Rework problem 3 in section 1 of Chapter 7 of your textbook, about the Natural Fertilizer Company, using the following data. Ass
ume that the company produces 100 pound sacks of 35-20-10 fertilizer for lawns and 100 pound sacks of 10-14-16 fertilizer for gardens, where the numbers are the percentage by weight of nitrate, phosphate, and potash, respectively, in each sack. Assume also that the company has on hand 13 tons of nitrate, 8 tons of phosphate, and 9 tons of potash, Assume also that the profit on each sack of lawn fertilizer is $10.00 and the profit on each sack of garden fertilizer is $11.00. How many sacks of each type of fertilizer should the company make in order maximize its profit
1 answer:
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Answer:
$24.18
Explanation:
Dividend for year 0 = $2.2
Dividend at year end 1 = $2.2
Dividend at year end 2 = $2.2(1 + .05) = 2.31
Dividend at year end 3 = $2.31 (1 + .05) = 2.4255
Dividend at year end 4 = $2.4255 (1 + .17)= 2.8378
Dividend at year end 5 = $2.8375 (1 + .09)= 3.0932
Dividend at year end 6 = $3.0932 (1 + .09) = 3.371
MPS =
where MPS = Market price of share
D= Dividend for different years
k = Cost of equity
g= constant growth rate after year 5
putting values in above equation we get,
MPS = 1.864 + 1.65 + 1.478 + 1.463 + 1.352 + 0.4371 × 37.462
MPS = $24.18
The maximum price per share that an investor who requires a return of 18% should pay for Home Place Hotels common stock is <u>$24.18</u>