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rodikova [14]
3 years ago
5

6. The DAP Company has decided to make a major investment. The investment will require a substantial early cash out-flow, and in

flows will be relatively late. As a result, it is expected that the impact on the firm's earnings for the first 2 years will be a negative growth of 5% annually. Further, it is anticipated that the firm will then experience 2 years of zero growth after which it will begin a positive annual sustainable growth of 6%. If the firm's cost of capital is 10% and its current dividend (D0) is $2 per share, what should be the current price per share?
Business
1 answer:
Trava [24]3 years ago
4 0

Answer:

The DAP Company

Current price per share:

Current price = Current Dividend (D0) / (WACC - Growth Rate)

= $2/ (0.10 - 0.06) = $50

Explanation:

The technique used to value the share price is called the Dividend Discount Model (DDM).  The Myron Gordon model of this DDM is popularly used.

This model states that the current price of a share is the Current Dividend (D0) divided the difference between the cost of capital and the growth rate.

The result is the intrinsic value of the stock.  The model assumes that dividends are paid in perpetuity and that the growth rate is constant over many years.

These remain assumptions as the real life offers quite different scenarios.  There is no company that pays dividend every year in perpetuity.   A company's growth rate is never constant year on year.

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A. And increases the retention of information in the ad

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Music in ad is a way of creating awareness which excite the prospective customers, it help to gain their attention and also helps to remember the information of the advert because subconsciously the music plays in their head and as it does , the information about the product keeps coming to them.

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3 years ago
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For each of the following items before adjustment, indicate the type of adjusting entry (prepaid expense, unearned revenue, accr
igor_vitrenko [27]

Answer:

See explanation

Explanation:

(a) Assets are understated - If we do not adjust accrued revenue, the assets are understated. For example - if we do not add any outstanding rent revenue, the assets will become understated.

(b) Liabilities are overstated - If we do not adjust unearned revenue, the liabilities are overstated. For example - if we do not deduct any expired unearned revenue, the liabilities will become overstated.

(c) Liabilities are understated - If we do not adjust accrued expense, the liabilities are understated. For example - if we do not add any outstanding rent expense, the liabilities will become understated.

(d) Expenses are understated - If we do not adjust accrued expense and prepaid expense, the expenses are understated. For example - if we do not add any outstanding rent expense and expired prepaid expenses, the expenses will become understated.

(e) Assets are overstated - If we do not adjust prepaid expense, the assets are overstated. For example - if we do not deduct any expired prepaid insurance, the assets will become overstated.

(f) Revenue is understated - If we do not adjust accrued revenue and unearned revenue, the revenue is understated. For example - if we do not add any outstanding rent revenue and expired unearned revenue, the revenue will become understated.

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From the above information, Phil has a standard tax of $7,150.

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3 years ago
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Anyone else alternatives possible does not apply to the situation throughout the question. That's the right thing above.

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