1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
maw [93]
3 years ago
15

A common stock pays an annual dividend per share of $1.80. The risk-free rate is 5%, and the risk premium for this stock is 4%.

If the annual dividend is expected to remain at $1.80 per share, what is the value of the stock
Business
1 answer:
ArbitrLikvidat [17]3 years ago
3 0

Answer:

The value of the stock today is $20

Explanation:

Using the CAPM equation, we first calculate the required rate of retunr on the stock.

The equation for CAPM is,

r = rRF + Beta * rpM

Where,

  • rRF is the risk free rate
  • rpM is the risk premium on market
  • Beta * rpM is the risk premium on stock

r = 0.05 + 0.04

r = 0.09 or 9%

The value of the stock can be calculated using the zero growth model of DDM. The DDM values the stock based on the present value of the expected future dividends from the stock. As the dividend from the stock is expected to remain constant through out to an indefinite period, the value of the stock today is,

P0 = Dividend / r

P0 = 1.8 / 0.09

P0 = $20

You might be interested in
A vendor sells hot dogs at $17.00 /piece. For every hot dog he spends $11.23 in the raw material. Additionally he spends $0.90 f
Gemiola [76]

Answer: $4.87

Explanation:

The question is asking for the Contribution margin which is the amount left of the selling price after the variable costs have been deducted.

Contribution margin = Selling price - variable costs

= Selling price - Raw materials - packing costs

= 17 - 11.23 - 0.90

= $4.87

8 0
3 years ago
Pember Corporation started business in 2012 by issuing 200,000 shares of $20 par common stock for $27 each. In 2017, 25,000 of t
natima [27]

Answer:

Option D is the correct option. Please choose option D that is $150,000.

Explanation:

Amount of paid-in capital from treasury stock transactions = Shares exchanged * (Market Price - Share purchase Cost)

Where Shares exchanged = 25000

Market price = $45

Cost of share = $39

Therefore, the amount of paid-in capital from treasury stock transactions = 25000 shares * (45 - 39) = $150,000

Option D $150,000 is correct

6 0
3 years ago
What does a money market account offer that a certificate of deposit (CD)
ruslelena [56]

Answer: A. You can withdraw money at any time.

Explanation:

4 0
2 years ago
Nadell Corporation reported the following data for the month of AprilInventory Beginning Ending Raw Materials $30,000 $32,000 Wo
jeyben [28]

Answer:

COGS= $181,000

Explanation:

Giving the following information:

Beginning Finished Goods= $39,000

Ending Finished Goods= $53,000

Cost of goods manufactured= 234,000 - 39,000= $195,000

<u>To calculate the cost of goods sold, we need to use the following formula:</u>

COGS= beginning finished inventory + cost of goods manufactured - ending finished inventory

COGS= 39,000 + 195,000 - 53,000

COGS= $181,000

7 0
2 years ago
An individual purchased a fixed annuity with flexible premiums. When she annuitized the policy, she chose the Life Income 10-Yea
Dvinal [7]

Answer:

The beneficiary should receive 6 more years of payment.

Explanation:

An annuity certain option guarantees that the insured or his/her beneficiaries will receive payments for a minimum period of time in case the insured dies.

In this question the certain option was 10 years, during the first 4 years the insured received his/her annuity payments, but once the insured passed away, his/her beneficiaries will continue to receive payments until the 10 year period ends (6 more years).

5 0
3 years ago
Other questions:
  • Stephen is preparing his pitch for a bank representative that will be considering him for a business loan. He lists the resumes
    7·1 answer
  • Macy Corporation's relevant range of activity is 4,000 units to 8,000 units. When it produces and sells 6,000 units, its average
    10·1 answer
  • Respond to the following comments:
    11·1 answer
  • What document is used to summarize a job applicant’s experience, education, and achievements?
    11·2 answers
  • 3 best basic economic questions
    15·1 answer
  • "Buying off" the leaders of a resistance group by giving them a key role and seeking their advice not to find a better solution
    10·1 answer
  • Both UTech Inc. and Mirco Corp. incur a cost of $200 to manufacture a single unit of a cell phone. However, UTech Inc. charges a
    13·1 answer
  • Choosing which types of assets you will invest in is known as
    8·1 answer
  • _____ is a series of activities designed to align and improve individual performance to drive organizational results.
    10·1 answer
  • Any action, other than lowering its price, that a firm undertakes to increase the demand for its output is called?
    5·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!