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PSYCHO15rus [73]
3 years ago
15

The Drogon Co. just issued a dividend of $3.00 per share on its common stock. The company is expected to maintain a constant 6.2

percent growth rate in its dividends indefinitely. If the stock sells for $60 a share, what is the company’s cost of equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places.
Business
1 answer:
Mars2501 [29]3 years ago
5 0

Answer:

The company’s cost of equity is 11.51%.

Explanation:

Please find the below for detailed explanations and calculations:

The company's cost of equity need to be found is the discounted rate that will bring net present value of its projected future dividend to its current stock price.

Denote cost of equity need to be found is x.

We apply the formula to calculated the present value of growing perpetuity to find x as shown below:

[ 3 x ( 1+0.062) ] / ( x - 0.062) = 60 <=> 3.186 / ( x - 0.062) = 60 <=> x = 11.51%.

Thus, the company's cost of equity is 11.51%.

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Explanation:

Preparation of What adjusting Journal entry should the company make at the end of the current year to record its estimated bad debts expense

Based on the information given the adjusting Journal entry that the company should make at the end of the current year to record its estimated bad debts expense will be:

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Keynesian economics argues for the use of active government policy to stabilize the economy.

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In order to alleviate or avert economic recessions, Keynesian economics places a strong emphasis on the employment of proactive government policy to control aggregate demand. Keynes contended that lengthy periods of high unemployment might result from a lack of general demand. Consumption, investment, government purchases, and net exports are the aggregate of four factors that determine an economy's amount of goods and services.

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Suppose there is an increase in both the supply and demand for personal computers. In the market for personal computers, we woul
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In the market for personal computers, we would expect the Equilibrium quantity to rise and the change in the equilibrium price to be ambiguous.

<h3>What is equilibrium quantity?</h3>
  • When there is no shortage or surplus of a product on the market, it is said to be in equilibrium quantity.
  • When supply and demand meet, the amount of an item that consumers want to buy equals the amount supplied by its producers.
  • The equilibrium price is the only price at which consumers' and producers' plans coincide—that is, the amount consumers want to buy of the product, quantity demanded, equals the amount producers want to sell, quantity supplied.
  • Assume there is an increase in both supply and demand for personal computers.
  • The Equilibrium quantity would then rise in the market for personal computers, while the change in the equilibrium price would be ambiguous.

Therefore, in the market for personal computers, we would expect the equilibrium quantity to rise and the change in the equilibrium price to be ambiguous.

Know more about equilibrium quantity here:

brainly.com/question/22569960

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The correct question is given below:

Suppose there is an increase in both the supply and demand for personal computers. In the market for personal computers, we would expect the Equilibrium quantity to ______ and the change in the equilibrium price to be __________

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The consumer price index or CPI is the most acceptable index used in determining the rate of inflation. Inflation may result from high economic growth where firms and individuals have increased incomes resulting in too much money in circulation.  A moderate level of inflation is required to promote spending and sustain favorable economic growth.

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