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Anna35 [415]
3 years ago
6

"Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years because

the firm needs to plow back its earnings to fuel growth. The company will pay a dividend of $10 per share 10 years from today and will increase the dividend by 5 percent per year thereafter. If the required return on this stock is 11.5 percent, what is the current share price
Business
1 answer:
zhuklara [117]3 years ago
6 0

Answer:

The price per share today will be $57.758

Explanation:

The price per share will be calculated using the constant growth model of the DDM as the dividends will grow at a constant rate forever. However, as DDM is only applicable for a dividend paying company and as the dividend is paid from Year 10 and on wards, we will adjust the DDM formula to calculate the price at Year 9 and discount it back using required rate of return to calculate the price today. The formula for price under constant growth model is,

P0 = D1 / r - g

Where D1 is the dividend in year 1 or next period to calculate price today. As we use the next period's dividend, to calculate the price at year 9, we will use D10 that is $10 per share.

The price at year 9 will be given by this equation,

P9 = 10 / (0.115 - 0.05)

And as we require price today, we will discount it back 9 years. So the price today will be,

P0 = (10 / (0.115 - 0.05) / (1+0.115)^9

P0 = $57.758

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Maple Company uses a job costing system. Maple​ Company's schedule of cost of goods manufactured showed the following amounts fo
Cerrena [4.2K]

Answer:

Allocated overhead= $43,180

Explanation:

Giving the following information:

Cost of direct materials used $42,600

Cost of goods manufactured $124,200

Cost of direct labor ​($30 per​ hour)= $76,200

Manufacturing overhead cost is allocated at the rate of $17 per direct labor hour.

Allocated overhead= predetermined overhead rate* actual allocation base

Allocated overhead= 17* (76200/30)= $43,180

8 0
4 years ago
P5-18 Calculating deposit needed. You put $10,000 in an account earning 5%. After 3 years, you make another deposit into the sam
goblinko [34]

Answer:

$4877.80

Explanation:

The computation of amount of the deposit at the end of year 3 is shown below:-

Future value = Present value × (1 + Rate of interest ÷ 100)^number of years

$20,000 = 10,000 × (1 + 5 ÷ 100)^7 + Deposit at end of year 3 × (1 + 5 ÷ 100)^4

$20,000 = 10,000 × (1.05)^7 + Deposit at end of year 3 × (1.05)^4

$20,000 = 14071.00423  + Deposit at end of year 3 × (1.05)^4

Deposit at end of year 3 = ($20,000 - 14071.00423 ) ÷ (1.05)^4

= $5928.995773  ÷ 1.21550625

= $4877.799496

or

= $4,877.80

We simply applied the above formula to find out the amount of deposit at the year 3 end

3 0
3 years ago
Wii Brothers, a game manufacturer, has a new idea for an adventure game. It can market the game either as a traditional board ga
Tanzania [10]

Answer:

a. Payback period:

Board game:

= Year before payback + Amount left / Cashflow in year of payback

= 1 + (1,200 - 690) / 950

= 1.54 years

Game DVD:

= 1 + (2,700 - 1,750) / 1,570

= 1.61 years

b. NPV

Board Game

= 690 / 1.12 + 950 / 1.12² + 210 / 1.12³ - 1,200

= $322.88

Game DVD

= 1,750 / 1.12 + 1,570 / 1.12² + 800 / 1.12³ - 2,700

= $683.52

c. IRR

Look at attached picture

Board Game IRR = 29%

Game DVD IRR = 28%

d. Incremental IRR

Look at attached picture

= 27%

6 0
3 years ago
What is the definition of compound interest? ( say in your own words and not from the internet )
ollegr [7]

Answer:

Compound interest (or combining interest) is that the interest on a loan or deposit calculated supported each the initial principal and also the accumulated interest from previous periods.

5 0
3 years ago
Because of the tvm concepts learned in this topic, you should _________ receiving $1,000 in 1 year if given the opportunity to r
lara [203]

Answer:

I think the answer is avoid.. Alex that my final answer

Explanation:

only because if you stay with that company by year two the company will know that ur a good fit for

6 0
2 years ago
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