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
The Saturn Company records all collections from customers (including 5% sales tax) in the Sales Revenue Account. The account bal
iris [78.8K]

Answer:

$5,000

Explanation:

Calculation for what the Sales Tax Payable will be:

Sales Tax Payable=5% sales tax*Account balance $100,000

Sales Tax Payable=$5,000

Therefore the Sales Tax Payable will be: $5,000

8 0
3 years ago
Recently, beagle boutique was attempting to hire a middle manager. they were looking for an intelligent, active, and creative in
ValentinkaMS [17]

Recently, beagle boutique was attempting to hire a middle manager. they were looking for an intelligent, active, and creative individual. Beagle used the trait approach. This is further explained below.

<h3>What is the trait approach?</h3>

Generally, An individual's attributes are used as indicators of their personality in a trait-based approach.

In conclusion, Beagle Boutique recently tried to find a middle manager. They were seeking someone who was energetic, clever, and creative. Beagle used the trait approach

Read more about The trait approach

brainly.com/question/25937970

#SPJ1

3 0
2 years ago
FARO Technologies, whose products include portable 3D measurement equipment, recently had 36 million shares outstanding trading
erma4kov [3.2K]

Answer:

A. $117 million

B.13%

C. $21.75

Explanation:

B. Calculation to determine How large a loss in dollar terms will existing FARO shareholders experience on the announcement date

Expected Loss= 390*30%

Expected Loss= $117 millions

Therefore How large a loss in dollar terms will existing FARO shareholders experience on the announcement date will be $117 millions

B. Calculation to determine What percentage of the value of FARO’s existing equity prior to the announcement is this expected gain or loss

First step is to calculate the Existing Shares Value

Existing Shares Value =36*$25

Existing Shares Value= $900 millions

Now let calculate the Expected Loss %

Expected Loss % = $ 117/$ 900

Expected Loss % = 13%

Therefore the percentage of the value of FARO’s existing equity prior to the announcement is this expected gain or loss will be 13%

C. Calculation to determine At what price should FARO expect its existing shares to sell immediately after the announcement

Price Per Share: $ 25*(1 - 0.13)

Price Per Share$25*0.87

Price Per Share: $21.75

Therefore what price should FARO expect its existing shares to sell immediately after the announcement is $21.75

6 0
3 years ago
Rediger Inc., a manufacturing Corporation, has provided the following data for the month of June. The balance in the Work in Pro
maw [93]

Answer:

$147,400

Explanation:

The computation of the cost of goods manufactured is shown below:

= Direct materials used + Direct labor cost + Manufacturing overhead cost + beginning work-in-process inventory - ending work-in-process inventory

= $56,400 + $30,100 + $52,400 + $29,000 - $20,500

= $147,400

We considered the applied manufacturing overhead cost instead of actual manufacturing cost

5 0
3 years ago
Crystal's Performance Pizza is a small restaurant in Denver that sells gluten-free pizzas. Crystal's very tiny kitchen has barel
galben [10]

Answer:

Components of creation that can be differed with yield delivered are alluded to as factor elements of creation.  

Elements of creation that can't be differed with yield delivered are alluded to as fixed elements of creation.  

In given case, stove and laborers are utilized in pizza creation.  

It has been given that in short-run, number of stoves can't be changed however number of laborers can be changed.  

Along these lines,  

In short-run, these laborers are variable information sources, and the stoves are fixed data sources.

Number of Workers: 0

Output  (Pizzas): 0

Marginal Product of Labor  (Pizzas): 0

Number of Workers: 1

Output  (Pizzas): 70

Marginal Product of Labor  (Pizzas): 70

Number of Workers: 2

Output  (Pizzas): 120

Marginal Product of Labor  (Pizzas): 50

Number of Workers: 3

Output  (Pizzas): 160

Marginal Product of Labor  (Pizzas): 40

Number of Workers: 4

Output  (Pizzas): 190

Marginal Product of Labor  (Pizzas): 30

Number of Workers: 5

Output  (Pizzas): 200

Marginal Product of Labor  (Pizzas): 10

3 0
3 years ago
Other questions:
  • Mayan Company had net income of $132,000. The weighted-average common shares outstanding were 80,000. The company has no preferr
    5·1 answer
  • Marianne is the payroll manager at johnson manufacturing. she wants to upgrade the department's accounting systems. to whom woul
    10·2 answers
  • How do product managers manage their product mix
    15·1 answer
  • The existing balance in the Allowance for Doubtful Accounts is considered in computing bad debt expense when using the percentag
    10·1 answer
  • Because it is difficult for economists to use experiments to generate data, they generally must a. use whatever data the world g
    12·1 answer
  • Our entrepreneur in problem 4 above is trying to set up a well-organized office filling system that will make it easier (and les
    15·1 answer
  • Budgeted sales are expected to be: January 200 Units February 300 Units March 400 Units April 300 Units May 400 Units Selling Pr
    7·1 answer
  • To choose the best training method, a company should consider such factors as the number of people to be trained, the cost of tr
    6·1 answer
  • Which situation best illustrates the effects of inflation?
    6·1 answer
  • record the adjusting entry for recording the interest due on a note payable liability. assume that the company has a $2400 note
    11·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!