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Paul [167]
4 years ago
5

West Coast Ltd. wants to issue preferred stock that pays an annual dividend of $6.80 a share. The company has determined that st

ocks with similar characteristics provide a 12.25 percent rate of return. What should the offer price be
Business
1 answer:
egoroff_w [7]4 years ago
5 0

Answer:

The offer price will be $55.51

Explanation:

The constant cash flow over a indefinite period of time is the perpetuity. The dividend payment on the preferred is also considered as perpetuity because it pays the constant amount of dividend and there is no time limit for the payment.

Value of the preferred share can be determine by following formula

Value of Perpetuity / Cash flow / required rate of return

Price of share = Dividend Payment / Rate of return

Price of share = $6.8 / 12.25% = $55.51

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Agata [3.3K]

Answer:

$87.25

Explanation:

Calculation for the effective price paid to repurchase the stock

Using this formula

Effective price = Strike Price + Price

Let plug in the formula

Effective price =$80+$7.25

Effective price =$87.25

Therefore the effective price paid to repurchase the stock will be $87.25

8 0
3 years ago
National manufacturer of ball bearings is experimenting with two different processes for producing precision ball bearings. it i
34kurt
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BBB Auto Club provides emergency road service and other services to its members. BBB Auto Club charges a higher membership fee t
Oksanka [162]

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In the given case, The company is charging more from new customers because they have perception that they take their services only when it is highly probable they have to use that.

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8 0
3 years ago
Your company is experiencing difficult times and must lay off 52 workers, many of whom have been with the company for a number o
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Answer:

ethical manner

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Ethical  manner because  in this particular case , the sender has to inform workers about their layoff. This is a bad news for workers. Therefore, the sender is justified in using indirect approach .  However there should be a formal or official communication to the workers at a later stage.

7 0
4 years ago
Airline travel and car rentals are complement goods. What happens first when
LenaWriter [7]

Answer:

D. The quantity of car rentals demanded goes up.

Explanation:

Complimentary goods are products that are used together. If Airline travel and car rentals are complementary goods, it means the two products must be used together. Either of the products will not add much value to the customer if purchased alone.  

Complimentary products have a joint demand. An increase in demand for one good leads to an increase in demand for the other product. If the demand for Airline travel rises, the demand for car rentals also increases. A decrease in demand will have similar effects.

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3 years ago
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