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Paul [167]
4 years ago
10

Lawrence​ Industries' most recent annual dividend was ​$1.80 per share ​(D0equals$ 1.80​), and the​ firm's required return is 11

​%. Find the market value of​ Lawrence's shares when dividends are expected to grow at 8​% annually for 3​ years, followed by a 5​% constant annual growth rate in years 4 to infinity.
Business
1 answer:
Dima020 [189]4 years ago
8 0

Answer:

The price of the stock today is $34.13

Explanation:

The price of the stock that grows at two different growth rates can be calculated using the two stage growth model of DDM. The DDM requires to discount back the dividends to calculate the price of the share today.

The price of the stock today is,

P0 = D1 / (1+r) + D2 / (1+r)^2 + ... + Dn / (1+r)^n + [(Dn * (1+g) / (r - g)) / (1+r)^n]

P0 = 1.8 * (1+0.08) / (1+0.11)   +  1.8 * (1+0.08)^2 / (1+0.11)^2  +  

1.8 * (1+0.08)^3 / (1+0.11)^3  +  [ (1.8 * (1+0.08)^3 *(1+0.05) / (0.11-0.05)) / (1+0.11)^3]

P0 = $34.127 rounded off to $34.13

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lisabon 2012 [21]

Answer:

An IPO stands for Initial Public Offering. It's a public offering in which shares of a company are sold to institutional investors and usually also retail investors.

8 0
3 years ago
Kim is the sales representative for a major textbook publisher. When she calls on the business faculty at General University, sh
Alisiya [41]

Answer:

The answer is: B) User

Explanation:

In this specific case the students can be both only final users of your products (books) or they can also be the buyers/users of the books. They are obviously going to be the product’s end-users. They will need to read and study the books for their university classes.

That doesn´t necessarily mean that they are going to buy the books. They definitely are not going to decide whether those books are appropriate and useful for the university´s courses or not. When I went to college sometimes our professor told us to buy certain books and other times textbooks were given to us.  

6 0
4 years ago
A bank has excess reserves of $1 million and makes a new loan for $500,000. If the bank faces a 10% required reserve ratio, by h
nataly862011 [7]

Answer:

With a 10% required reserve ratio, the money supply could increase by $500,000/r when the loan is made.

This equals $5,000,000 ($500,000/0.1) where r = 10%

Explanation:

a) The money multiplier is the amount of money that banks generate with each dollar of reserves. Reserves is the amount of deposits that the Federal Reserve requires banks to hold and not lend.

b) The formula for the money multiplier is simply 1/r, where r = the reserve ratio.

c) The reserve ratio, also known as Cash Reserve Ratio, is the percentage of deposits which commercial banks are required to keep as cash according to the directions of the central bank.  It is used by the central bank to control the supply of money in the economy.  When the central bank wants to increase the money supply, it lowers the reserve ratio and vice versa.

d) According to wikipedia.com, "the money supply is the total value of money available in an economy at a point of time."  It is usually defined as currency in circulation plus demand deposits.  It is the demand deposits that give commercial banks the ability to create money using the reserve ratio.

8 0
3 years ago
Based on the reasonable-consumer standard, a consumer should be protected by the government ____________.
Alinara [238K]

This is the standard that the government should protect consumers but that consumers are also expected to be responsible and stay informed.

7 0
3 years ago
Stock X has a beta of 1.4 and stock Y has a beta of 0.8. The market risk premium is 5.0% and the risk-free rate is 2.0%. What is
NNADVOKAT [17]

Answer:

d. 4%.

Explanation:

The computation is shown below;

We know that

Expected stock return = Risk free rate + Beta × Market risk premium

So,  

Expected stock return X is

= 2% + 1.4 × 5%

= 9%

And,

Expected stock return Y is

= 2% +.8 × 5%

= 6%

Now  

Expected Portfolio return Y and risk free asset is

= Weight stock y × return Y + Weight risk-free asset × Return risk-free asset

= .5 × 6% + .5 × 2%

= 4%

8 0
3 years ago
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