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
I am Lyosha [343]
3 years ago
14

BC 'n D just paid its annual dividend of $.60 a share. The projected dividends for the next five years are $.30, $.50, $.75, $1.

00, and $1.20, respectively. After that time, the dividends will be held constant at $1.40 per share. What is this stock worth today at a discount rate of 14 percent
Business
1 answer:
Lemur [1.5K]3 years ago
6 0

Answer:

$7.60

Explanation:

Find PV dividend per year at 14% discount rate;

0.30 / 1.14 = 0.2632

0.50 / 1.14² = 0.3847

0.75 / 1.14³ = 0.5062

1 / (1.14^4) = 0.5921

1.20 / (1.14^5) = 0.6232

Find the PV of the terminal cashflow;PV = \frac{\frac{1.40}{0.14} }{(1.14)^{5} }  = 5.2308

Next, sum up the PVs to find the price of the stock today;

Price = 0.2632 + 0.3847 + 0.5062 + 0.5921 + 0.6232 + 5.2308

= $7.60

You might be interested in
Franklin Corporation issues $50,000, 10%, 5-year bonds on January 1, for $52,100. Interest is paid semiannually on January 1 and
Karo-lina-s [1.5K]

Answer:

Bond interest expense = $2,290

so correct option is b. $2,290

Explanation:

given data

Bond issued = $50,000

Interest rate  = 10%

interest semi-annually = 5%

time period = 5 year

to find out

amount of bond interest expense

solution

we get first Cash interest payment that is here

Cash interest payment = $50,000 × 5%

Cash interest payment = $2,500     ....................1

and Bond premium will be

Bond premium = $52,100 – $50,000

Bond premium = $2,100      .......................2

we know interest paid semi annually so time period will be  = 10

so Amortization of bond premium will be here as

Amortization of bond premium = \frac{2100}{10}

Amortization of bond premium = $210      .................3

so  Bond interest expense will be calculate as

Bond interest expense = Cash interest payment - Amortization of bond premium     .......................4

put here value

Bond interest expense = $2,500 - $210

Bond interest expense = $2,290

so correct option is b. $2,290

8 0
3 years ago
(a) how are bonds rated? (b) how are these rating helpful to the investors?​
Jet001 [13]

Answer:

a) Bond rating is done by evaluating and considering all the relevant internal as well as external factors associated with the financial status of a business.

b) Bond rating helps in analysing the risk associated with the bond by analyzing its credit quality and thus helps investors taking decisions related to their investments.

Explanation:

a) Bond-rating is the letter grading system that is used to indicate the quality of the credit-related to the bond of various organizations. Bond-rating is done by evaluating and considering all the relevant internal as well as external factors associated with the financial status of a business. Internal factors may include the financial strength of the organization. External factors may include various networks with interested investors and other government organizations and policies related to the same.

There are three important agencies that analyze the credit quality of a bond. These agencies are Standard & Poor's, Moody's, and Fitch rating Inc.

b) Bond-rating help in analyzing the risk associated with the bond by analyzing its credit quality and thus helps investors taking decisions related to their investments. It helps the investors to study the stability and quality of a bond. Hence, higher-rated bonds are considered to be more stable and appropriate for investment purposes.

7 0
3 years ago
As a rule of thumb, how often should an entrepreneur reevaluate her compensation package?
Leni [432]

As a rule of thumb, an entrepreneuer should reevaluate her compensation package yearly. It's worthwhile to reevaluate because you may need to make changes to your plan if you are making more or less money. As your business grows, as an entreprenuer you are able to take a larger cut of your money or reinvest it elsewhere.

7 0
3 years ago
Read 2 more answers
A company is formulating its marketing expense budget for the last quarter of the year. Sales in units for the third quarter amo
iren2701 [21]

Answer:

a. $29,496

b. $21,996

Explanation:

a. The Computation of budgeted marketing expense for the fourth quarter is shown below:-

Sales units                                                            2,640

(2400 × 110%)

Variable marketing expenses per unit sold $0.15

Total Variable marketing expenses                 $396

Fixed Marketing expenses                                    $18,000

Salaries ($6,000 × 3)

Depreciation ($2,500 × 3)                                      $7,500

Insurance ($1,200 × 3)                                            $3,600

Total Fixed marketing expenses                            $29,100

Budgeted marketing expense

for the fourth quarter                                           $29,496

b. Estimated cash payment for marketing expenses for the fourth quarter = Budgeted marketing expense for the fourth quarter - Depreciation

= $29,496 - $$7500

= $21,996

7 0
3 years ago
When the price of good A rises from ​$11 to ​$33​, the quantity of good A demanded decreases from 400400 to 200200 units a day a
Novay_Z [31]

Answer:

The correct answer is option A.

Explanation:

The price of good A is initially at $11.

The initial demand of A  is 400 units.

The price increases to $33.

The demand of A , as a result, falls to 200 units.

The demand for good C is initially at 150 units.

With increase in price of A, the demand rises to 250 units.

The positive cross elasticity as given in the figure represents that the two goods are substitutes. When price of A increases, consumer will prefer its cheaper substitute. So, the demand for good C will increase.

6 0
3 years ago
Other questions:
  • The biggest U.S. stock exchange is located in which city?
    12·1 answer
  • Compared to a Direct Unsubsidized Federal Loan, a Direct Subsidized Federal Loan provides which benefits?
    9·1 answer
  • The ability of an office holder to avoid challenges from quality challengers is known as the __________ effect.
    15·1 answer
  • Industrial tools owes you $38,600. this amount is seriously delinquent so you have offered to accept weekly payments for one yea
    14·1 answer
  • Management Theories, Inc. at a cash price of $1.5 million. Management Theories, Inc. has short-term liabilities of $500,000. As
    5·1 answer
  • The Hype Company's currently outstanding bonds have a 10 percent coupon and a 11 percent yield to maturity. Hype believes it cou
    7·1 answer
  • Explain how opportunity cost is different for economic goods and free goods
    15·1 answer
  • What is purpose of public relations?
    13·2 answers
  • The Fisher effect indicates that an increase in the expected inflation rate will cause the real rate of interest to:
    7·1 answer
  • The analytic technique utilized after an adverse event occurs to prevent its recurrence is called?
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!