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allsm [11]
3 years ago
13

If ABC corporation paid a dividend of $6 per share last year. The stock currently sells for $80 per share. You estimate that the

dividend will grow steadily at a rate of 6% per year into the indefinite future. What is the cost of equity?
a. 7.5%
b. 7.95%
c. 11.50%
d. 13.50%
e. 13.95%
Business
1 answer:
krok68 [10]3 years ago
6 0

Answer:

option (e) 13.95%

Explanation:

Data provided in the question:

Dividend paid, D0 = $6 per share

Current selling price = $80 per share

Dividend growth rate = 6% = 0.06

Now,

Cost of equity = [ D1 ÷ Current price] + Growth rate

=  [ ( D0 × (1 + g) ) ÷ $80 ] + 0.06

=  [ ( $6 × (1 + 0.06) ) ÷ $80 ] + 0.06

= [ 6.36 ÷ $80 ] + 0.06

= 0.1395

or

= 0.1395 × 100%

= 13.95%

Hence,

The correct answer is option (e) 13.95%

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Sheffield Realty Corporation purchased a tract of unimproved land for $115,500. This land was improved and subdivided into build
monitta

Answer

The answer and procedures of the exercise are attached in the following archives.

Explanation  

You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.  

Download xlsx
4 0
3 years ago
The term ______ describes circumstances where a country's exports exceed it imports.
Misha Larkins [42]

Trade surplus or positive trade balance.

Both of these terms refer to the situation of higher exports than imports.

8 0
3 years ago
An economist makes an assumption that each additional year of education causes future wages to rise by 7 percent. In this​ model
ladessa [460]

Answer:

Wage year 4= $12222.19

Explanation:

Giving the following information:

Each additional year of education causes future wages to rise by 7 percent.

A person with 12 years of education makes ​$21 000 per​ year.

A person with 4 years of education=$?

We will use the present value formula to calculate the wage in year 0. Then with the final value formula calculate the year 4 wage.

PV= FV/[(1+r)^n]

FV=final value at t time

r= rate

n= period of time

PV= 21000/(1,07^12)= $9324. 2511

Final Value= PV*(1+r)^t

Final Value year 4= 9324.2511*(1,07^4)= $12222.19

8 0
3 years ago
Fresh Veggies, Inc. (FVI), purchases land and a warehouse for $550,000. In addition to the purchase price, FVI makes the followi
maw [93]

Answer:

Land 594,500

Explanation:

We must include all cost necessary to acquire the land and lelave it ready to use.

But, the demolition cost are associate with the old warehouse thus, as thsis asset is being destroyed It will be considered period cost, It will not be capitalized through land.

Acquisition cost    550,000

broker commission 35,000

title insurance            2,500

closing cost       <u>         7,000   </u>

Total cost               594,500

8 0
3 years ago
Linda visits her favorite clothing store and is disappointed to discover that the shirt she was hoping to purchase is out of sto
Julli [10]

Answer:

d. backorder

Explanation:

Based on the scenario being described within the question it can be said that the sales associate most likely offered to backorder the item for Linda. This is when a retailer places an order for a product that is no longer in stock for the time being, in order to comply with the customer, but will take a while for that order to come in and for the transaction to be completed.

8 0
3 years ago
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