in the above formula, we get

Value after 3rd year = (7.2351744 * 1.074) / (0.16 - 0.074)

Value after 3rd year = $90.35555007

Therefore by putting the values in the share price formula, we get

current share price = 4.416 / 1.16 + 5.65248 / 1.16^2 + 7.2351744/1.16^3 + 90.35555007 / 1.16^3

current share price = $70.53

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scoundrel [369]

Answer:

$38,000 loss

Explanation:

For calculation of entry to record the sale of the tractor first we need to determine the total depreciation and net book value on Jan 1, 2018 which is shown below:-

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Loss on sale = Sold tractor amount - Net book value on January 1, 2018

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3 years ago
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<span>is that the capm recognizes only one systematic risk factor.</span>
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What will happen to the price and quantity of Japanese goods in the US if the dollar depreciates causing the costs of producing
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The prices of Japanese goods will increase.

<h3>Economic Principles of Demand and Supply </h3>

Following the principles of demand and supply, the higher the price, the higher the quantity supplied (all other factors remaining constant).

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See the link below for more about the law of supply:
brainly.com/question/4803223

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