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Serggg [28]
3 years ago
9

A Corporation will pay a dividend of $1.75 per share at this year's end and a dividend of $2.25 per share at the end of next yea

r. It is expected that the price of its stock will be $42 per share after two years. If the firm has an equity cost of capital of 9%, what is the maximum price that a prudent investor would be willing to pay for a share of the stock today
Business
1 answer:
g100num [7]3 years ago
7 0

Answer:

$38.85

Explanation:

The computation of the maximum price would be willing to pay is shown below:

Current price = Future dividend × Present value of discount factor (rate of interest , time period)

= $1.75 ÷ 1.09 + $2.25 ÷ (1.09^2) + $42 ÷ (1.09^2)

= $1.61 + $1.89 + $35.35

= $38.85

Simply applied the above formula so that the maximum price could come

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Answer:Capitalism had too many limits

Explanation:

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4 years ago
Curtis Corporation's noncallable bonds currently sell for $1,165. They have a 15-year maturity, an annual coupon of $95, and a p
azamat

Answer:

The answer is 7.61%

Explanation:

N(Number of periods) = 15 years

I/Y(Yield to maturity) = ?

PV(present value or market price) = $1,165

PMT( coupon payment) = $95

FV( Future value or par value) = $1,000.

We are using a Financial calculator for this.

N= 15; PV = -1165; PMT = 95; FV= $1,000; CPT I/Y= 7.61

Therefore, the Yield-to-maturity of the bond is 7.61%

7 0
4 years ago
The size of the change in the quantity demanded of a good or service due to change in its price is measured by the elasticity of
Dmitry_Shevchenko [17]

Answer:

Elastic ; greater than 1

Explanation:

We know that

Price elasticity of demand =  (Percentage change in quantity demanded) ÷ (Percentage change in price) × 100

Since in the question it is given that the percentage change in quantity demanded is more than the percentage change in price that reflects that the price elasticity is elastic that means it is greater than one.

8 0
3 years ago
Suppose two neighbors share a park. One neighbor, Al, leaves trash in the park. This bothers the other neighbor, Bill. a. Accord
Sergio039 [100]

Answer:

1 optimal level is the level of trash where AL willingness to compensate Bill is equal to damage cost to bill by trash

2 it can be alleviated

3 yes there is a way by granting property rights to either of the two parties

7 0
3 years ago
Bob's tropical fish store is a great place to find rare fish. bob's tropical fish store has a very motivated sales staff and a u
Lapatulllka [165]
B. External reference price

In "external reference price”, sellers price items by comparing the prices to those found outside of this shopping situation.
External reference prices are usually set up with the format “compare to $ …”.
Bob’s <span>Tropical Fish Store is referencing external reference price of $65, and comparing it to its lower price of $45.



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7 0
3 years ago
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