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
Macroland, currency held by the public is 2,000 econs, bank reserves are 300 econs, and the required reserve/deposit ratio is 10
I am Lyosha [343]

Answer:

D)5,000; 7,000

Explanation:

Public is holding 2000 econs and banks reserves are 300 econs. It is mentioned that reserve requirement is 10%.

So total bank deposits must be 3000. Money supply in the economy is (3000 + 2000 = 5000)

When the reserve ratio is 0.1, that means the money multiplier is 10.

If there is an additional inflow of currency because of printing 200 econs by central bank then because of multiplier effect it will be 2000 econs.

Money supply from earlier 5000 econs will become 7000 econs.

Option D is correct.

7 0
3 years ago
Westchester Corp. is considering two equally risky, mutually exclusive projects, both of which have normal cash flows. Project A
inn [45]

Answer:

d. If the WACC is 9%, Project B's NPV will be higher than Project A's.

Explanation:

The internal rate of return is the return in which the NPV is zero i.e cash inflows equal to the initial investment

While the WACC refers to the cost of capital by considering the capital structure i.e cost of equity, cost of preferred stock and cost of debt by taking their weightage

Now if the WACC is 9% so project B NPV would be higher as compared to project A as we can see that project B IRR is greater than the project A IRR

Therefore option d is correct

5 0
3 years ago
Professional athletes attempting only to maximize income will defer larger salaries if:
GenaCL600 [577]
Professional athletes attempting only to maximize income will defer larger salaries if DEFERRED PAYOUTS ARE ADJUSTED UPWARD TO COMPENSATE FOR FOREGONE INTERESTS.
If professional athletes, whose sole aim is larger income are asked to wait for sometime before collecting their salaries, with the promise that their incomes will be raise for the period of their waiting, then, most of them will gladly agree to the arrangement, since, they are sure of higher amounts.
4 0
3 years ago
A company's beginning Work in Process inventory consisted of 37,000 units that were 90% complete with respect to direct labor. A
pychu [463]

Answer:

128,000 units

Explanation:

The calculation of the equivalent units of production using the weighted average method is given below:

= Total units of finished goods × completion percentage + ending work in process units × completion percentage

= 107,000 units × 100% + 42,000 units × 50%

= 107,000 units + 21,000 units

= 128,000 units

Hence, the equivalent units of production of direct labor is 128,000 units.

8 0
3 years ago
After US companies objected that the Foreign Corrupt Practices Act would put them at a competitive disadvantage, the FCPA was ev
Luden [163]

After US companies objected that the Foreign Corrupt Practices Act would put them at a competitive disadvantage, the FCPA was eventually amended to allow for <u>grease payments.</u>

<h3><u>Grease payments are what?</u></h3>

While a grease payment is made to hasten a trade or transaction, the former. The purpose of a grease payment is to expedite the process rather than to actually complete a transaction. Grease payments are not allowed under the FCPA as a way to influence the decision-making process of foreign officials.

In the event that they did, the money would be seen as a bribe and would be prohibited. It all comes down to the purpose of the money, and there is a very thin line between a greasing payment and a foreign bribe.

Learn more about grease payments with the help of the given link:

brainly.com/question/14529082

#SPJ4

<u>Correct question:</u>

After US companies objected that the Foreign Corrupt Practices Act would put them at a competitive disadvantage, the FCPA was eventually amended to allow for ______.

Multiple choice question.

a) grease payments

b) import tariffs

c) commission payments

d) export tariffs

6 0
2 years ago
Other questions:
  • Jose runs a gallery which specializes in neon art with an emphasis on vacation icons like flamingos, dolphins, and palm trees. s
    5·1 answer
  • A security professional needs to identify a physical security control that will identify and authenticate individuals before all
    8·1 answer
  • What is a panel discussion
    12·1 answer
  • Anything that is capable of being owned or controlled to produce value would be considered as what?
    5·1 answer
  • What is considered one cause of inflation?
    6·2 answers
  • "Craig, the CEO of ShopRite, Inc., has noticed that one of his store locations has consistently through-the-roof sales numbers.
    9·1 answer
  • Paunch Burger has a beta of 1.2 and just paid a dividend of $2.30 that is expected to grow at 3.2%. If the risk-free rate is 3%
    8·1 answer
  • On March 7, a buyer and a seller execute a contract for the purchase of the seller's property. Closing is set for June 10. On Ap
    5·1 answer
  • The purposes of managerial accounting are to provide useful information to aid in: (You may select more than one answer. Single
    5·1 answer
  • Target market segments are defined by common factors such as ________. psychographics geography demographics all of the above.
    10·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!