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
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.

You might be interested in
A firm receives the proceeds from the sale of its securities in the _________________ market. over-the-counter secondary New Yor
harkovskaia [24]

In the stock exchange market, a firm does receives the proceeds from the sale of its securities in the primary market.

<h3>What is primary market in stock exchange market?</h3>

Basically, the primary market is the market where securities are created and sold to the public by various firms.

In this market, different firm sells new stocks, bonds etc to the public for the first time.

In conclusion, in the stock exchange market, a firm does receives the proceeds from the sale of its securities in the primary market.

Read more about primary market

<em>brainly.com/question/3904762</em>

8 0
3 years ago
What are consumer goods and how do they allow a country to become a mdc?
Reika [66]
Consumer goods are those goods that are purchased and used by consumers. Consumer goods are not used by manufacturers to produce other goods. In essence, consumer goods are ready for use since they have been taken through the production and manufacturing. For a country to have consumer goods it must trade with other countries either to acquire raw materials or trade in consumer goods. This trade process contributes greatly towards the development of LDC economies into MDC status.
6 0
3 years ago
Without actually saying what was wrong with the program, beth alluded to
Natasha_Volkova [10]
Without actually saying what was wrong with the program, Beth alluded to walking around the space. Jerry is lucky with a lady and Beth recalls her childhood. After learning that a father of one her childhood friends, Tommy, is set to be executed for the murder of the said friend, Beth remembers how she tried to deal with his disappearance via imagining that he got lost in her imaginary international referred to as "Froopyland" and laughs at how stupid it becomes.
6 0
3 years ago
If marginal cost is above average total cost,
PtichkaEL [24]

Answer:

Average total cost is rising

6 0
3 years ago
Read 2 more answers
With reference to the expectancy theory, when pay is based on factors other than performance, such as seniority, the ________ re
aalyn [17]

Answer:

Performance-reward

Explanation:

With reference to the expectancy theory, when pay is based on factors other than performance, such as seniority, the <u>Performance-reward</u> relationship tends to be weak.

Expectancy theory: It is theory of motivation which advocate that employee should rewarded on the basis of performance and reward should be higher and known to the employee earlier, which motivate to perform well and put more effort in the task given as they know what would be the reward. The reward could be vacation, day off, salary hike, etc. The reward structure should also be clear with defined goal and transparent evaluation. Tenure of the employee should not be the major factor for pay hike, as it weaken the performance of employee.

5 0
3 years ago
Other questions:
  • The department chain you work for has had numerous complaints about slow customer service. Your colleague, a sales manager, info
    6·1 answer
  • As a result of cash flow shortages, Millard's Department Stores has fallen behind in payments to suppliers. Some suppliers are w
    9·1 answer
  • Troy (single) purchased a home in Hopkinton, MA, on January 1,2007, for $300,000. He sold the home on January 1, 2016, for$320,0
    13·1 answer
  • LO 2.2Which of the following are prime costs?
    6·1 answer
  • Which of these job descriptions is least likely to fall under an events manager?
    13·1 answer
  • A landlord with a bad reputation among students for her high rent, deceptive advertising, and refusal to return security deposit
    10·1 answer
  • Proponents of the notion of a "political business cycle" suggest that: 
A. The standardized budget is a better indicator of the
    12·1 answer
  • An arrangement in which brokers pool their listings and all commissions are divided between the listing broker and the selling b
    11·1 answer
  • Link Company uses a process cost system and the weighted average method. During the year the company completed 1,300 units of pr
    8·1 answer
  • Due to a downturn the wage of entry level workers has declined by 10 per cent, as a
    15·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!