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Whitepunk [10]
3 years ago
9

Assume that the expected future dividends (D) at end of periods 1,2, and 3, as well as the expected future price (P) at end of p

eriod 3 for a stock are as follows: D1 = $1.20, D2 = $1.40, D3 = $1.55, and P3 = $82 . What should be the stock's expected price today, (i.e. P0 )? I encourage you to draw a time line clearly indicating the situation. Assume the required return is 8.9 percent.
Business
1 answer:
MariettaO [177]3 years ago
8 0

Answer:

$66.9725

Explanation:

Data provided in the question:

Dividend:

D1 = $1.20

D2 = $1.40

D3 = $1.55

Expected future price, P3 = $82

Required return = 8.9 percent = 0.089

Now,

Stock price today = Present value of dividends and the future value

Stock price today = \frac{1.20}{(1+0.089)}+\frac{1.40}{(1+0.089)^2}+\frac{1.55}{(1+0.089)^3}+\frac{82}{(1+0.089)^3}

or

Stock price today = 1.1019 + 1.1805 + 1.2001 + 63.49

or

Stock price today = $66.9725

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Answer:

$2.50

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Use your knowledge of balance sheets, what are the total liabilities and retained earnings in the text below, respectively? ASSE
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Answer:

B) 280,000; 200,000

Explanation:

Assets = Liabilities + Shareholder Equity

Assets:

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Inventory                     $100,000

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Accounts payable         $12,000

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