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atroni [7]
4 years ago
9

Biarritz Corp. is growing quickly. Dividends are expected to grow at a rate of 28 percent for the next three years, with the gro

wth rate falling off to a constant 7.9 percent thereafter. If the required return is 16 percent and the company just paid a dividend of $3.70, what is the current share price?
Business
1 answer:
Georgia [21]4 years ago
8 0

Answer:

The price of the stock today is $79.78

Explanation:

The two stage growth model of the DDM will be used to calculate the price of the stock based on discounting the expected future dividends. The first three years dividends will be discounted using the required rate of return along with the calculation of terminal value at the end of third year when the dividend growth becomes constant. The terminal value will also be discounted back. The price per share of the stock today is,

P0 = D1 / (1+r)  +  D2 / (1+r)^2  +  D3 / (1+r)^3  +  [D3 * (1+g) / (r - g)] / (1+r)^3

Where,

D1 is the D0 * (1+G) which is and G is the initial growth rate of 28%.

P0 = 3.7 * (1+0.28) / (1+0.16)  +  3.7 * (1+0.28)^2  /  (1+0.16)^2  +  

3.7 * (1+0.28)^3  /  (1+0.16)^3  +  

[ 3.7*(1+0.28)^3*(1+0.079) / (0.16-0.079)] / (1+0.16)^3

P0 = $79.779 rounded off to $79.78

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Answer:

groupware

Explanation:

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3 0
4 years ago
St. Jude Medical makes cardiovascular medical devices, including the world's most widely used mechanical heart valve. Its produc
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Answer:

Advantage in competition. ( competitive advantage)

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8 0
3 years ago
Read 2 more answers
If a company employs two office assistants for every nine architects (a staffing ratio of 2:9) and it plans to expand and hire e
Art [367]

Answer:

4

Explanation:

Given:

A company employs two office assistants for every nine architects and

ratio is given = 2:9

Question asked:

How many new office assistants will it need to hire as it plans to hire eighteen new architects = ?

Solution:

Let ratio of new office assistants = x

Ratio of two office assistants for every nine architects = 2:9

By using formula of ratio and proportion:

Ratio of two office assistants for every nine architects : :  ratio of new office assistants for eighteen new architects,

2 : 9 : : x : 18

\frac{2}{9}  = \frac{x}{18} \\

By cross multiplication,

2\times18 = x \times18\\36 = 9 x

Dividing both side by 9,

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Thus, 4 new office assistants will it need to hire.

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in 2015 the financial statements of Ultimate Medical Center report a 500000 and total revenues and 145000 and net income the bal
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Price-sales ratio = Price per share/Sales per share .... *calculate each as a percentage of total sales to determine the the Net Profit ... financial managers using a common-size balance sheet.

3 0
3 years ago
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Mad Hatter Enterprises purchased new equipment for $373,000, terms f.o.b. shipping point. Other costs connected with the purchas
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Answer: $332,540

Explanation: find attached my solution in the document below.

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