Answer:
d. The stock price is expected to be $54 a share one year from now.
Explanation:
Using dividend discount model(DDM), find next year's dividend;
P0 = D1/ (r-g)
50 = D1/(0.14-0.08)
50 = D1/ 0.06
Multiply both sides by 0.06 to solve for D1;
50 *0.06 = D1
3 = D1
Next, year's dividend is $3
Dividend yield = D1/P0;
= 3/ 50 = 0.06 or 6% hence choices A& B are incorrect.
Next year's price; P1 = P0(1+g)
P1 = 50(1.08) = $54 hence choice D is correct
Answer:
It is 16.9
Explanation:
Operating cycle = Inventory turnover + Receivable turn over - payable turnover
Hence, Operating cycle = 7.3+9.6
=16.9
Operating cycle implies how long it takes us to convert entire production process to cash .
It has an direct relationship with the level of working capital required. The higher the operating cycle, the higher the working capital investment required to keep the operation running.
A cash driven businesses like restaurant which hardly sell on credit will certainly have shorter operating cycle compared to a manufacturing company.
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Answer:
a. 9.07%
b. 5.93%
c. 12.07%
Explanation:
Dividend valuation method is used to calculate the the value of stock based on the dividend paid, its growth rate and rate of return.
Stock Price = Dividend / ( Rate of return - Growth rate )
a.
$27 = $1.64 / ( Rate of return - 3% )
Rate of return - 0.03 = $1.64 / $27
Rate of return - 0.03 = 0.0607
Rate of return = 0.0607 + 0.03
Rate of return = 0.0907 = 9.07%
b.
$27 = $1.64 / ( 12% - Growth rate )
0.12 - Growth rate = $1.64 / $27
0.12 - Growth rate = 0.0607
Growth rate = 0.12 - 0.0607
Growth rate = 0.0593 = 5.93%
c.
$27 = $1.64 / ( Rate of return - 6% )
Rate of return - 0.06 = $1.64 / $27
Rate of return - 0.06 = 0.0607
Rate of return = 0.0607 + 0.06
Rate of return = 0.1207 = 12.07%
Answer:
This question is incomplete, here are the missing answers:
<em>a. medium of exchange</em>
<em>b. unit of account</em>
<em>c. backed by a precious metal</em>
<em>d. store of value</em>
<u>The answer is </u><u>c.</u>
Explanation:
Money has three general functions (characteristics):
- <em>medium of exchange</em> - Mainly created as the substitute of barter, money has the elementary use as an intermediary when exchanging goods or services.
- <em>unit of account</em> - In order to compare the value of certain goods and services, it is essential to measure them. This is where money applies as unit of account.
- <em>store of value </em>- Given that the money is stable (purchasing power and limited inflation), it is a general option for storing value. That means it can always be easily exchanged into goods or services, no matter the time.
According to basic elimination, <u>c. is the correct answer</u>. Also, it is also known that <em>backing money with gold</em> or silver reserves is an old practice which is irrelevant for most currencies nowadays. Today, the government is backing up the value of its currency. Such money is called <em>fiat money</em>.
