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
slavikrds [6]
3 years ago
13

The required return for Williamson Heating's stock is 12%, and the stock sells for $40 per share. The firm just paid a dividend

of $1.00, and the dividend is expected to grow by 30% per year for the next 4 years, so D4 = $1.00(1.30)4 = $2.8561. After t = 4, the dividend is expected to grow at a constant rate of X% per year forever. What is the stock's expected constant growth rate after t = 4, i.e., what is X?
A: 5.17%
B: 5.44%
C: 5.72%
D: 6.02
E: 6.34
Business
1 answer:
olga_2 [115]3 years ago
4 1

Answer:

E: 6.34

Explanation:

First we solve for the PV of the next years dividends using the lump sum PV formula:

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

rate = 12%

\left[\begin{array}{ccc}Year&dividends&PV\\1&1.3&1.1607\\2&1.69&1.3473\\3&2.197&1.5638\\4&2.8561&1.8151\\\end{array}\right]

Total of 5.8869

Then, this with the PV of the future dividends usign the gordon model should match 40 dollars.

so the PV of the indefinite sum of dividends should be: 40 - 5.8869 = 34.1131

\frac{Dividends_1}{return - growth} = Value

This is four years into the future thus, we discount as well for the rate of return We want ot knwo the value at the fourth year to solve for the grow rate:

34.1131 x 1.12^4 = 53.67762328

Now the formual for the gordon model requires next year dividends thus D0 x 1 + g and we don't know g so we have to operate to solve  it:

\frac{2.8561 \times (1+g)}{0.12-g} =53.67762328\\2.8561 + 2.8561g = 53.67762328 / (0.12 - g)\\g ( 1 + 2.8561/53.67762328) = 0.12 - \frac{2.8561}{53.67762328} \\g = 0.066791608 \div 1.053208392= 0.063417277

The correct answer would be E

You might be interested in
To make a decision resulting in good corporate citizenship, a business should evaluate the decision based on:
Sergio039 [100]

Answer:

All of them

Explanation:

When making decisions, a business should evaluate:

  • Legal implications of each decision : do our decisions comply with all applicable laws and regulation?
  • Public relations impact : how will the public feel about our decision?
  • Safety risks for consumers and employees: does it affect the safety and well being of our employees and customers?
  • Financial implications: does our decision benefit our business?
7 0
3 years ago
Robert is a single taxpayer who has AGI of $145,000 in 2019; his taxable income is $122,000. What is his federal tax liability f
PolarNik [594]

Answer:

His tax liability for 2019 (due April 2020) is $23,359.50

Explanation:

Since Robert s a single filer, he falls under the fourth tax bracket: income between $84,201 to $160,725. His marginal tax rate is 24%, and his total taxes due are as following:

<u>tax rate</u>         <u>earnings</u>                          <u>taxes due</u>

10%            $0 – $9,875                        $987,50

12%         $9,875 – $40,125                  $3,630

22%        $40,126 – $85,525                $9,988

24%        $85,526 – $122,000              $8,754

                    total                              $23,359.50      

*Option C is the closest one, but it used the 2018 tax brackets, not the 2019.

7 0
3 years ago
The united states economy spends about as many months in recession as it spends in expansion. True or False
kobusy [5.1K]

Answer:

I think the answer will be true

8 0
3 years ago
On July 16, 2017, Logan acquires land and a building for $500,000 to use in his sole proprietorship. Of the purchase price, $400
SashulF [63]

Answer:

A.Land $100,000

Building 400,000

B.Land $100,000

Building 395,292

Explanation:

a. Logan's adjusted basis at acquisition date will be the cost of the land and that of the building which is:

Land $100,000

Building 400,000

b. What will be Logan adjusted basis at the end of 2017 :

Land will be: $100,000

Building will be :395,292

($400,000 − $4,708)

Thus the Depreciation is a capital recovery.

4 0
3 years ago
If Patty Shoemaker estimates that her $400 weekly grocery bill will increase at an annual inflation rate of 5%, what should her
balu736 [363]

Answer:

the weekly grocery bill in 4 years is $486.2025

Explanation:

The computation of the weekly grocery bill in four years is shown below:

= Estimated amount × (1 + rate of interest)^number of years

= $400 × (1 + 0.05)^4

= $400 × 1.21550625

= $486.2025

hence, the weekly grocery bill in 4 years is $486.2025

We simply applied the above formula so that the correct value could come

And, the same is to be considered

6 0
3 years ago
Other questions:
  • Reanna is a high school student. She has been feeling overwhelmed recently because there seems to be so many things to do. She d
    10·2 answers
  • The following events result in a tax. Which is an example of a direct tax?
    14·1 answer
  • The type of cover letter written to request assistance and support from the author’s job network:
    6·1 answer
  • The difference between a divine command view and authoritarian view is that the authority figure is different. true or false?
    6·1 answer
  • Due to Coronavirus, all of the stock markets and businesses and our overall economy is failing, but companies that are producing
    15·2 answers
  • _____ goals are set by and for an organization's top management. a. Operational b. Diversification c. Strategic
    13·1 answer
  • Payton Corporation provided the following information for the​ year: Beginning Balancelong dash​Work-in-Process Inventory $ 25 c
    15·1 answer
  • Tại sao sản lượng bằng thu nhập
    12·1 answer
  • Marketing goods and services to the B2B market relies more heavily on advertising than marketing efforts aimed toward the consum
    11·1 answer
  • Bob cratchit needs $16 per month for grave maintenance after he passes. if he earns 3.0 nnual interest, compounded monthly, how
    11·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!