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
yulyashka [42]
4 years ago
8

The Ramirez Company's last dividend was $1.75. Its dividend growth rate is expected to be constant at 25% for 2 years, after whi

ch dividends are expected to grow at a rate of 6% forever. Its required return (rs) is 12%. What is the best estimate of the current stock price?a. $41.58.b. $42.64.
c. $43.71.d. $44.80.e. $45.92.
Business
1 answer:
Greeley [361]4 years ago
8 0

Answer:

option b is correct

current stock price is $42.64

Explanation:

given data

dividend = $1.75

growth rate = 25% for 2 year

growth rate 1 = 6%

required return 2 = 12%

to find out

current stock price

solution

we will find here first stock price after 2 year that is

stock price = cash flow at 2 year end × ( 1+rate ) / ( rate 2 - rate1 )    ..................1

so here  cash flow at 2 year end = 1.75×1.25 = 2.1875

2.1875 × 1.25 = 2.734

stock price = 2.734  × ( 1+ 0.06 ) / ( 0.12 - 0.06 )  

stock price = 48.30

so stock price at 0.12 return

= cash flow at 1 year / ( 1+ rate 2 ) + cash flow at 2 year / ( 1+ rate 2 )² + stock price / ( 1+ rate 2 )²

= 2.1875 / ( 1+ 0.12 ) +  2.734 / ( 1+ 0.12 )² + 48.30 / ( 1+ 0.12 )²

= $42.64

so option b is correct

current stock price is $42.64

You might be interested in
Review the various strategies and assemble the strategies on the continuum from left to right in the order of magnitude from lea
sertanlavr [38]

Answer:

Following are the solution to this question:

Explanation:

In part A:

The following were it's less to one of the most foreign enterprises for businesses by using danger, contribution, and command.

  • Licenses
  • Exports
  • Franchises
  • Fabrication of contracts
  • Joint Undertaking/Strategic Arrangement
  • Specific Foreign Profits

In part B:

KFC- franchise

US Bank — Foreign Direct Investment

Soup by Campbell—Joint Venture/Strategic Alignment

Budweiser  Licensing

Exportation of international clients

Cell phone US —Manufacture of contracts

3 0
3 years ago
Leh Inc. recently borrowed $275,000 from its bank at a simple interest rate of 9 percent. The loan is for nine months and, accor
Andreyy89

Answer:

Monthly payment =$32,618.05

Explanation:

<em>To arrive at the monthly installment, we would calculate the total interest due on the loan for nine months, add it to the principal and then divided the sum by 9 months</em>

<em>The monthly installment</em>

= (Principal + total interest for 9 months)/ number of months

<em>Interest for 9 months </em>

= 9%× 9/12 × 275,000

= $18,562.5

<em>Monthly installment</em>

= (275,000 + $18,562.5)/9

=32,618.05 per month

3 0
3 years ago
Determine the annual financing cost of a 6-month (182-day) 20,000 discounted bank loan at a stated annual interest rate of 10 pe
ratelena [41]

Answer:

10.52%

Explanation:

The computation of the annual financing cost is shown below:

First we have to calculate the interest cost that is shown below:

= $20,000 × 10% × 182 days ÷ 365 days

= $997.26

Now the used funds is

= $20,000 - $997.26

= $19,003

Now the annual financing cost is

= ($997 ÷ $19,003) × (365 days ÷ 182 days)

= 10.52%

We assume there are 365 days in a year

3 0
3 years ago
Which of the following is the correct statement about fixed costs? The fixed cost per unit will decrease when volume increases.
Montano1993 [528]

Answer:

The correct statement is: "The fixed cost per unit will decrease when volume increases."

Explanation:

Total fixed costs remain the same within a relevant range, but the <em>fixed cost per unit</em> decreases as production increases, because the same fixed costs are spread over more units produced.

6 0
4 years ago
"A proposed new project has projected sales of $201,000, costs of $93,000, and depreciation of $25,400. The tax rate is 22 perce
Neko [114]

Answer:

Cash Flow = $89,828.

Explanation:

Detail is given in the picture attached.

5 0
4 years ago
Other questions:
  • The mandatory leadership-training seminar had just been concluded. All of the newly promoted managers at Marc’s Music, Inc. had
    7·1 answer
  • Perpetual Inventory Using LIFOBeginning inventory, purchases, and sales data for prepaid cell phones for May are as follows:Inve
    11·1 answer
  • What is the purpose of a trial balance?
    14·1 answer
  • Which of the following is a characteristic of effective teams? Groupthink is encouraged among team members. Conflict is managed
    7·1 answer
  • You've decided to buy a house that is valued at $1 million. You have $150,000 to use as a down payment on the house, and you tak
    10·1 answer
  • The contribution margin ratio of Candle Corporation's only product is 65%. The company's monthly fixed expense is $455,300 and t
    7·1 answer
  • Suppose you just bought an annuity with 11 annual payments of $16,100 at the current interest rate of 12.75 percent per year. a.
    14·1 answer
  • An industrial oven and fryer is an example of which factor of production?
    13·2 answers
  • Computer database programs make it easier for businesses to manage
    13·1 answer
  • How is it possible for nominal GDP to rise but real GDP to fall from one year to the next?
    6·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!