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Nitella [24]
3 years ago
10

CDB stock is currently priced at $82. The company will pay a dividend of $4.65 next year and investors require a return of 10.9

percent on similar stocks. What is the dividend growth rate on this stock
Business
1 answer:
lidiya [134]3 years ago
8 0

Answer:

g = 0.05229 or 5.229% rounded off to 5.23%

Explanation:

Using the constant growth model of dividend discount model, we can calculate the price of the stock today. The DDM values a stock based on the present value of the expected future dividends from the stock. The formula for price today under this model is,

P0 = D1 / (r - g)

Where,

  • D1 is dividend in year 1 or the next dividend
  • g is the growth rate
  • r is the required rate of return

Plugging in the available values for P0, D1 and r, we can calculate the value of g.

82 = 4.65  /  (0.109 - g)

82 * (0.109 - g) = 4.65

8.938 - 82g  =  4.65

8.938 - 4.65 = 82g

4.288 = 82g

g = 4.288 / 82

g = 0.05229 or 5.229% rounded off to 5.23%

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The answer is B. corporate bond issued by a computer manufacturer

Explanation:

Capital in business is the money committed to the business by its owner or owners. Capital can also be from a borrowed fund e.g loan

Bond is a long term loan issued to finance a capital project.

Therefore, the corporate bond issued by a computer manufacturer is a capital.

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Answer:

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The present value of the cash flows can be found by discounting the cash flows at the discount rate.

This can be found using a financial calculator

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I hope my answer helps you

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Explanation:

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Explanation:

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