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
drek231 [11]
3 years ago
7

The Three Amigos Restaurant just paid an annual dividend of $4.20 per share and is expected to pay annual dividends of $4.40 and

$4.50 per share the next two years, respectively. After that, the firm expects to maintain a constant dividend growth rate of 2 percent per year. What is the value of this stock today if the required return is 15 percent?
Business
1 answer:
shusha [124]3 years ago
7 0

Answer:

$33.93

Explanation:

First, find the present value of each year's dividend at 15% required rate of return;

(PV of D1 ) = 4.40 / (1.15) = 3.8261

(PV of D2 ) = 4.50 / (1.15²) = 3.4026

Next, find terminal Cashflow;

D3 = D2 (1+g)

D3 = 4.50 (1.02) = 4.59

(PV of D4 onwards ) = \frac{\frac{4.59}{0.15-0.02} }{(1.15)^{2} } \\ \\ = \frac{35.3077}{1.3225} \\ \\ = 26.6977

Next sum up the PVs to find price;

=3.8261 + 3.4026 + 26.6977

= 33.926

Therefore, this stock is worth $33.93 today

You might be interested in
In 2007, Gillette saw an opportunity to capture the market of 500 million Indians who used double edge razors with no protection
rusak2 [61]

Answer:

Gillette in India

The failure of the Vector was caused by the fact that Indian men have longer and thicker hair, which the lack of earlier research in the targeted demographic segment did not discover.

Explanation:

Since Indian men have longer and thicker hair than the local consumers of Gillette's razor products in America, an earlier research would have uncovered the fact.  Thereafter, the discovery would have been incorporated into the design and production of Vector for the Indian market. No wonder, with its Mach 3 Turbo razor, Gillette overcame its initial inertia and handicap and made a success of the razor business in India.

5 0
2 years ago
Whether exchange is between individuals, firms, or countries, voluntary trade occurs because:
larisa86 [58]

Answer:

b.both parties are made better off.

Explanation:

People voluntary to trade when they will better off after the trade. Since individual or nation has different proficiency and endowment resources, the ability to produce some product will be different for each country.

For example, German people are skillful of making beer. They have efficient production. Whereas France have expertise in making perfume. It is reasonable for German people to buy perfume from France since it is cheaper and has better quality than making it themselves. On the other hand, if french want to drink beer, it is cheaper to buy from Germany. Thus, both Germany and France will be better of after the trade.

5 0
3 years ago
The Federal Reserve S role as a lender of last resort involves lending to which of the following financially troubled institutio
ANTONII [103]

Answer: U.S. banks that cannot borrow elsewhere

Explanation:

Lender of last resort is.a situation that occurs when the central bank in a country gives loans to the commercial banks in the country when they are going through financial difficulties.

In this scenario, The Federal Reserve S role as a lender of last resort involves lending to U.S. banks that cannot borrow elsewhere.

5 0
3 years ago
Brenda is an electrician with bright light home and business. into which category of job does she best fit
Daniel [21]
Isn't she an electrician? Please explain question more
8 0
3 years ago
Buchholz Corporation follows a moderate current asset investment policy, but it is now considering a change, perhaps to a restri
omeli [17]

Answer:

6.56%

Explanation:

1. Restricted policy where current assets are 15% of sales.

Sales = $400,000

Current assets = 0.15 * 400000 = $60,000

Total assets = Fix assets + Current assets = 100,000 + 60,000 = $160,000

Debt accounts for 50% of capital structure. Therefore 50% assets will be financed through debt.

Debt = 0.5 *160,000 = $80,000

Equity = Assets - Debt =$80,000

Interest on Debt = 10% * $80,000 = $8,000

EBIT = $35,000

Profit before tax = 35000 - 8000 = 27000

Tax = 25% of 27,000 = $6,750

PAT = $27,000-$6,750

= $20,250

ROE = 20,250/ 80000 = 25.31%

2. Calculations for relaxed policy where current assets are 25% of sales.

Sales = $400,000

Current assets = 0.25 * 400000 = $100,000

Total assets = Fix assets + Current assets = 100,000 + 100,000 = $200,000

Debt accounts for 50% of capital structure. Therefore 50% assets will be financed through debt.

Debt = 0.5 *200,000 = $100,000

Equity = Assets - Debt =$100,000

Interest on Debt = 10% * $100,000 = $10,000

EBIT = $35,000

Profit before tax = 35000 - 10000 = 25000

Tax = 25% of 25,000 = $6,250

PAT = 25000 - 6,250 = $18,750

ROE = 18750/ 100000 = 18.75%

The difference between the 2 ROEs = 25.31% - 18.75% = 6.56%

Therefore the difference in the projected ROEs between the restricted and relaxed policies is 6.56%

3 0
3 years ago
Other questions:
  • Eduardo goes to his mentor, Mateo, to get tips for improving his performance. Administrative While reviewing his goals for the y
    13·1 answer
  • The Coffee Express has computed its fixed costs to be $.48for every cup of coffee it sells given annual sales of 145,000 cups. T
    14·1 answer
  • Managers in a home improvement company have been having problems with employees starting cliques. To develop more of a team cult
    8·1 answer
  • New items developed for automobiles in the 1997 model year included a safer air bag, which, unlike previous air bags, eliminated
    6·1 answer
  • A firm's bonds have a maturity of 10 years with a $1,000 face value, a 9 percent semiannual coupon, are callable in 5 years at $
    15·1 answer
  • Conchita is applying for a VA loan. She has served in the military, on active service, for ninety days. She is trying to buy a t
    14·1 answer
  • Down and Out Co. operates an executive placement service for corporate executives displaced by corporate restructuring. Its mont
    7·1 answer
  • g How would you define the role of human resources in your organization? How does it compare with the information in this week's
    14·1 answer
  • You have $2,000 today in your savings account. How long must you wait for your savings to be worth $4,500 if you are earning 1.2
    10·1 answer
  • What is the responsibilities of supervisor to his superior?​
    6·2 answers
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!