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olya-2409 [2.1K]
3 years ago
14

Home Place Hotels Inc. is entering into a 3-year remodeling and expansion project. The construction will have a limiting effect

on earnings during that time, but when completed, it should allow the company to enjoy much improved growth in earnings and dividends. Last year, the company paid a dividend of $3.40. It expects zero growth in the next year. In years 2 and 3, 5% growth is expected, and in year 4, 15% growth. In year 5 and thereafter, growth should be a constant 10% per year. What is the maximum price per share that an investor who requires a return of 14% should pay for Home Place Hotels common stock?
Business
1 answer:
solong [7]3 years ago
7 0

Answer:

$291.56

Explanation:

Find the dividend amount per year;

D1 = D0(1+g ) = 3.40(1+0) = 3.40

D2 = 3.40*(1.05) =3.57

D3 = 3.57*(1.05) =3.7485

D4= 3.7485*(1.15) = 4.3108

D5 = 4.3108 *(1.10) = 4.7419

Find the Present value of each year's dividend;

PV (of D1) = 3.40/ (1.14 ) = 2.9825

PV (of D2) = 3.57/ (1.14² ) = 2.7470

PV (of D3) = 3.7485/ (1.14³ ) = 2.5301

PV (of D4) = 4.3108/ (1.14^4 ) = 2.5523

PV (of D5 onwards)=\frac{\frac{4.7419}{0.14-0.1} }{1.14^{4} } \\ \\ =\frac{474.19}{1.6890}

PV (of D5 onwards) = 280.7519

Next, sum up the PVs to find the maximum price of this stock;

= 2.9825 + 2.7470 + 2.5301 + 2.5523 + 280.7519

= 291.564

Therefore, an investor should pay $291.56

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Suppose that the market price for a bottle of vitamins is $2.50 and that at that price the total market quantity demanded is 75,
tatiyna

Answer:

there will be 187, 500, 000 firms in the industry.

Explanation:

just multiply 2.50 with 75, 000,000 and get the answer.

6 0
3 years ago
Read 2 more answers
Two isolated nations, Alphaland and Betaton, are considering opening their borders to trade with each other. Both nations consum
Artist 52 [7]

Answer:

5 tons of salt for 1 ton of pepper

10 tons of salt for 1 ton of pepper

Explanation:

Alphaland's opportunity cost of producing one ton of pepper = 80 ÷ 5

                                                                            = 16 tons of salt

Betaton's opportunity cost of producing one ton of pepper = 3 ÷ 1

                                                                            = 3 tons of salt

Alphaland's opportunity cost of producing one ton of salt = 5 ÷ 80

                                                                            = 0.0625 tons of pepper

Betaton's opportunity cost of producing one ton of salt = 1 ÷ 3

                                                                            = 0.3333 tons of pepper

Therefore, Betaton has a comparative advantage in producing pepper because it has the lower opportunity cost of producing pepper as compared to Alphaland. On the other hand, Alphaland has a comparative advantage in producing salt because it has the lower opportunity cost of producing salt as compared to Betaton.

Hence, Betaton is specialized in the production of pepper and Alphaland is specialized in the production of salt.

Trade is beneficial for both the nations when Alphaland buys pepper at a price lower than the 16 tons of salt and Betaton sells pepper at a price greater than 3 tons of salt.

Trade ratios:

5 tons of salt for 1 ton of pepper

10 tons of salt for 1 ton of pepper

7 0
3 years ago
Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can
Ierofanga [76]

The true statement out of all is

B) Georgeland has both an absolute and a comparative advantage in producing clothing.

Explanation:

This is because Absolute advantage is when one firm or a producer is able to produce more of a product using less resources or less time or more of the product in the same resources or same time as the other.

Comparative advantage is found out at the added bonus of having the product be as viable as it is advantageous which means that the producer could also be making another product and would have the advantage in that too so either one of them is equally profitable.

5 0
3 years ago
Melody and Todd are married and have employee wages of $250,000 each in 2019. They have no other income. How much additional 0.9
sasho [114]

Answer:

$1,350

Explanation:

The computation of the amount pay or received as a refund at the time of filing the income tax return for the year 2019 is shown below:

As we know that

The Medicare tax rate is 1.45% till $200,000

And, if it is above $200,000 than 2.35% is charged (1.45% + 0.9%)

Now

For individually calculated,

Melody = ($200,000 × 1.45%) + ($50,000 × 2.35%) = $4,075

Todd = ($200,000 × 1.45%) + ($50,000 × 2.35%) = $4,075

So, the total is

= $4,075 + $4,075

= $8,150

Now if they filling their joint return so

Total salary is $500,000   ($250,000 × 2)

Medicare upto $250,000 = $3,625 ($250,000 × 1.45%)

for remaining $250,000 = $5,875 ($250,000 × 2.35%)

So, the Total is

= $3,625 + $5,875

= $9,500

Now the refund is

= Joint return - individually return for each one

= $9,500 - $8,150

= $1,350

4 0
3 years ago
which type of account typically has very high liquidity, low or no interest, and low minimum balance?
sdas [7]
<span><span>Checking accounts: best for unrestricted access to funds; typically worst for earning interest.
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Savings accounts: good for earning some interest with quick access to funds.
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Money market accounts: can have higher interest than savings accounts, plus some check-writing and ATM access.
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Certificates of deposit (CDs): highest interest rates in exchange for most-limited access to funds</span></span>
6 0
3 years ago
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