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
soldi70 [24.7K]
3 years ago
7

Orwell building supplies' last dividend was $1.75. Its dividend growth rate is expected to be constant at 13.00% for 2 years, af

ter which dividends are expected to grow at a rate of 6% forever. Its required return (rs) is 12%. What is the best estimate of the current stock price? Select the correct answer. a. $36.36 b. $35.02 c. $37.03 d. $37.70 e. $35.69
Business
1 answer:
vitfil [10]3 years ago
5 0

Answer:

b. $35.02

Explanation:

The first dividends will be calculate by multiplying by the grow rate and bring them to present value:

first year:

D0 x (1+g)

1.75 x 1.13 = 1.977500

Then we calcualte the present value:

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

1.9775/1.12 = 1.7656

second year:

D1 x (1+g)

1.9775 x (1.13) = 1.7656

\frac{1.7656}{(1 + 0.12)^{2} } = PV

PV: 1.7814

Finally,, we calcualte the present value of the next dividends using the dividend grow model

\frac{divends}{return-growth} = Intrinsic \: Value

We calcualte next year dividneds:

D2 x (1+g) = D3

1.9775 x 1.06 = 2.368650

g = 6%

and return 12%

\frac{2.36865}{0.12-0.06} = Intrinsic \: Value

39.47749167

then, we calcualte the present vale:

\frac39.47749167}{(1 + 0.12)^{2} } = PV

PV = 31.4712

Finally, we add all these values

1.7656 + 1.7814 + 31.4712 = 35,0182 = 35.02

This will be the estimate current stock price.

You might be interested in
After posting the journal entries to the ledger, what is the balance of the Cash account?
MArishka [77]
There needs to be more information.
7 0
3 years ago
The Peter's Group originated four years ago, and since then, the company has grown each year. Management has focused on making s
Gekata [30.6K]

Answer:

The Peter's Group originated four years ago, and since then, the company has grown each year. Management has focused on making sure that the organization's strategic goals cascade down through the organization so that the employees can work together in pursuit of common ends. Peter's Group is using aligned goals in their organization.

Explanation:

Aligned goals is what organizations do in order to gather all the forces towards the achievement of  common objectives.

6 0
3 years ago
Nick and Katelyn paid $1,600 and $2,100 in qualifying expenses for their two daughters, Nicole and Naomi, respectively, to atten
Damm [24]

Answer: $0

Explanation:

From the question, we are informed that Nick and Katelyn paid $1,600 and $2,100 in qualifying expenses for their two daughters, Nicole and Naomi, respectively, to attend the University of Nevada and that Nicole is a sophomore and Naomi is a freshman.

We are further told that Nick and Katelyn's AGI is $202,000. Based on the above scenario, their allowable American opportunity tax credit will be $0. This is because when AGI is more than $180,000 for such taxpayers, the credit is being phased out.

5 0
3 years ago
During the current year, Morgan, Inc., had net income of $657,000. Morgan also recorded $203,000 in deprecation expense and had
Paraphin [41]

Answer:

$823,000

Explanation:

To determine the net cash provided by operating activities using the indirect method we can use the following formula:

net cash flow = net income + depreciation expense - accounts receivable increase + inventory decrease - accounts payable decrease

net cash flow = $657,000 + $203,000 - $28,000 + $12,000 - $21,000 = $823,000

If accounts receivable decreased, then it would be added.

If inventories increased, then it would be subtracted.

If accounts payable increased, then it would be added.

6 0
3 years ago
Mr. D is the manager of a local Walgreens. His biggest concern is to make sure that his store is always making the most profit p
nydimaria [60]

<u>Answer: </u>Just in time inventory

<u>Explanation:</u>

Just in time is the strategy that is generally used in production units where they can efficiently manage the stock by reducing the waste. The waste can be reduced by receiving the goods only when they are needed so this reduced the inventory costs.

Inventory cost are the costs related to procurement, storage and maintenance of the inventory. Walgreens store can reduce the stocking of goods cost by ordering them on time when required alone. The small shipment of goods for every two days once can reduce the inventory cost.

4 0
3 years ago
Other questions:
  • PLEASE HELP
    5·1 answer
  • How can optimism help you as an entrepreneur? A. It helps you adapt to new challenges. B. It helps you accept advice from others
    9·2 answers
  • The country of Yokovia does not trade with any other country. Its GDP is $20 billion. Its government collects $2 billion in taxe
    5·1 answer
  • An organization with a(n) ___ culture is characterized by employees not becoming friends and having a high degree of autonomy an
    12·1 answer
  • Determining whether to raise or lower the Federal Funds Rate is a responsibility of __________.
    6·1 answer
  • Calculate the times interest earned ratio using the financial statement data shown below. Current liabilities $185 Income before
    10·1 answer
  • What protocol, developed by Netscape in 1994, is designed to create an encrypted data path between a client and server that coul
    10·2 answers
  • Suppose there is a duopoly of gas companies, Energy X and Energy Y. The following is the market demand for gas. There are no mar
    13·1 answer
  • Forever Inc. is a confectionery company that manufactures candies. It does not use specific strategies to target children when m
    9·1 answer
  • Because of the increased bulkiness of the anterior abdomen and the change in a pregnant woman's center of gravity, what type of
    10·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!