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
Roman55 [17]
3 years ago
10

Cooperton Mining just announced it will cut its dividend from $4 to $2.50 per share and use the extra funds to expand. Prior to

the announcement, Cooperton’s dividends were expected to grow at a 3% rate, and its share price was $50. With the planned expansion, Cooperton’s dividends are expected to grow at a 5% rate. What share price would you expect after the announcement? (Assume that the new expansion does not change Cooperton’s risk.) Is the expansion a good investment?
Business
1 answer:
mylen [45]3 years ago
3 0

Answer: Share price after announcement is $41.67.

The Expansion is not a good investment.

Explanation:

To solve this we would need to first calculate the cost of equity. Given the Initial stock price as well as the dividend and growth rate, we are able to calculate the cost of equity using the Gordon Growth Formula which is,

Sp = D1/ (r - g)

Where,

Sp is stock price

D1 is the next dividend

r is cost of equity

g is growth rate.

Inserting the figures we have,

50 = 4 / ( r - 3%)

50 ( r - 3%) = 4

r = 4/50 + 3%

r = 11%

Given that we now know r, we can calculate the new stock price using the same formula,

Sp = D1/ ( r - g)

Sp = 2.5 ( 11% - 5%)

Sp = $41.67

The stock price after the announcement became $41.67.

The Expansion is NOT a good investment as it leads to a reduction in Stock Price.

You might be interested in
Gord Larose and his friend David Allan worked in Ottawa at Nortel Networks, a giant telecommunications-equipment maker. One Frid
butalik [34]

Answer:

intrapreneurs

Explanation:

An intrapreneur is an employee who is tasked with developing an innovative idea or project within a company.

An intrapreneur works inside a company to develop an innovative idea or project that will enhance the company's future.

The intrapreneur is generally given autonomy to work on a project that may have a considerable impact on the company. Over time, an intrapreneur may turn into an entrepreneur.

5 0
3 years ago
Brown Cow Dairy uses the aging approach to estimate Bad Debt Expense. The balance of each account receivable is aged on the basi
mars1129 [50]

<u>Solution and Explanation:</u>

Age of the     Amount             Estimated                    Estimated

Receivables             Uncollectibles  Uncollectible Amounts    

1-30 days old    $12,000   3%                            $360

31-90 days old   $5,000   15%                              $750

more than 90

days old               $3,000   30%                     $900

Estimated year end Balances for Uncollectible Amounts   $2,010

Bad Debt Expense for the year : Estimated Uncollectible Amount - Existing Credit Balance in the Allowance Account

Bad Debt Expense : $2,010 minus $800 = 1210

If the existing balance is Debit Balance of $600.

Bad Debt Expense : $2,010 plus 600 = $2,610.

8 0
3 years ago
Which of the following loans typically have the highest interest rate? Car loan, credit card, payday loan, mortgage
Ann [662]
Payday loans typically have the highest interest rate. APEX
3 0
3 years ago
Read 2 more answers
why do you think governments want to influence the supply of alcohol and tobacco products by imposing excise taxes?
anastassius [24]
So that the government earn more revenue .Few governments for exampe India people are still ready to pay high to consume alcohol and tobacco,So therefore Indian government charges high tax(not too high) so that the consumers doesn't decrease their consumption and increase the government revenues to reduce the consumption .if taxes are high people might refuse to buy tobacco and alcohol thus reduces the consumption
4 0
4 years ago
If at a particular price level, real domestic output from producers is greater than real domestic output desired by purchasers,
Alexeev081 [22]

Answer:

B. Surplus and the price level will fall

Explanation:

If at a particular price level the real domestic output from producers is greater than real domestic output desired by purchasers it means that supply has outstripped demand and price has not changed.

If supply is greater than demand, there would be a surplus and prices would fall.

An increase in supply is shown by a rightward shift of the supply curve.

3 0
3 years ago
Other questions:
  • Assume that you are the project manager for the construction of a 15-mile road. Further, assume that the work is uniformly distr
    11·1 answer
  • Current GAAP requires the allocation of total share-based compensation cost to expense on a straight-line basis over the vesting
    14·1 answer
  • Markland Manufacturing intends to increase capacity by overcoming a bottleneck operation by adding new equipment. Two vendors ha
    7·1 answer
  • It is estimated that firms lose ___________ annually in productivity, absenteeism, and employee turnover due to caring for aging
    9·1 answer
  • Which of the following statements about revenues are true? (You may select more than one answer. Single click the box with the q
    14·1 answer
  • Marst Corporation's budgeted production in units and budgeted raw materials purchases over the next three months are given below
    12·1 answer
  • On July 10, 2020, Pronghorn Music sold CDs to retailers on account and recorded sales revenue of $635,000 (cost $508,000). Prong
    12·1 answer
  • Using the information below, calculate the cost of goods manufactured for the period: Beginning Raw Materials Inventory $ 45,000
    10·1 answer
  • Training needs analysis
    14·1 answer
  • A plan showing the planned sales units and the revenue to be derived from these sales, and is the usual starting point in the bu
    6·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!