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lyudmila [28]
3 years ago
5

Pacor Industries recently paid its annual dividend of $2. Dividends have consistently grown at a rate of 2.2%. Analysts estimate

that the stock has a beta of 1.12. The current risk-free rate is 2.4% and the market return is 10.7%. Assuming that CAPM holds, what is the intrinsic value of this stock? Group of answer choices $20.67 $21.52 $21.24 $22.19 $20.64
Business
1 answer:
yulyashka [42]3 years ago
5 0

Answer:

The intrinsic value of the stock is $21.52

Explanation:

To calculate the intrinsic value of the stock, we will use the constant growth model of the dividend discount model (DDM). The DDM values the stock based on the present value of the expected future dividends from the stock. The formula for price today under the constant growth model of DDM is,

P0 = D0 * (1+g) / r - g

Where,

  • D0 * (1+g) is D1 or the next expected dividend
  • r is the required rate of return
  • g is the growth rate in dividends

First of all, we need to calculate the r or required rate of return using the CAPM equation,

r = rRF + Beta * (rM - rRF)

Where,

  • rRF is the risk free rate
  • rM is the return on market

r = 0.024 + 1.12 * (0.107 - 0.024)

r = 0.11696 or 11.696%

P0 = 2 * (1+0.022) / (0.11696 - 0.022)

P0 = $21.52

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The City of San Diego is about to replace an old fire truck with a new vehicle in an effort to save maintenance and other operat
marin [14]

Answer:

B. Purchase Price of the Old Vehicle

Explanation:

Step 1: Consider the relevant transaction from the old vehicle

The Purchase price of the old vehicle is considered a historical cost and in most situations, especially for accounting purposes, this amount has undergone depreciation from the very first year the old vehicle was bought.

Instead of concentrating on the purchase price of the old vehicle, the only transaction from that old vehicle that is worth considering is the Proceeds from its disposal which can serve as part of the payment for the new fire truck to be purchased.

Step 2: Consider the relevant transactions for the new vehicle

One of the very first transactions that are relevant for the new vehicle is the purchase price. A very expensive new fire truck can cancel out the benefits of its acquisition since the main essence of acquisition is to save cost.

Step 3: Consider the Expected Operating Expenses that can be saved by the new truck

This the main reason advanced by the CIty of San Diego to get a new fire truck. Hence, a fire truck that tends to increase maintenance and operating cos will not fit into the decision.

Based on these explanations, therefore, the only transaction that is not relevant to this decision is the purchase price of the old vehicle

6 0
3 years ago
Any differences in future development of monozygotic twins can be attributed only to _________ factors.
sergejj [24]
<span>Any differences in future development of monozygotic twins can be attributed only to "environmental factors".
</span><span>
</span>
<span>Twins can be either monozygotic or dizygotic. monozygotic refers to the identical twins which means that they develop from one zygote, which splits and forms two embryos. And  dizygotic refers to fraternal twins, which means that they develop from two different eggs. In fraternal twins, each twin is fertilized by its own sperm cell.</span>
6 0
3 years ago
Explain how the ntsb can be a reactive organization in terms of accident/incident investigation (after the fact yet, still be a
kolbaska11 [484]
A definitive objective or reason behind mishap examination is to discover the underlying drivers of why the mischance happened so that if comparative examples happen later on viable controls or techniques can be set up to keep a reoccurrence of the mishap. Rodrigues and Cusic portray the reason behind mischance examinations as, "To help counteract mishaps, the NTSB creates and issues security proposals to other government offices, industry, and associations that are in a position to enhance transportation wellbeing."
4 0
4 years ago
Archer Corp has the following account balances listed in alphabetical​ order: Accumulated​ Depreciation, $18,000; Accounts​ Paya
Setler [38]

Answer:

Equipment, $46,000, and Land, $21,000 including Accumulated​ Depreciation, $18,000.

This amounts to $49,000.

Explanation:

The long term asset are also known as the non current assets.

These are assets that will not be used up in a year. It means that the benefits that will accrue to the entity as a result of ownership and control of these assets will be for more than a year. Examples are fixed asset, intangible assets etc

Archer's long term assets​ are Equipment, $46,000, and Land, $21,000 including Accumulated​ Depreciation, $18,000.

This amounts to

= $46,000 + $21,000 - $18,000

= $49,000

6 0
3 years ago
Emily works in an orphanage and strongly believes that what she does is important and adds real values to the lives of others. S
Allushta [10]

Answer: EMPATHY

Explanation: Empathy can be defined as the ability of an individual to understand the feelings of other individuals. It is the capacity of experiencing the difficulties that the others are facing.

In the given case, Emily works in an orphanage and believes what she do is important. Emily understands the feeling of loneliness that those orphan children experiences even though she is not an orphan herself. Hence , we can conclude that she is reflecting empathy.

3 0
3 years ago
Read 2 more answers
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