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stiv31 [10]
3 years ago
10

Eastern Electric expects to pay a dividend of $1.69 per share next year and sells for $24 a share. a. If investors believe the g

rowth rate of dividends is 2% per year, what rate of return (r) do they expect to earn on the stock? b. Instead of the facts outlined in a. above, if investors' required rate of return is now 12%, what must be the growth rate they expect of the firm (based on the initial facts provided)? c. At a sustainable growth rate of 3% and a plowback ratio of 30%, what must be the rate of return earned by the firm on its new investments?
Business
1 answer:
jonny [76]3 years ago
8 0

Answer:

a. 9.04%

b. 4.96% approx.

c. 10%

Explanation:

a. As per dividend growth model,

Required rate of return = \frac{D_{1} }{P_{0} } \ +\ g

wherein, D_{1} = Next year expected dividend

               P_{0} =  Current market price of a share as on today

               g = Annual growth rate in dividend ( in percentage)

               r = Rate of return or cost of equity

Hence, required rate of return (r) = \frac{1.69}{24} \ +\ .02   = 9.04%

b.  R = 12%

    P_{0} = $24

    D_{1} = $1.69

Then, using the above formula, we have,

.12 = \frac{1.69}{24} \ +\ g

⇒ g = 4.96 % approx

c. g = 3%

   Retention ratio (b) = 30%

   Hence dividend payout ratio = 1 - 30 = 70%

   g = b × r

   .03 = .3 × r

⇒ r = 0.1 or 10%

Hence, rate of return earned by the firm on its's new investment is 10%.

   

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Answer:

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2 years ago
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pishuonlain [190]

Answer:

b. $8.3 million

Explanation:

A 2013 court verdict then ordered DePuy to pay plaintiffs <u>$8.3 million</u> in damages.

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3 years ago
Which of the actions must be taken if a municipality wishes to raise its debt limit?
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Public referendum

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Public referendum

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Who is responsible for withholding the employees income tax?​
julia-pushkina [17]
An employer's federal payroll tax responsibilities include withholding from an employee's compensation and paying an employer's contribution for Social Security and Medicare taxes under the Federal Insurance Contributions Act (FICA).

Employers have numerous payroll tax withholding and payment obligations. Of the utmost importance is the proper payment of what are commonly known as FICA taxes. FICA taxes are somewhat unique in that there is required withholding from an employee's wages as well as an employer's portion of the taxes that must be paid.

The Federal Insurance Contributions Act (FICA) is the federal law requiring you to withhold three separate taxes from the wages you pay your employees. FICA is comprised of the following taxes:

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The law also requires you to pay the employer's portion of two of these taxes:

6.2 percent Social Security tax
1.45 percent Medicare tax (the “regular” Medicare tax).
As you can see, the employer’s portion for the Social security tax and the regular Medicare tax is the same amount that you're required to withhold from your employees' wages. (Different rules apply for employees who receive tips.) There is no employer portion for the 0.9 percent Medicare surtax on high-earning employees.

In other words, you withhold a 6.2 percent Social Security tax from your employee’s wages and you pay an additional 6.2 percent as your employer share of the tax (6.2 employee portion + 6.2 employer portion = 12.4 percent total). Also, you withhold a 1.45 percent Medicare tax from your employee’s wages and you pay an additional 1.45 percent as your employer share (1.45 employee portion + 1.45 employer portion = 2.9 percent total). The total of all four portions is 15.3 percent (6.2 percent employee portion of Social Security + 6.2 percent employer portion of Social Security + 1.45 percent employee portion of Medicare + 1.45 percent employer portion of Medicare = 15.3 percent).

Unlike the other FICA taxes, the 0.9 percent Medicare surtax is imposed on the employee portion only. There is no employer match for the Medicare surtax (also called the Additional Medicare Tax). You withhold this 0.9 percent tax from employee wages and you do not pay an employer’s portion. Also, unlike the other FICA taxes, you withhold the 0.9 percent Medicare surtax only to the extent that wages paid to an employee exceed $200,000 in a calendar year. You begin withholding the surtax in the pay period in which you pay wages in excess of this $200,000 “floor” to an employee and you continue to withhold it each pay period until the end of the calendar year.

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eimsori [14]

Answer:

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