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Anuta_ua [19.1K]
4 years ago
5

Dividends are expected to grow at 25% per year during the next three years, 15% over the following year and then 6% per year ind

efinitely. The required return on this stock is 9% and the stock currently sells for $79 per share. What is the projected dividend for the second year
Business
1 answer:
salantis [7]4 years ago
8 0

Answer:

$1.56

Explanation:

Lets assume the dividend paid for year zero is $1. The growth for the first  3 years is 25% which is given in the question. Now we will find the value of the Projected dividend for year 2 using the compounding formula, as under:

The Projected dividend for year 1 = $1 * (1 + 25%)^ 2 years = $1.56

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Bert's Car Sales is a new firm that is still in a period of rapid growth. The company plans on retaining all of its earnings for
DaniilM [7]

Answer:

The correct choice is C)

The most logical thing to do would be to calculate the value of the stock in 5 years time.

Explanation:

This speaks to ones understanding of dividend growth stock valuation models. These tools are used to establish a fair value for a stock by discounting the present value of its future dividends. A commonly used model is the constant growth dividend discount model.

The formula for the DDM, which assumes constant growth in dividends, is provided below.

P0 = D1/(r-g)

Where,

P0 = intrinsic value of stock

D1 = dividend payment one year from today

r = discount rate

g = growth rate

Identifying the correct answer entails establishing a timeline of the expected cash flows. We are given the following information:

t0 = $0

t1 = $0

t2 = $0

t3 = $0

t4 = $0

t5 = $0.20

t6 = $0.20 * 1.035

Given a rate of return, we could use the constant growth dividend discount model to establish the fair value of the firm at t5 (five years from today). Incidentally, to determine today's value, we'd discount it back another five years.

Based on the information above,  we are able to prove that the answer is '5'.

Cheers!

3 0
3 years ago
One of the important questions Jerome needs answered about his potential career is whether he will be working outdoors, because
krek1111 [17]
It is his work enviornment, i know this is correct because its on my online school :) hope this helps
3 0
4 years ago
Read 2 more answers
Which statement is not true about life insurance companies? A. They sell contracts that offer financial protection against prema
Readme [11.4K]

Answer:

The statement which is not true about life insurance companies is:

B. They invest heavily in short-term highly marketable securities.

Explanation:

  • The option A is true about the life insurance companies as they sell contracts that offer financial protection against premature death and against living too long as this the main purpose of a life insurance policy.
  • These companies don't invest heavily in short-term highly marketable securities so the option B is not true about these companies.
  • The option C is true about the insurance companies as they have prediction about their inflows and outflows.
  • The option D is also correct as their liabilities are long-term in nature as the insurance policy is a long term policy.
7 0
4 years ago
The head of accounting at delores inc. is computing a value that represents the company's financial performance for the previous
Nesterboy [21]
<span> In this scenario, the mean as a measure of central tendency will be least effective as an accurate representation of financial performance.
</span><span>The mean is a measure of central tendency that is the average for a sample.
</span><span>In this specific case the mean is not effective measure because there is a huge difference in the financial performance in the last month compared to the previous months.So the mean would not give the real picture.</span>
5 0
3 years ago
On December 15, 2018, Rigsby Sales Co. sold a tract of land that cost $3,200,000 for $5,000,000. Rigsby appropriately uses the i
ivann1987 [24]

Answer:

Instalment receivables (net) of $2,905,600 is the correct answer.

Explanation:

Instalment Receivables ($5,000,000 - $460,000) = $4,540,000

Deferred gross profit ($1,800,000 - $165,600) = $1,634,400

Instalment Receivables (Net) = $2,905,600

6 0
3 years ago
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