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
Snowcat [4.5K]
3 years ago
9

Assume that Bolton Company will pay a $2.00 dividend per share next year, an increase from the current dividend of $1.50 per sha

re that was just paid. After that, the dividend is expected to increase at a constant rate of 5%. If you require a 12% return on the stock, the value of the stock is Multiple Choice $31.78. $30.00. None of the options are correct. $28.57. $28.79.
Business
1 answer:
Gwar [14]3 years ago
3 0

Answer:

None of the options are correct as the price today will be $26.786

Explanation:

The price of a stock whose dividends are expected to grow at a constant rate forever can be calculated using the constant growth model of the dividend discount model approach (DDM). The DDM bases the value of a stock on the present value of the future expected dividends from the stock.

The formula for price under constant growth model is,

P0 = D1 / (r - g)

Where,

  • D1 is the dividend expected for the next period
  • r is the required rate of return or cost of equity
  • g is the growth rate in dividends

However, as the constant growth rate in dividends is to be applied from Year 2 onwards, we will use the D2 to calculate the price at Year 1 and we will then discount this further for one year to calculate the price today.

P1 or Year1 price  =  2 * (1+0.05) / (0.12 - 0.05)

P1 or Year 1 price = $30

The price of the stock today or P0 will be,

P0 = 30 / (1+0.12)

P0 = $26.786

You might be interested in
In the? __________ communication? network, ideas and information flow along the lines of command in the? company?s organizationa
Anna11 [10]
The correct letter of the answer is letter a. formal. It is because it is the one responsible for the organization or the pattern in terms of the communication. It is the one that deals with the ideas, network and information that is being sent out that is in line with the structure of organization to facilitate network communication.
5 0
3 years ago
The bond, which has a $1,000 face value and a coupon rate equal to 10 percent, matures in six years. Interest is paid every six
nikitadnepr [17]

Answer:

Market value of bond = 841.14

Explanation:

Explanation:

The value of the bond is the present value(PV) of the future cash receipts expected from the bond. The value is equal to present values of interest payment plus the redemption value (RV) discounted at the yield rate.

Value of Bond = PV of interest + PV of RV

The value of bond  can be worked out as follows:

Step 1  

Calculate the PV of interest payments

Semi annual interest payment

= 10% × 1,000× 1/2 = 50

PV of interest payment

A ×(1- (1+r)^(-n))/r

r- semi-annual yield = 14%/2 = 7%

n- 6× 2 = 12

= 50× (1-(1.07^(-12)/0.07

= 397.13

Step 2

PV of redemption Value

PV = $1000 × (1.07)^(-12)

= 444.011

Step 3

Price of bond

= 397.13 +444.01

=841.14

Market value of bond = 841.14

3 0
2 years ago
How can a company´s salespeople help with product development?
Marizza181 [45]

Answer:

Salespeople, who are on the front line interacting with customers, assume one of the most important roles in the product differentiation process. A well-informed customer will usually choose the product that offers the most value. There- fore, salespeople need to position their product with a value proposition.

6 0
3 years ago
On January 1, Franz Co. accepted a 30-day, 6% note in the amount of $5,000 from Bria Co., a customer. On January 31, the due dat
Blababa [14]

Answer:

The answer is:

Dr Cash $5,025

Cr: Receivable $5,000

Cr: Interest Revenue $25

Explanation:

The year is 360 days.

Annual rate is 6%

Therefore, interest rare for the 30-day is 1.5%[(90/360) x 6%]

So, the interest on the rate is:

0.5% x $5,000

$25.

The total amount collected from Bria will be principal + interest

$5,000 + $25 = $5,025

According to the accounting rule, debit increases asset and expenses and vice-versa while credit decreases liability, equity, income and vice versa.

So we have:

Dr Cash $5,025

Cr: Receivable $5,000

Cr: Interest Revenue $25

4 0
3 years ago
The world’s largest bank. Deutsche Bank set as its objective to make its name more recognizable in the United States. The succes
Vilka [71]

Answer: Planning

Some of the functions of management are planning, organizing, controlling, and leading.

Success depends on the "planning" function they will have to execute the task of sponsoring the golf tournament. Since they must map who will be the main participants and if they could be related to the bank, they must also have the best marketing strategy, place the right advertising in the right places to meet their objectives

6 0
2 years ago
Other questions:
  • Which is true of someone with a low credit score? I. They probably make on time payments. II. They may not be able to rent the a
    9·1 answer
  • Most suppliers of travel products pay travel agencies____percent commission on any sales they make.
    7·1 answer
  • Terry Industries produces two electronic decoders, P and Q. Decoder P is more sophisticated and requires more programming and te
    5·1 answer
  • If a stock has a preemptive right, it gives current stockholders the right to purchase any new shares issued by the firm, so as
    9·1 answer
  • Ryan, age 57, is single with no dependents. In 2019, Ryan's principal residence was sold for the net amount of $400,000 after al
    13·1 answer
  • Jordan signed a finance agreement for her recent purchase. what is the total amount she will pay back under this agreement?
    10·2 answers
  • Anyone got sc? mines babyjas04
    12·1 answer
  • Jerome has insignificant influence of Melina Corporation because it owns less than 20% of the voting stock. The cost of the Meli
    11·1 answer
  • This is my mom channel please subscribe​
    13·1 answer
  • What principle prevents the disclosure of information to unauthorized people, resources, and processes?.
    6·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!