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drek231 [11]
3 years ago
6

Shore Hotels just paid an annual dividend of $1.50 per share. The company will increase its dividend by 7 percent next year and

will then reduce its dividend growth rate by 2 percentage points per year until it reaches the industry average of 3 percent dividend growth, after which the company will keep a constant growth rate forever. What is the price of this stock today given a required return of 14 percent?
(A) $14.85
(B) $18.99
(C) $11.83
(D) $16.54
(E) $13.02
Business
1 answer:
kiruha [24]3 years ago
5 0

Answer:

(A) $14.85

Explanation:

Annual dividend just paid (D0)= $1.50

growth rate = 7% or 0.07 as a decimal

D1 ; next year's dividend = D0(1+g) = 1.50(1.07)= 1.605

growth rate = 7-2% = 5% or 0.05 as a decimal

D2; dividend yr2 = D1(1+g) = 1.605(1.05) = 1.6853

growth rate = 5-2% = 3% or 0.03 as a decimal

Terminal Cashflow; D3 = 1.6853 (1.03) = 1.7359

Next, find the present value of each dividend at 14%;

PV(D1) = 1.605/(1.14 ) = 1.4079

PV(D2) = 1.6853/(1.14² ) = 1.2968

PV of terminal Cashflow (D3 onwards) = \frac{\frac{1.7359}{0.14-0.03} }{1.14^{2} } = 12.1429

Next, sum up the PVs to find the price;

= 1.4079 + 1.2968 + 12.1429

= 14.848

Therefore the price of the stock today  is $14.85

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kumpel [21]

Answer:

Owners Equity/Net Worth is $106,080

<u>Explanation:</u>

<u>Assets</u>

Cash                             $33,700

Supplies                       $5,780

Accounts Receivable  $12,600

Equipment                    <u>$77,400</u>

Total Assets                 <u>$129,480</u>

<u>Liabilities</u>

Accounts Payable                 $23,400

<em>Owners Equity (Balance)    </em><u><em>$106,080</em></u>

Total Liabilities and Equity    <u>$129,480</u>

4 0
3 years ago
Sarah's company encourages her to tolerate ambiguity and reward her employees for taking risk. In​ addition, she often has descr
Alik [6]

Answer:

Innovative company culture

Explanation:

This Characterizes a particular form of corporate culture mainly aimed at promoting creativity in business. Innovation Culture is the working environment that managers create to promote and apply unorthodox thought. Work environments that promote a creativity culture generally believe that creativity is not a leading province but it can originate from everyone.

7 0
3 years ago
A $ 5000 bond with a coupon rate of 6.7​% paid semiannually has eight years to maturity and a yield to maturity of 7.8​%. If int
prohojiy [21]

Answer:

As a result of an increase in the YTM, the price of the bond will fall $4677.19 from to $4593.67

Explanation:

The bonds are valued or priced based on the present value of annuity of interest payments and the present value of the principal. Based on the YTM of 7.8% the bonds are priced at,

coupon payment = 5000 * 0.067 *1/2  =  $167.5

Semiannual YTM = 7.8 *0.5  =  3.9%

Semi annual periods to maturity = 8 * 2  =  16 periods

Old Price = 167.5 * [( 1 - (1 + 0.039)^-16  + 5000 / (1+0.039)^16

Old Price = $4677.19

New semiannual YTM = 8.1% / 2  =  4.05%

New Price = 167.5 * [( 1 - (1+0.0405)^-16) / 0.0405] + 5000 / 1.0405^16

New Price = $4593.67

7 0
2 years ago
Which of the following factors, by itself, requires a corporation to comply with the reporting requirements of the Securities Ex
Ludmilka [50]

Answer:

d.Shares listed on a national securities exchange.

Explanation:

The primary purpose of enacting the securities exchange act of 1934 was to regulate securities and transactions in the financial or money markets. The act ensures fairness in financial dealings, thereby creating investor confidence.

For it to achieve its objectives, the securities exchange act contains mandatory disclosure requirements that ensure investors have access to relevant and accurate information to make decisions. The disclosures have to be made at crucial times to aid in investment decisions. All companies listed in the stock exchange are required to abide by the requirements of the exchange act.

6 0
3 years ago
Beginning Work in Process Inventory was 10,000 units that were 20% complete and 40,000 units started, with ending Work in Proces
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Answer:

Material EUP = 5000

Conversion Costs EUP = 51,200

Explanation:

Under weighted average method

Beginning Work in Process Inventory            10,000

Units Started                                                 <u>  = 40,000</u>

Units to account for                                           <u>50,000</u>

<em><u>In the Work In Process for Conversion Costs</u></em>

Beginning Work In Process (10,000*20 %)   = 2000 were complete

Work done on beginning inventory = 10,000- 2,000= 8,000

Units Started                                                   = 40,000

Add Ending Inventory (8000*40%)                 <u> 3200</u>

Units to account for =                                     <u>51,200</u>

5 0
3 years ago
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