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CaHeK987 [17]
3 years ago
13

Drake Custom Cycles' common stock currently pays no dividends. The company plans to begin paying dividends beginning 3 years fro

m today. The first dividend will be $3.00, and dividends will grow at 5 percent per year thereafter. Given a required return of 15 percent, what would you pay for the stock today
Business
1 answer:
kifflom [539]3 years ago
5 0

Answer:

The maximum price that should be paid for this stock today is $20.71

Explanation:

The company will pay its first dividend in Year 3 which means the dividend of $3 is D3. Using the constant growth model of DDM we can calculate the price of this stock at year 3. We will discount back that to the present value to calculate the price of the stock today. the price at year 3 using the constant growth model will be,

P3 = D4 / r - g

P3 = 3 * (1+0.05)  /  (0.15 - 0.05)

P3 = $31.5

The maximum price that should be paid for this stock today is,

P0 = 31.5 / (1+0.15)^3

P0 = $20.71

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The following data pertain to an investment proposal (Ignore income taxes.):
Viefleur [7K]

Answer:

The closest answer is option A,$7649

Explanation:

The net present value of the investment is the present value of annual cost savings minus the initial cost of investment.

present of cash flow=cash flow/(1+r)^n

r is the discount rate of 12%

n is the year the cash flow relates to ,for instance year zero for the initial investment

NPV=-$54,000+$16,000/(1+12%)^1+$16,000/(1+12%)^2+$16,000/(1+12%)^3+$16,000/(1+12%)^4+($16,000+$7,000)/(1+12%)^5=$ 7,648.41  

note that the project gives $7,000 in salvage value in year 5

4 0
3 years ago
Offer. Ball writes to Sullivan and inquires how much Sullivan is asking for a specific forty-acre tract of land Sullivan owns. B
Fittoniya [83]

Answer:

Ball can certainly hold Sullivan to a contract for sale of the land.  Sullivan in his reply to Ball's enquiry offered to sell the forty-acre tract of land at $60,000 and nothing less.  Ball accepted this offer by Sullivan by stating his acceptance.

These exchanges of offer and acceptance meet the terms of a valid contract.  Therefore, Ball can always hold Sullivan for contract enforcement.

Explanation:

In making a valid contract, offer and acceptance are key ingredients, with specific consideration.  Since the two parties, Ball and Sullivan are agreed on the consideration and have exchanged offer and acceptance, the validity of the contract is enhanced thereupon.

7 0
3 years ago
Some cafes that sell espresso drinks teach their employees wrist and arm relaxation exercises because the repetitive motions req
marta [7]

Answer:  Risk prevention

Explanation: In simple words, risk prevention refers to a risk management strategy in which an organisation takes some actions or conduct different activities to minimize or diminish the potential harm that may or  may not occur in the future.

Usually the problems for which such strategy is used, have high probability of happening, thus, companies prefers to take disciplinary actions in advance rather than corrective actions in future.

In the given case, the cafes knows that their employees could get injured due to repetitive motions thus they were conducting exercises for relaxation.

Hence we can conclude that they are doing risk prevention.

5 0
3 years ago
If each piece of a 10 piece puzzle had a word that represented you on it, what 10 words would we see?
Marysya12 [62]

Answer: brave,strong, funny, short, smart, unique, beautiful, amusing, pretty

Explanation:

5 0
2 years ago
Scampini Technologies is expected to generate $25 million in free cash flow next year, and FCF is expected to grow at a constant
DedPeter [7]

Answer:

$9.26 per stock

Explanation:

using the discounted cash flow model, the value of Scampini Technologies is:

company's value = free cash flow / (required rate of return - growth rate) = $25,000,000 / (13% - 7%) = $25,000,000 / 6% = $416,666,667

since the company does not have any debt, the price of each stock is:

stock price = total value of the company / total outstanding stocks = $416,666,667 / 45 million shares = $9.26 per stock

8 0
3 years ago
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