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mestny [16]
3 years ago
11

ABC Inc. just paid a dividend of $1.00 this year. The stock price is $15.43 currently. The market risk premium is 15% and the ri

sk-free rate is 6%. What will the price of ABC's stock be if the dividend growth increases by 25%?
Business
1 answer:
mariarad [96]3 years ago
4 0

Answer:

Price lowers and becomes negative or -5.37 dollars

Explanation:

Market risk premium's formula could be written as dividends/price + dividend's growth rate. Therefore, we dividend growth rate according to the current price and dividend level equal to market risk premium - dividends/price or 0.15 - 1/15.43 = 0.086 or 8.6%. If the dividend growth rate rises by 25% than new one is 33.6%. Price is equal to dividends/market risk premium - dividend growth rate or in this case 1/0.15-0.336 or 1/-0.186 or -5.37 dollars. If the price is negative that would mean that any future selling of the stock would mean that ABC would have to pay in order to sell it.

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3 years ago
The stock in Up-Towne Movers is selling for $46.00 per share. Investors have a required return of 11.1 percent and expect the di
Dimas [21]

Answer:

From the calculation below Up-Towne Movers just paid a dividend of $3.13

Explanation:

The price of share=D1/r-g

The Do is the dividend just paid which is the unknown in the equation

g is the dividend growth rate of 4.3%

r is the required return of 11.1%

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$46=Do/(11.1%-4.3%)

46=Do/0.068

by cross-multiplication the equation becomes

$46*0.068 =Do

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Do=$3.13

The dividend just paid by Up-Towne Movers is $3.13 as calculated above from the share price equation

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4 years ago
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7 0
2 years ago
Regardless of quantity in long-run equilibrium, the industry price cannot exceed the?
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An extremely large number of vendors, each of whom makes a comparable or same product, make up a competitive market. The total of all these unique outputs, which each provider produces as a small portion of the market as a whole, represents the production of that industry. This includes dry cleaners, corner stores, barbershops, and florists.

A market that has just one supplier is considered a monopolist at the other extreme. Examples include the fact that the National Hockey League is the only provider of top-notch professional hockey matches in North America, Hydro Quebec is the province of Quebec's sole electricity supplier, and Via Rail is the only provider of passenger rail services between Windsor, Ontario, and the city of Quebec.

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When market supply and demand are in balance, prices become steady. This is known as equilibrium. In general, a surplus of goods or services leads to lower prices, which increases demand, whereas a shortfall or under supply raises prices, which decreases demand.

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3 0
2 years ago
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The type types of private solutions to the pollution externality which has occured is charity. This is because it is a voluntary activity. The money collected is meant for a specific objective which is to tackle the issue of pollution.

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3 years ago
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