Answer: The market rate of return is 7.45%
We follow these steps to find the answer.
Here we can interpret the term 'market rate of return' as the required rate of return on the stock. We represent this as 
The current market price of stock (P₀), whose dividends are expected to grow for a constant rate is given by:
where
D = Upcoming dividend
k_{e} = required rate of return on the stock
g = constant growth rate of dividends.
Plugging in the values from the question in the formula above we get,
Based on the actions of Preteresia , we can infer that this scenario best describes <u>Global Convergence</u>.
<h3>What is Global Convergence?</h3>
- It refers to the current trend of various dimensions of the human life being integrated across nations.
- Describes the integration of dimensions such as business, culture, the economy, and political policy across nations.
Preteresia in helping Abresia build those facilities, is engaging in global convergence because the industries in both countries are being integrated to allow for more efficient smartphone manufacturing.
In conclusion, this is global convergence.
Find out more on the effects of global convergence at brainly.com/question/18077255.
Answer: 11.65%
Explanation:
First find cost of equity using CAPM:
= Risk free rate + Beta * Market risk premium
= 3.4% + 1.37 * 8.2%
= 14.6%
Debt to equity = 0.45
This means that weight of debt is:
= 0.45 / (1 + 0.45)
= 31.03%
Weight of equity:
= 1 - 31.03%
= 68.97%
WACC = (Weight of equity * cost of equity) + (weight of debt * cost of debt * (1 - tax))
= (68.97% * 14.6%) + (31.03% * 7.6% * (1 - 34%))
= 11.63%
= 11.65% as per options
Answer:
The perpetuity is worth $1486.43 more than the ordinary annuity
Explanation:
A perpetuity that with an annual cash inflow or cash outflow payable for a foreseeable future - for an infinite number of period
The present value of a perpetual annuity is calculated as
PV= A/r
PV = 1000/0.1
PV =&10,000
On the other hand, an annuity with annual cash inflows or cash outflows for certain number of years is called an ordinary annuity.
The present value of an ordinary annuity is determined as follows:
PV = (1 - (1+r)^n)/r × A
= (1-(1+0.1)^(-20))/0.1 × 1000
= 8.5135 × 1000
= 8513.56
Difference in PV = 10,000 - 8513.56
= $1486.43
The perpetuity is worth $ 1,486.43 more than the ordinary annuity
The intrinsic value of the stock is $29.44.
<h3>What is the intrinsic value of the stock?</h3>
The first step is to determine the value of the dividend at the end of each year:
Dividend in Y1 = 2. x 1.03 = 2.06
Dividend in Y2 = 2.06x 1.06 = 2.18
Dividend in Y3 = 2.18 x 1.04 = 2.27
Dividend after year 3 = (2.27 x 1.05) / (0.12 - 0.05) = $34.06
Now, find the present value of these dividends :2.06 / 1.12 + 2.18 / 1.12² + 2.27 / 1.12³ + 34.06 / 1.12³ = $29.44
To learn more about how to determine intrinsic value, please check: brainly.com/question/15710204
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