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
Nikolay [14]
3 years ago
7

Dividends are expected to grow at a rate of 25 percent for the next three years, with the growth rate falling off to a constant

6 percent thereafter. If the required return is 11 percent and the company just paid a dividend of $1.15, what is the current share price?
Business
1 answer:
Brut [27]3 years ago
8 0

Answer:

The current price per share is $39.21

Explanation:

The two stage dividend growth model will be used to calculate the price of the share today. The first three years dividends will be calculated and discounted back and when dividend growth becomes constant, the terminal value will be calculated and discounted back to today's price.

The price per share =  D1 / 1+r + ...  + D3 / (1+r)³  + [(D4 / r - g) / (1+r)³]

The current price per share is,

P = 1.15 * (1+0.25) / (1+0.11)  +  1.15 * (1+0.25)² / (1+0.11)²  +  1.15 * (1+0.25)³ / (1+0.11)³  +  [( 1.15 * (1+0.25)³ * (1+0.06) / 0.11 - 0.06) / (1+0.11)³]

Price per share today = $39.21

You might be interested in
Assuming a 360-day year, proceeds of $48,750 were received from discounting a $50,000, 90-day note at a bank. The discount rate
PIT_PIT [208]

Answer:

the discount rate should be 10%

Explanation:

The computation of the discount rate should be given below:

The Amount of discount is is

= $50,000 - $48,750

= $ 1,250

The $1,250 should be for 90 days.

So for 360 days, it should be

= $1,250 × 4

= $5,000.

And, the discount rate is

= $5,000 ÷ 50,000 × 100

= 10%

Hence, the discount rate should be 10%

3 0
3 years ago
At the initial equilibrium value of money and price level, the quantity of money supplied is nowless than the quantity of money
tiny-mole [99]
The value of money will FALL
5 0
3 years ago
Scottech is examining an investment opportunity that will involve buying $100,000 worth of equipment. They will need $10,000 in
aleksandrvk [35]

Answer:

113,000.

Explanation:

Let go through all the items to see whether we need to include them in the initial outlay or not.

(1) $100,000 worth of equipment => Yes

(2) Shipping will cost $5,000 and installation will cost $8,000 => Yes (Add to purchase price of equipment)

(3) Paid a management consultant $4,000 to analyze this project => No =>This is sunk cost (already incurred regardless of accept or reject the prject)

(4) Increase sales by $20,000 per year => No => under operating cashflow.

(5) $3,500 to train the employees to use the new equipment => No => under operating cashflow.

So, total initial outlay = 100,000 + 5,000 + 8,000 = 113,000.

7 0
4 years ago
When Harley-Davidson advertises to reinforce the perception that the brand is masculine, rugged, and individualistic, it is buil
andreev551 [17]

Harley-Davidson is building brand personality by reinforcing the perception that his brand is masculine, rugged, and individualistic.

<h3>What is Brand personality?</h3>

Brand personality is a characteristics attributed to a brand name to which the consumer can relate.

It is an effective brand increases which empowers one's company to build connections with its target audience.

Hence, Harley-Davidson is building brand personality by reinforcing the perception that the brand is masculine, rugged, and individualistic.

Learn more about Brand personality here: brainly.com/question/14558525

#SPJ1  

3 0
2 years ago
The production department should generally be responsible for materials price variances that resulted from:
Romashka-Z-Leto [24]

Answer:

c. rush orders arising from poor scheduling.

Explanation:

3 0
3 years ago
Other questions:
  • The Harleysville Manufacturing Shop produces motorcycle parts. Typically, 10 pieces out of a job lot of 1,000 parts are spoiled.
    5·1 answer
  • 9. Suppose an investor has two choices:Choice 1: invest in a Bond A which is a 2-year bond with an interest rate of 12% Choice B
    12·1 answer
  • On july 1 of the current calendar year, plum co. paid $7,500 cash for management services to be performed over a two-year period
    13·2 answers
  • Morgan is interested in upgrading to a new sofa for her apartment. Morgan looks online to see what new models her favorite sofa
    15·1 answer
  • Harriet works at Good Steaks,a local bar and restaurant.Her manager is always barking orders at her,saying she needs to move fas
    7·1 answer
  • Imagine your boss wants you to investigate ways your company might be able enhance customer satisfaction, create an attractive l
    11·1 answer
  • Flint Corporation issued 700 shares of no-par common stock for $7,800. Prepare Flint’s journal entry if (a) the stock has no sta
    15·2 answers
  • A short-term debt is the same thing as a<br> debt.<br> A. Current<br> B. Liquid<br> C. Tragic
    14·2 answers
  • What are some of the resources that families and individuals can use to reach their financial goals? Why is it important to take
    10·1 answer
  • Define nongovernment organizations
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!