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Scorpion4ik [409]
3 years ago
5

Nachman Industries just paid a dividend of D0 = $1.32. Analysts expect the company's dividend to grow by 30% this year, by 10% i

n Year 2, and at a constant rate of 5% in Year 3 and thereafter. The required return on this low-risk stock is 9.00%. What is the best estimate of the stock’s current market value? $41.59 $42.65 $43.75 $44.87 $45.99
Business
1 answer:
Nuetrik [128]3 years ago
4 0

Answer:

Stock's current market value = $44.87

Explanation:

We can solve this stock valuation problem using DDM (Dividend Discount Model).

Lets find the dividends for the years:

D0 = $1.32

D1 = $1.32*1.3 = $1.716

D2 = $1.716*1.1 = $1.888

D3 = $1.888*1.05 = $1.982

The formula of stock valuation:

P_n=\frac{D_{n+1}}{k_e-g}

Lets calculate the terminal value after Year 3 afterwards:

P_n=\frac{D_{n+1}}{k_e-g}\\P_n=\frac{1.982}{0.09-0.05}\\P_n=49.55

<u>Note:</u> rate of return, k_e = 0.09 (given) and growth rate (g) is 5% or 0.05

Now,

The present value of the stocks is gotten using formula:

P_n=\frac{D_{n+1}}{(1+r)^n}+\frac{Terminal}{(1+r)^n}

So, we have:

P_0=\frac{1.716}{1.09}+\frac{1.888}{1.09^2}+\frac{49.55}{1.09^2}\\P_0=44.87

Stock's current market value = $44.87

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3 years ago
The Boxwood Company sells blankets for $ 32.00 each. The following was taken from the inventory records during May. The company
nika2105 [10]

Answer:

(C) $94.00

Explanation:

The computation of the cost of goods sold for the sale of May 20 is shown below:

= Remaining units × cost price + remaining units × cost price

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= $60 + $34

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8 0
3 years ago
When Home Movies Inc. opened stores in other countries, it increased the company's international market share. Home Movies took
olga55 [171]

Answer:

<h2>In this instance,Home Movies Inc. took advantage of market expansion opportunity to enhance market share.Hence,the correct answer is market expansion.</h2>

Explanation:

In Microeconomics,the practice of market expansion refers to the enhancement of business activities or selling of goods and services into newer sections of the market which encompasses factors such as demographic,economic,geographical,social etc.In this context,the geographical expansion of market can possibly include international markets as well as long it can comprehensively cover the desired consumer group which can lead to higher revenue generation and potential market share.It is an extremely formidable economic strategy for any business organisation or company to expand the consumer accessibility by tapping into new geographical areas in the global or international market.An effective market expansion,however, requires a thorough and considerable market research with a specific emphasis on the the potential new markets that the existing business can easily reach and the new consumer base in those markets who will most probably like the products and/or services sold by the business based on various preferential attributes.This can evidently generate immense opportunities for sales and overall economic growth.

6 0
4 years ago
The following information is provided for Slickers, Inc. for year 2016: • Preferred stock, 5%, $20 par value, 1,500 shares issue
gayaneshka [121]

Answer:

The amount of dividends paid to common stockholders in 2016 is $4000

Explanation:

The cumulative preferred shares are the shares that accumulate dividends in case the dividends on these shares are not paid or paid partially in a year. The accumulated dividends will need to be paid first whenever the company declares dividends.

The amounts of dividends on preferred share for one year is,

Dividends - Preferred shares = 20 * 0.05 * 1500  =  $1500

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The common shares holders are paid after the preferred share holders have been paid. This means that we will deduct the amount of accumulated dividends on preferred shares and the dividends for this year on preferred shares from the total dividends to calculate the amount to be paid to common share holders as dividends.

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3 0
3 years ago
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Explanation:

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b. Unless he returns money to Acme this year, Ralph will be able to claim a deduction of $5,000. Although Ralph originally paid the $1,750 tax on invoice and only saved $1,400 on the reduction of the refund and because the repayment timing resulted in an additional $350 tax. As the amount refunded to Ralph is more than $3,000 according to IRC§ 1341a. This is possible for Ralph to use the taxes accrued in the next year from the same refund to cover taxes. So Ralph will say a tax offset of $1,750 instead of a deduction of $5,000.

c.The sum of the deduction must be more than $3,000, according to IRC § 1341(a). Because Ralph spent just $2,500, he is not liable for tax reduction deductions, but can only claim a refund deduction.

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