1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Leno4ka [110]
3 years ago
6

Suppose Stark Ltd. just issued a dividend of $2.33 per share on its common stock. The company paid dividends of $2.00, $2.08, $2

.15, and $2.26 per share in the last four years. If the stock currently sells for $55, what is your best estimate of the company's cost of equity capital using the arithmetic average growth rate in dividends?What if you use the geometric average growth rate?
Business
1 answer:
klasskru [66]3 years ago
5 0

Answer:

arithmetic average growth rate = (4% + 3.37% + 5.12% + 3.1%) / 4 = 3.9%

we need to find the required rate or return (RRR) in the following formula:

stock price = expected dividend / (RRR - growth rate)

  • expected dividend = $2.33 x 1.039 = $2.42
  • stock price = $55
  • growth rate = 0.039

55 = 2.42 / (RRR - 0.039)

RRR - 0.039 = 2.42 / 55 = 0.044

RRR = 0.083 = 8.3%

geometric average growth rate = [(1.04 x 1.0337 x 1.0512 x 1.031)¹/⁴] - 1 = 3.89%

again we need to find the required rate or return (RRR) in the following formula:

stock price = expected dividend / (RRR - growth rate)

  • expected dividend = $2.33 x 1.0389 = $2.42
  • stock price = $55
  • growth rate = 0.0389

55 = 2.42 / (RRR - 0.0389)

RRR - 0.0389 = 2.42 / 55 = 0.044

RRR = 0.0829 = 8.29%

You might be interested in
Which two of the following tips are important to remember when writing a resume?
jonny [76]
<h2>The two of the following tips that are important to remember when writing a resume are: A) be clear and concise in the descriptions you use</h2><h2>D) use bullet points to organize your thoughts </h2>

Explanation:

Our resume should be clear and concise. If the resume is longer than one page, the employer may not go through it. One page resume shows that you are concise, clear, and to the point.

There should be absolutely no typos as spell check doesn’t fix everything!.

Personal information should not be added in the resume like relationship status, age, siblings.

We can list all the jobs that a person had in the past to show our experiments in different fields but it should be something related to the new job.

It is necessary to use bullet points to organize all our thoughts properly.

7 0
3 years ago
Necesito un susario de la uanl de aspirante con admisión rechazada
max2010maxim [7]

Answer:

ta bueno pue

Explanation:

6 0
3 years ago
Collaborative and co-operative approach among all the stake holders is important. This is a feature of the _______________ agile
andrezito [222]

Collaborative and co-operative approach among all the stake holders is important. This is a feature of the Dynamic system development method of  agile methodology.

<h3>What is collaborative approach?</h3>

A collaborative  learning approach  can be described as one which involves the operation of the activities or  tasks together within a  group or organization so as to make sure  that everyone participates.

It should be noted that Collaborative and co-operative approach among all the stake holders is important because it help them to work , hand in hand for the progress of the organization.

Find out more on the Dynamic system at brainly.com/question/16797306

#SPJ1

5 0
2 years ago
Darlene Company had checks outstanding totaling $5,400 on its June bank reconciliation. In July, Darlene Company issued checks t
Pie

Answer:

b. $18,000

Explanation:

The computation of outstanding checks is shown below:-

Outstanding checks as of the end of July = Start with outstanding checks as of June + Amount of checks issued in July - Amount of checks that cleared in July

= $5,400 + $38,900 - $26,300

= $44,300 - $26,300

= $18,000

Note, The $300 check was issued by a customer, not Darlene.

So, for computing the outstanding checks as of the end of July we simply applied the above formula.

4 0
3 years ago
For business combinations involving less than 100 percent ownership, the acquirer recognizes and measures all of the following a
Mariana [72]

Answer:

b. Liabilities assumed, at book value.

Explanation:

International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS) require everything (Assets, Liabilities and Non-controlling interest) to be measured at the fair market value, the amount a third-party would pay on the open market, at the time of acquisition — the date that the acquirer took control of the target company.

3 0
3 years ago
Other questions:
  • Assume a company pays out $100 in dividends in Year 1. What would the annual growth rate (rounded to the nearest 1%) for dividen
    13·1 answer
  • Sasha's new company has told her that she will be required to move at her own expense in two years. What should she consider bef
    15·2 answers
  • What are the portfolio weights for a portfolio that has 138 shares of Stock A that sell for $48 per share and 118 shares of Stoc
    13·1 answer
  • Which potential stakeholders are a list in Proctor and Gamble’s purpose statement
    13·1 answer
  • Fuller Company builds swimming pools. Fuller budgets that they will sell 12 pools during the month of April at a price of $20,17
    14·1 answer
  • A product that cannot be perceived by the senses is called an _____ product.
    14·1 answer
  • Leslie Halverson is considering investing in the stock market. She wants to be sure to be able to get her money back whenever sh
    9·1 answer
  • The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2021. The compan
    9·1 answer
  • House Loan. Suppose you take out a home mortgage for $180,000 at a monthly interest rate of 0.5%. If you make payments of $1000/
    10·1 answer
  • which factor in the business environment does be wiser need to address in order to stay abreast minimum wage
    13·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!