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lakkis [162]
2 years ago
5

J.C. Penney Company is expected to pay a dividend in year 1 of $1.65, a dividend in year 2 of $1.97, and a dividend in year 3 of

$2.54. After year 3, dividends are expected to grow at the rate of 8% per year. An appropriate required return for the stock is 11%. The stock should be worth _______ today.
Business
1 answer:
Alchen [17]2 years ago
4 0

Answer:

$71.80

Explanation:

First, calculate the present value (PV) of each year's dividend at 11% required return;

PV(of D1) = 1.65 / (1.11) = 1.4865

PV(of D2) = 1.97 / (1.11²) = 1.5969

PV(of D3) = 2.54 / (1.11³) = 1.8572

Find D4 = 2.54(1+0.08) = 2.7432

Next find Present value PV of terminal cashflows

PV(of D4 onwards) = \frac{\frac{2.7432}{0.11-0.08} }{(1.11)^{3} } \\ \\ =\frac{61.9067}{1.3676} \\ \\ = 66.8601

Add the PVs to find the current value of the stock today;

= 1.4865 + 1.5969 + 1.8572 + 66.8601

= 71.8007

Therefore, it is worth $71.80

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The market risk premium is computed by: adding the risk-free rate of return to the inflation rate. adding the risk-free rate of
OverLord2011 [107]

Answer:

subtracting the risk-free rate of return from the market rate of return

Explanation:

Market risk premium is the premium over the risk free rate that investors demand for holding a risky asset

Market risk premium = market rate of return - risk free rate

the higher the risk premium, the higher the return investors are demanding and the riskier the investment

for example if risk free rate is 5% , market rate of return in industry A is 10% while in industry B it is 20%

Market premium in A = 10% - 5% = 5%

Market premium in b = 20% - 5% = 15%

3 0
3 years ago
T Company expects to incur the following per unit costs for 1,000 units of production: Direct materials of 4 pounds per unit at
Vladimir [108]

Answer:

Total overhead =  = $7,500

so here correct option is E. $7,500

Explanation:

given data

production = 1,000 units

direct labor = ¼ hour @ $24 per hour

variable overhead = 75 % of direct labor

fixed overhead = $3,000

to find out

total amount of overhead

solution

we first find Direct labor that is

Direct labor = ¼ × 24

Direct labor = $6

so

Total overhead will be here

Total overhead = Variable overhead + Fixed overhead     .................1

now put here value we get

Total overhead = ($6 ×  75% ) × 1,000 + $3,000

so

Total overhead =  = $7,500

so here correct option is E. $7,500

8 0
3 years ago
Growth stocks:
crimeas [40]

option d. is the right option

7 0
3 years ago
To succeed in building a competitive advantage, a company's strategy must aim at Select one:
7nadin3 [17]

Answer: E (Both B & C)

Explanation:

As a staff in Coca-Cola, the number one brand in the world, Externally providing buyers with what they perceive as superior value and Internally performing value chain activities differently than rivals and building resources and capabilities that they cannot readily match - is infact the main reasons Coca-Cola have stayed as the major player in the food and beverage industry.

4 0
3 years ago
Chance Company had two operating divisions, one manufacturing farm equipment and the other office supplies. Both divisions are c
S_A_V [24]

Answer:

Net income = $76,000

Earning per share (EPS):

Income from continuing operations per share = $4.40 per share

Loss from discontinued operations per share = -$3.64 per share

Net Income per share = $0.76 per share

Explanation:

Note: See the attached excel file for the income statement.

Also Note: Two years (2016 and 2018) were mistakenly mentioned in the question instead of just one of them. I therefore picked 2016 to prepare the income statement.

In the attached excel file, the earning per share (EPS) is calculated as follows:

Number of shares outstanding = 100,000 shares

Income from continuing operations per share  = Income from continuing operations / Number of shares outstanding = $440,000 / 100,000 = $4.40 per share

Loss from discontinued operations per share = Loss from discontinued operations / Number of shares outstanding = -$364,000 / 100,000 = -$3.64 per share

Net Income per share = Net Income / Number of shares outstanding = $76,000 / 100,000 = $0.76 per share

Download xlsx
5 0
2 years ago
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