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Rina8888 [55]
3 years ago
9

IBM expects to pay a dividend of $6 next year and expects these dividends to grow at 4% a year for the foreseeable future. The p

rice of IBM is $110 per share. What is IBM's cost of equity capital
Business
1 answer:
jolli1 [7]3 years ago
4 0

Answer:

9.45%

Explanation:

Data provided in the question

Current year dividend = $6

Expected growth rate = 4%

Price of the IBM = $110

The computation of the cost of equity capital is shown below:

Cost of equity capital = Current year dividend ÷ price + Growth rate

                                    = $6 ÷ $110 + 4%

                                    = 9.45%

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You want to buy a new sports coupe for $84,500, and the finance office at the dealership has quoted you an apr of 6.6 percent fo
Margaret [11]

Answer: The monthly payment will be $2007.81.

We have:

Cost of the sports coupe (PV)                     $84,500

Annual Percentage Rate (APR)                         6.6%

Loan tenure in months (n)                                    48

We can find the monthly payment by using the Present value of an annuity formula:

\mathbf{PV_{Annuity}= PMT * \left ( \frac{1-(1+r)^{-n}}{r} \right )}

Since APR is a yearly number, we need to convert it into a monthly rate.

So , r = \frac{0.066}{12} = 0.0055

Plugging values in the PV formula above we get,

\mathbf{84500 = PMT * \left ( \frac{1-(1+0.0055)^{-48}}{0.0055} \right )}

\mathbf{84500 = PMT * \left ( \frac{1-0.768529253}{0.0055} \right )}

\mathbf{84500 = PMT * \left ( \frac{0.231470747}{0.0055} \right )}

\mathbf{84500 = PMT * 42.08559028}

\mathbf{\frac{84500}{42.08559028}= PMT}

\mathbf{PMT = 2007.813112}



8 0
3 years ago
ABC Inc. just paid a dividend of $1.00 this year. The stock price is $15.43 currently. The market risk premium is 15% and the ri
mariarad [96]

Answer:

Price lowers and becomes negative or -5.37 dollars

Explanation:

Market risk premium's formula could be written as dividends/price + dividend's growth rate. Therefore, we dividend growth rate according to the current price and dividend level equal to market risk premium - dividends/price or 0.15 - 1/15.43 = 0.086 or 8.6%. If the dividend growth rate rises by 25% than new one is 33.6%. Price is equal to dividends/market risk premium - dividend growth rate or in this case 1/0.15-0.336 or 1/-0.186 or -5.37 dollars. If the price is negative that would mean that any future selling of the stock would mean that ABC would have to pay in order to sell it.

4 0
3 years ago
What is the main problem that sellers suffering from marketing myopia​ face?
Tanya [424]
The answer is "<span>They focus more on products than the​ customer's underlying need.".
</span>
Marketing Myopia is marketing term as it shows by its name, referred to short-sighted and inward looking way to deal with promoting that spotlights on the requirements of the organization as opposed to characterizing the organization and its items as far as the clients' needs. It brings about the inability to check and accommodates to the quick changes in their business sectors or markets.
8 0
3 years ago
Read 2 more answers
At Sunland Company, events and transactions during 2020 included the following. The tax rate for all items is 20%. (1) Depreciat
e-lub [12.9K]

Answer:

B. $1673920

Explanation:

First calculate Total loss

$2000000 loss from disposal of a component of the business and loss of $92400 from strike by the employees of a supplier

$2000000 + $92400 = $2,092,400

20% of the loss =

20% × $2,092,400

= $418,480

Therefore the effect of these events and transactions on 2020 net income net of tax would = Total loss - 20% of total loss

$2,092,400 - $418,480

= $1,673,920

4 0
3 years ago
Bill has been adding funds to his investment account each year for the past 3 years. He started with an initial investment of $1
Nookie1986 [14]

Answer:

2.96% will be effective rate of the investment

Explanation:

First year:

1,000 x 1 + 10%) = 1,100

<em><u>Second year: </u></em>

1,100 + 3,000 = 4,100 invesmtent balance

4,100 x (1  - 5%) = 3,895

<em><u>Third year:</u></em>

3,895 + 2,000 = 5,895

5,895 x (1 + 2%) = 6012.9

<em><u>Fourth year:</u></em>

6012.9 + 500 = 6512.9

6,512.9 x (1+ 8%)  =  7033.932

We calcualte rate that is equivalent with the following cash flow:

1,000 (1+r)^4 + 3,000  (1+r)^3 +  2,000(1+r)^2 +  500(1+r) = 7,033.93

We solve using excel goal seek

0.029646151

6 0
3 years ago
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