Answer:
$81.52
Explanation:
The current share price is the present value of future dividends as well as the present value of the terminal value of dividends beyond year 6 as shown thus:
Current dividend=$3.95
Year 1 dividend=$3.95*(1+5%)=$4.15
Year 2 dividend=$4.15*(1+5%)=$4.36
Year 3 dividend=$4.36*(1+5%)=$4.58
The required rate of return(discount rate) for the dividends in the FIRST 3 years above is 14%
Year 4 dividend=$4.58*(1+5%)=$4.81
Year 5 dividend=$4.81*(1+5%)=$5.05
Year 6 dividend=$5.05*(1+5%)=$5.30
The required rate of return(discount rate) for the dividends in the NEXT 3 years above is 12%
Terminal value of dividend=Year 6 dividend*(1+growth rate)/(rate of return-growth rate)
growth rate=5%
rate of return=10%(rate of return thereafter)
terminal value=$5.30*(1+5%)/(10%-5%)
terminal value=$111.30
current share price=$4.15/(1+14%)+$4.36/(1+14%)^2+$4.58/(1+14%)^3+$4.81/(1+12%)^4+$5.05/(1+12%)^5+$5.30/(1+12%)^6+$111.30/(1+10%)^6
current share price=$81.52
It is true that Costs, also called differential costs, are the additional costs from selecting a certain course of action.
<h3>What is
differential costs?</h3>
Differential cost serves as the difference between the cost of alternative decisions.
Therefore, It is true that Costs, also called differential costs, are the additional costs from selecting a certain course of action and the cost do take place when a business have several similar options,
Learn more about differential costs, at
brainly.com/question/25799822
#SPJ1
Answer: 0.78 pound mark exchange rate
Explanation:
The Purchasing power parity (PPP) is typically used to make comparison between the currencies of different countries' currencies and also used in comparing their standards of living.
According to PPP, the pound-mark exchange rate in 2003 will be calculated as:
= 280/360
= 0.78
<u>Solution and Explanation:</u>
The data of SAG of special order is given below:
Cost per unit = $3.50
, Allocated fix cost = $1.50
, Number of units in order = 15000
<u>Calculated the total cost of the special order as follows:
</u>
Incremental cost per unit = Cost per unit-Allocated fix cost =$(3.50 minus 1.50) =$2
Incremental cost per unit=cost per unit-allocated fix cost =$(3.50 minus1.50) =$2
Total incremental cost 15000 unit = number of units in order x Incremental cost per unit =15000 multiply $2 =$30000
Therefore, total cost of the special order is $30000
b) Offering price by ETU = $35000. Hence, the offer made by ETU would affect the short term of the special order.
Contribution cost = $(35000 minus 30000) =$5000
Answer:
Each 1000 par value bond will sell at issuance for $110.71
Explanation:
A zero coupon bond is a bond that does not pay interest and is issued at a heavy discount which is a compensation for the interest payment. The value of the zero coupon bond today is calculated using the present value of the face value of zero coupon bond. The formula to calculate the present value of the zero coupon bonds is,
PV = Face value / (1+r)^t
As the required rate is quoted in annual terms, we will divide it by 2 to calculate the semi annual required rate and multiply the time (annual) by 2 to calculate the semi annual periods in 25 years.
Semi annual required rate = 9% / 2 = 4.5%
Semi annual periods (t) = 25 * 2 = 50
PV = 1000 / (1+0.045)^50
PV = $110.70965 rounded off to $110.71
