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Georgia [21]
3 years ago
7

Crisp Cookware's common stock is expected to pay a dividend of $3 per share at the end of this year; its beta is 0.9; the risk-f

ree rate is 5.2%; and the market risk permium is 6%. The dividend is expected to grow at some constant rate g, and the stock currently sells for $40 per share. What does the market believe will be the stock's price three years from now?
Business
1 answer:
slavikrds [6]3 years ago
7 0

Answer:

The answer is $41.21

Explanation:

Required Rate of Return = Risk Free Rate + Beta*(Market Risk Premium)= 5.2% + 0.9 * 6% = 10.6%

Cost of Equity = D1/Current Stock Price + Growth Rate

10.6% = $3/$40 +g

g = 3.1%

Stock Price After 3 Years = Current Stock Price*Growth Rate= $40 * (1.031)= $41.21

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A is the correct answer.
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3 years ago
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Several years ago, Castles in the Sand Inc. issued bonds at face value of $1,000 at a yield to maturity of 6.2%. Now, with 6 yea
lyudmila [28]

Answer:

The price of the bond is $659.64.

Explanation:

C = coupon payment = $62.00 (Par Value * Coupon Rate)

n = number of years = 6

i = market rate, or required yield = 15 = 0.15  = 0.15 /2  = 0.075

k = number of coupon payments in 1 year = 2

P = value at maturity, or par value = $1000

BOND PRICE= C/k [ 1 - ( 1 / ( 1 + i )^nk ) / i ] + [ P / ( 1 + i )^nk )]

BOND PRICE= 62/2 [ 1 - ( 1 / ( 1 + 0.075 )^6x2 ) / 0.075 ] + [ $1,000 / ( 1 + 0.075 )^6x2 )]

BOND PRICE= 31 [ 1 - ( 1 / ( 1.075 )^12 ) / 0.075 ] + [ $1,000 / ( 1.075 )^12 )]

BOND PRICE= 31 [ 1 - ( 1 / ( 1.075 )^12 ) / 0.075 ] + [ $1,000 / ( 1.075 )^12 )]

BOND PRICE= $239.79 + $419.85 = $659.64

8 0
3 years ago
Assuming the contract qualifies for revenue recognition while the performance obligations are being satisfied, excluding cash, w
shepuryov [24]

Question Completion:

Blue Co. had the following first-year amounts related to its $12,000,000 construction contract Actual costs incurred and paid Estimated remaining costs to complete Progress billings Cash collected $3,000,000 6,000,000 3,500,000 3,100,000 Assuming the contract qualifies for 'revenue recognition over time, what total amount (excluding cash) should Blue Co. recognize as current assets at year end?

Multiple Choice

a) $3,000,000

b) $1,000,000

c) $0

d) $900,000

Answer:

Blue Co.

The total amount (excluding cash) that Blue Co should recognize as current assets at year end is:

d) $900,000

Explanation:

a) Data and Calculations:

Value of Construction Contract =              $12,000,000

Actual costs incurred and paid                    $3,000,000

Estimated remaining costs to complete     $6,000,000

Progress billings                                           $3,500,000

Cash collected                                              $3,100,000

Percentage completion during the first year = Actual costs incurred/Total costs * 100

= $3,000,000/$9,000,000 * 100 = 33.333%

Revenue to be recognized based on percentage of completion and revenue recognition over time = $12,000,000 * 33.333%

= $4,000,000

Accounts Receivable = $900,000 ($4,000,000 - $3,100,000)

8 0
3 years ago
What will happen if the value of the american dollar decreases
SSSSS [86.1K]

Answer:

If the money decreases things will be more harder and more expensive to buy

Explanation:

Pretend you have $10 and something you want is $10 it is easier to buy it when the value of money is higher and if the money is lower than it'll be harder to get $10 to buy the item you want

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If the month-end bank statement shows a balance of $148000, outstanding checks are $48000, a deposit of $17000 was in transit at
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Answer:

$119,300

Explanation:

the bank balance must be adjusted by adding the deposit in transit and the check that was charged against the account by mistake, and you must also subtract outstanding checks:

adjusted bank balance = $148,000 + $17,000 + $2,300 - $48,000 = $119,300

5 0
3 years ago
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