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frez [133]
3 years ago
14

An investor has examined Home Depot stock and makes the following predictions for the future: YEAR 1 2 3 4 DIVIDEND $1.31 $1.58

$1.54 $1.56 The investor believes the selling price in four years will be $76.25. If the investor wants a 18.00% return to hold the stock, what intrinsic value does the investor put on Home Depot today
Business
1 answer:
Murrr4er [49]3 years ago
7 0

Answer: $43.32

Explanation:

The Intrinsic value of Home Depot Stock will be the present value of all the future cashflows from the stock.

Discounting with a rate of 18%, the intrinsic value is;

= 1.31/ ( 1 + 18%) + 1.58 / ( 1 + 18%)² + 1.54/ ( 1 + 18%)³ + 1.56 ( 1 + 18%) ⁴ + 76.25 / ( 1 + 18%) ⁴

= 1.11 + 1.1347 + 0.937 + 0.8046 + 39.3289

= 43.3152

= $43.32

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nydimaria [60]

Answer: $186,000

Explanation:

January is the 2nd month from November which means that all of November's $31,000 will be collected in January.

January is the first month after December so 30% of December sales should be collected in January. 50% has already been collected in December and this left $50,000.

Total credit sales in December must have been:

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Amount to be collected in January for December:

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Amount to be collected from January credit sales:

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= $75,000

January cash sales = $50,000

Total cash in January :

= 31,000 + 30,000 + 75,000 + 50,000

= $186,000

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Kevin bought 205 shares of Intel stock on January 1, 2020, for $52 per share, with a brokerage fee of $105. Then, Kevin sells al
Papessa [141]

Answer: $4660

Explanation:

Firstly, we need to calculate the amount that Kevin realized on the shares which will be:

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