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
What is the correct answer...A, B, or C?
Mamont248 [21]
B, to avoid potential liability issues
5 0
3 years ago
Martha and Gordon purchased a home for $175,000 six years ago with a 5.5 percent, 30-year $140,000 mortgage. Their home now has
aliya0001 [1]

Answer:

The correct answer is A that is $76,000

Explanation:

Home equity is the market value of a home owner un-mortgaged interest in the real property, which is the difference among the home's fair market value and the outstanding balance of all liens on the property.

So, it is computed as:

Home Equity = Market value - Outstanding balance

= $210,000 - $134,000

= $76,000

4 0
4 years ago
Negacho, a food and beverage company, introduced a new flavor of potato chips called South Indian Chillis. It received a positiv
Genrish500 [490]

Answer:

Inflow of innovation

Explanation:

Negacho introduced its new flavoured chips and received positive response. This shows that the market is open to adopting new innovative products

This is what prompted Brex Mex to introduce their own flavored potato chips.

Basically the market is favorable to introduction of new ideas and products.

8 0
3 years ago
Moore General Store purchased office supplies on account during the month of February for $4,500. Payment for the supplies will
Anni [7]

Answer:

The correct answer is option (B).

Explanation:

According to the scenario, the given data are as follows:

Purchased office supplies = $4,500

Supplies on balance account (in beginning) = $200

Supplies remaining (in end of month) = $180

So, To calculate supplies used in February we use following method:

Supplies Used  = Supplies in Beginning + Purchased office supplies - Supplies in Ending

= $200 + $4,500 - $180

Supplies Used = $4,520

Hence, the amount of supplies USED during February was $4,520.

6 0
3 years ago
The owners' equity section of a firm includes (1) $10,000 of 8%, $100 par cumulative preferred stock, and (2) $40,000 of $5 par
bezimeni [28]
Fjfjrnrjr jenrjjekrjejrn ennejejenejbejejeje jehejejejejnejrnej ejejejenejjebejjejeje ejejjejenjebeejbejejbejhebe
3 0
3 years ago
Other questions:
  • What would one use Webex.com for? A. To distribute e-mails to a mailing list B. To post an announcement about a convention C. Fo
    7·1 answer
  • How easily an investment can be exchanged for cash is known as
    5·2 answers
  • If you receive a telephone solicitation, A. feel free to give them personal information. B. end the conversation quickly, withou
    13·1 answer
  • Zolezzi Inc. is preparing its cash budget for March. The budgeted beginning cash balance is $27,000. Budgeted cash receipts tota
    5·1 answer
  • Where is a good place for highschool​
    5·1 answer
  • Sometimes when an organization first starts horizontal coordination efforts to promote innovation, is needed to help employees c
    5·1 answer
  • Consider the following three scenarios:
    8·1 answer
  • Darla puts her money into a bank account that earns interest. One year later she sees that the account has 6 percent more dollar
    9·2 answers
  • What is the difference between time work and piece work rates​
    5·2 answers
  • He commenced business with Rs 60000 cash and goods worth Rs 20000 .(Journal entries) ​
    8·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!