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Paha777 [63]
2 years ago
6

MTB Industries currently pays an annual dividend of $1.50 per share, and it is expected that these dividend payments will contin

ue indefinitely. If the firm's equity cost of capital is 12%, the value of a share of MTB stock is closest to:
Business
1 answer:
Sergio [31]2 years ago
8 0

Answer:

The value of MTB stock is closest to $12.50

Explanation:

The value of MTB stock is calculated using the below formula for the present of an annuity in perpetuity=dividend/expected rate of return

The expected rate of return in this instance is the equity cost of capital

Value of MTB stock=$1.50/12%

Value of MTB stock=$12.5

A rational investor a price for a stock today that reflects the future cash flows payable by a way of dividends payments promised by such stock considering the investor's rate of return as done above

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Answer:

$48,000

Explanation:

The computation of the corporation debt is shown below:

Since the asset is increased by 20%

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ANd, the increased assets is

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= $120,000

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