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lakkis [162]
3 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]3 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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Answer:

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Explanation:

Goodwill arises when is a business is acquired as a going concern. It is an intangible asset of a business. Goodwill represents the value of a company's customer base, its location, any patents, and the brand name. It consists of the value of suppliers, customers, and employee relationships that facilitates the smooth running of the business.

The value of goodwill is the difference between the purchase price and the net cost of its tangible and other intangible assets of a business. Amortization of goodwill means spreading the cost of goodwill to several financial years.

Goodwill is amortized because the business benefits from the goodwill for many years.  In other words, the expenditure on goodwill will profit the company in more than one financial year. As per the matching principle, expenses and incomes should be recognized in the period they occur. As benefits will be enjoyed in many years, the expenses should also be spread in similar years.

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3 years ago
Does wealth make you happy? Yes, No - explain the reason for your response
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3 years ago
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Answer:

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Explanation:

Giving the following information:

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Sales on account from April= 280,000*0.25= 70,000

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