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
Nonamiya [84]
3 years ago
14

A stock sells for $40. The next dividend will be $4 per share. If the rate of return earned on reinvested funds is a constant 15

% and the company reinvests 40% of earnings in the firm, what must be the discount rate
Business
1 answer:
AlladinOne [14]3 years ago
5 0

Answer:

r= 16%

Explanation:

The Common Stock Valuation method is also simply referred to as the Value of the Stock Method and it is calculated taking different items such as growth rate of dividend, the dividend itself and number of periods into consideration

FIrst, we identify the formula of rate of return where dividend inceases constantly and at a compound rate

P0 = Div1/ r-g

Where Po is the price of the stock, Div1 is the next year's dividend, r is the rate of return and g is the growth rate of teh dividend

Secondly, we look at the growth rate with thereinvestment of 40% stock and a rate of return on reinvestmetn of 15% according to the question

Growth rate = r x e, where r is the rate of return and e is the reinvestment earning

Growth rate = 0.15 x 0.40 = 0.6

Finally, we calculate The rate of return or the discount rate using the first formula

P0 = Div1/ r-g

$40 = $4/r-0.06

r = ($4/$40) + 0.06

r= 16% or 0.16

You might be interested in
The difference between your sales and your cost of goods sold is known as your what
Anettt [7]

Answer:

profit.

Explanation: its just right

8 0
3 years ago
John just opened a savings account and wants to maximize the amount of interest he earns. Which of the following actions would e
jeka94
Since their is no choices he shouldn’t never touch the money and keep adding cash it increase it over time.
8 0
3 years ago
If unaccompanied on board, what must a person 12 to 15 years of age have in order to legally operate a boat with more than 6 hp
Anettt [7]
The correct answer is "to obtain a Boater I.D.".

Some states in the United States do not require any boater I.D in order to drive a boat, yet some states in the US requires it citizens to apply for a Boater I.D. and go through a safety course in order for them to be approved and allowed to driver their watercraft, it is commonly due to safety regulations.
7 0
3 years ago
Read 2 more answers
Jakarta Company is a service firm with current service revenue of $500,000 and a 40% contribution margin. Its fixed costs are $8
Lady_Fox [76]

Answer and Explanation:

The computation of the margin of safety is shown below:

As we know that

margin of safety = Actual sales - break even sales

For Jakarta, it is

= $500,000 - ($80,000 ÷ 0.40)

= $500,000 - $200,000

= $300,000

And, for maldives, it is

= $6,620,000 - ($2,151,500 ÷ 50%)

= $2,317,000

7 0
2 years ago
Cost allocation involves:_______.A. Identifying a cost driver for each cost to be allocated. B. Calculating an allocation rate f
Bess [88]

Answer:

d. all of the answers are correct

Explanation:

Cost allocation is being done:

1)  to influence management behavior and thus promote goal and managerial effort,

2) to measure inventory costs and to know of goods sold on a product or project,

3) to justify cost (e.g to justify an accepted bid).

For example, if you are to determine the amount of electricity consumed at a particular period, the number of units consumed determines the total cost to be paid for the electricity consumed. In such an instance, the number of units of electricity consumed is a Cost Driver.

   A cost driver is the most appropriate way of calculating or determining a specific cost.

   Variable cost drivers can come in the form of hourly costs, costs per unit, or batch costs, among others.

   Cost drivers can be fixed costs, such as in the case of set-up costs.

4 0
3 years ago
Other questions:
  • The probability of incurring bankruptcy increases as a firm's debt/equity ratio decreases. false true
    10·1 answer
  • Identify three areas in our daily lives that would benefit from the study of communication. Use specific examples from the site.
    8·2 answers
  • The state of massachusetts established a clearinghouse system, the commonwealth health insurance connector, which facilitated th
    6·1 answer
  • The following production data were taken from the records of the Finishing Department for June: Inventory in process, June 1, 25
    13·1 answer
  • Lyle and Miranda agree that Lyle will fix the refrigeration unit in Miranda’s Bagel Café in exchange for her payment of a debt t
    11·1 answer
  • Which of the following illustrates the law of demand? a. Jorge buys fewer pencils at $2 per pencil than at $1 per pencil, ceteri
    9·1 answer
  • Your boss would like your help on a marketing research project she is conducting on the relationship between the price of soda a
    15·1 answer
  • How do the effects of voluntary restraint agreements differ from the effects of a tariff? Tariffs reduce trade by more than volu
    5·1 answer
  • Standard Product Cost, Direct Materials Variance
    11·1 answer
  • Using your economic knowledge and the information you learned about Oprah Winfrey compose a well-written three-paragraph biograp
    9·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!