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
svetoff [14.1K]
3 years ago
15

1) You are indecisive about which stock to buy Microsoft, which is selling for $173 a share; or Apple, which is selling for $285

a share. Microsoft stock promises to pay annual dividends of $4.00, $5.00, and $5.50 over the next three years respectively, and you estimate it can be sold for $190 at the end of the third year. You expect Apple to pay a dividend of $5.50 the first year, $8.50, and $10.50 over the next two years, respectively. You also expect Apple’s stock to be trading at $330 in three years. Which stock would you buy if stocks from computer manufacturers typically yield 10%?
Business
2 answers:
almond37 [142]3 years ago
5 0

Answer:

I would buy the APPLE stock

Explanation:

Microsoft stock price = $173  

dividends earned = $4, $5 and $5.5

value after 3 years = $190

Apple stock price = $285

Dividends earned = $5.5, $8.5 and $10.5

value after 3 years = $330

Applying the dividend discount model

IVO = present value of dividend + present value of terminal price

for Microsoft

IVO = ( 4/1.1 + (5/(1.1/2)) + ( 5.5/(1.1/3)) + ( 190/(1.1/3))

      = $154.65  

for Apple

IVO = ( 5.5/1.1 + ( 8.5/( 1.1/2)) + (10.5/(1.1/3)) + ( 330/(1.1/3))

       = $267.8

Note: the IVO's are less than the current price of the stocks ( IVO = the intrinsic value of the shares ) but Microsoft shares are overpriced compared to apple

Novosadov [1.4K]3 years ago
5 0

Answer:

If decided to purchase, Apple will yield better

Explanation:

we solve for the present value of the future cashflow discounted at 10%

we will then compare against the current market price and pick with the better NPV

<u><em>Microsoft:</em></u>

\left[\begin{array}{ccc}#&Cashflow&Discounted\\1&4&3.64\\2&5&4.13\\3&195.5&146.88\\TOTAL&&154.65\\\end{array}\right]

154.65 - 173 = -18.36

<u><em>Apple:</em></u>

\left[\begin{array}{ccc}#&$Cashflow&$Discounted\\1&5.5&5\\2&8.5&7.02\\3&340.5&255.82\\&TOTAL&267.84\\\end{array}\right]

267.84 - 285 = -17.16

Now, as both are negative we must decide if we accep to receive less than 10% in which case, we will purchase stock as their net present alue is higher than microsoft.

You might be interested in
Data​ _______ refers to the​ collection, storage,​ retrieval, and management of data in an​ organization's electronic files.
Mademuasel [1]
<span>This is called data warehousing. This is a core element of business intelligence. Data warehouses store both the current and historical data in one place. The data warehouses can be used to create analytical reports for knowledge workers throughout the enterprise.</span>
4 0
3 years ago
This occurs when one party repeatedly holds out for a better deal.
Debora [2.8K]
A breakdown in bargaining happens when one party repeatedly holds our for a better deal. In this cases, private solutions to this kind of externalities is deemed necessary. Though bargaining is quite common among transactions made by economists, it cannot be helped that there are certain problems that arise from this.
8 0
4 years ago
The market value of​ Fords' equity, preferred​ stock, and debt are $ 7 ​billion, $ 2 ​billion, and $ 15 ​billion, respectively.
Stolb23 [73]

Answer:

Ford's weighted average cost of capital is 8.22 %

Explanation:

Weighted Average Cost of Capital (WACC) is the minimum return that the company expect from a project. It shows the risk of the company.

Calculation of WACC

WACC = Cost of equity + Cost of preferred​ stock + Cost of debt

Capital Source       Market Values     Weight      Cost      Total Cost

equity                         $ 7 ​billion          29.17%      13.6%       3.97 %

preferred​ stock         $ 2 ​billion            8.33%      12%          1.00 %

debt                           $ 15 ​billion         62.50%     5.2 %       3.25%

Total                          $ 24 billion                                          8.22 %

Cost of equity = Risk free rate + Beta × Risk Premium

                       =  4% + 1.2 × 8%

                       =  13.6%

Cost of preferred​ stock = Dividend/Market Price

                                       = $ 3/ $ 25 × 100

                                       = 12%

Cost of debt = interest × (1- tax rate)

                    = 8% × (1-0.35)

                    = 5.2 %

7 0
3 years ago
Chez Fred Bakery estimates the allowance for uncollectible accounts at 3% of the ending balance of accounts receivable. During 2
notsponge [240]

Answer:

The balance of accounts receivable on January 1, 2018 is $31,180.

Explanation:

The following are given in the question:

Percentage of allowance for uncollectible accounts = 3%

Credit sales = $125,000

Collections = $131,000

Amount written off = $180

Therefore, we have:

Account receivable on 31 December 2018 * 3% = $750

Account receivable on 31 December 2018 = $750 / 3% = $25,000

Accounts receivable on 01 January 2018 = Account receivable on 31 December 2018 - Credit sales + Collections + Amount written off = $25,000 - $125,000 + $131,000 + $180 = $31,180

Therefore, the balance of accounts receivable on January 1, 2018 is $31,180.

8 0
3 years ago
Help ASAP
Amiraneli [1.4K]

Using the "Thinking at Margin" methodology, the relevant statement for a television maker to consider while making a choice is as follows: the average cost of ten TVs is one hundred dollars apiece. Option C. This will be discussed in further detail below.

<h3>What exactly does "Thinking at Margin" entail?</h3>

In most cases, it means giving some consideration to the action that will come next in your plan. The word "marginal" may also be used to signify "additional." The first glass of lemonade you drink on a hot day will quench your thirst, but successive glasses may not have the same impact on you.

When you contemplate at the margin, you are considering what the next or succeeding action will mean for you on an individual level.

In conclusion, using the "Thinking at Margin" technique, the following are the essential points for a television producer to take into consideration before making a decision when it comes to television programming: The usual cost of creating ten televisions is one thousand dollars each. Alternative C

Learn more about Thinking at the Margins by visiting this link: brainly.com/question/4468044 #SPJ1

3 0
2 years ago
Other questions:
  • Which of the following is not recommended for cooking fresh pasta
    14·2 answers
  • During the Great Depression there were a number of federal programs which brought electricity to people in rural areas of the Mi
    5·1 answer
  • A team of construction workers have joined together to form a union. The team likes and respects their manager Thomas and would
    8·1 answer
  • Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 2. Which of the following e
    6·1 answer
  • If STUDENT and COURSE participate in a relationship, this is an example of a(n):
    9·1 answer
  • Vincent and Jean are two cooks who work in a village. Each of them can either bake cakes or make pizzas. Every ingredient is rea
    6·1 answer
  • Ms. Krisak asks the question, "Does the ability to stay on the cutting edge of home interior trends provide our customer tangibl
    14·1 answer
  • Which of the following would help in the creation of a visual workplace?
    6·1 answer
  • A ___ warranty promises replacement or refund for defective products.
    12·1 answer
  • Classify the type of data analytics ​(descriptive, diagnostic,​ predictive, prescriptive, or adaptive and​ autonomous) being use
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!