Answer:
Cost of equity = 10.7%
Explanation:
<em>We will work out the required rate of return using the the dividend valuation model. The model states that the value of a stock is the present value of the future divided discounted at the cost of equity.
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The model is given below:
P = D× (1+g)/(r-g)
P- price of stock, D- dividend payable now, g- growth rate in dividend, r- cost of equity
So we substitute
130 = 5.50× (1+r)/(r-0.06)
cross multiplying
(r-0.06)× 130 = 5.50 × (1+r)
130 r- 7.8 = 5.50 + 5.50r
collecting like terms
130 r - 5.50r=5.50 + 7.8
124.5 r= 13.3
Divide both sides by 124.5
r =13.3 /124.5= 0.1068
r=0.1068 × 100= 10.7%
Cost of equity = 10.7%
Answer:
The market price for this stock is $15.23
Explanation:
The price per share of a stock today can be calculated using the dividend discount model which values a stock based on the present value of the expected future dividends of the stock. The value of this stock using the DDM will be,
V0 or P0 = 1.55 / (1+0.11) + 1.63 / (1+0.11)^2 + 1.65 / (1+0.11)^3 +
[ ( 1.7 / 0.11) / (1+0.11)^3 ]
V0 or P0 = $15.226 rounded off to $15.23
The $16 is not enforceable because of a preexisting duty.
Could you put some options lol
Answer: The firm issued common stock in 2013.
Explanation:
Since the firm has never paid a dividend to its common stockholders, we can see that the firm issued common stock in 2013.
Looking clearly at the common equity section, we can see that there was an increase in the common stock from $1000 to $2000.
The reduction in the retained earnings from $2340 to $2000 also shows that there was a loss.
Based on the above scenarios, we can say that the firm issued common stock in 2013.