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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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Which one of these people does not attend the closing?
ycow [4]

Answer:

d. Appraiser

Explanation:

During a closing appointment, there are many individuals usually present, including the buyer, seller, closing agent, and the attorney. Sometimes the company representative, mortgage lender, and other real estate agents may attend in unique situations. From the list provided the one individual that never attends a closing appointment is the Appraiser. This individual's only job is to estimate the market value of the house before listing it, and once this is done has no involvement in the selling process.

5 0
3 years ago
If you make only the minimum payment on your credit card by the due date
crimeas [40]
It’s B or either C I think
7 0
3 years ago
Lusk Company produces and sells 15,200 units of Product X each month.The selling price of Product X is $22 per unit, and variabl
Brrunno [24]

Answer:

1. decrease by $62,200 per month

Explanation:

Fixed Cost savings (FC) from discontinuing product A = $102,000 - $73,000  = $29,000

Variable Cost of 15,200 of product A:

VC = 15,200* \$16 = \$243,200

Revenue from selling 15,200 units of product A:

R = 15,200* \$22 = \$334,400

The change in net income is:

\Delta N=FC+VC-R\\\Delta N=\$29,000+\$243,200-\$334,400\\\Delta N=-\$62,200

The company's overall net operating income would decrease by $62,200 per month

3 0
3 years ago
Which of the following is not an example of a significant noncash transaction? Conversion of bonds into common stock. Sale of pl
Lostsunrise [7]

Answer:

Sale of plant assets.  If the company<u> sales an equipment it will receive cash </u>for it. We are not given with any information of this transaction not being in cash, so we should assume it was a sale in cash or cash equivalent.

Explanation:

<u>Conversion of bonds into common stock.</u> The bonds, which are outstanding and represent a promise to pay, are converted into common stock, this transaction doesn't involve cash.

<u>Issuance of common stock to purchase land. </u>The land is acquire in exchange of common stock, the company is not using cash. the owner of the land can later sold the stock to a third party but it won't affect the cash flow of the company.

<u>Issuance of debt to purchase equipment </u>Like singing a note to purchase a machine, no cash is involve.

3 0
3 years ago
Why is it important for a company to operate cross-functionally?
scoundrel [369]
It is important so business managers can make more successful decisions and facilitate problem solving and decision making.
4 0
3 years ago
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