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Natasha2012 [34]
2 years ago
11

Suppose that a firm’s recent earnings per share and dividend per share are $2.50 and $1.50, respectively. Both are expected to

grow at 9 percent. However, the firm’s current P/E ratio of 24 seems high for this growth rate. The P/E ratio is expected to fall to 20 within five years.
Compute the dividends over the next five years.

Compute the value of this stock in five years.

Calculate the present value of these cash flows using an 11 percent discount rate.
Business
1 answer:
Elis [28]2 years ago
7 0

Answer:

D0 1.50

D1 1.60

D2 1.78

D3 1.94

D4 2.12

D5 2.31

Price of the stock after 5-year $ 77

PV $ 81.75

Explanation:

Earning per share 2.5

Dividend per share 1.5

grow ratio 9%

P/E ratio 24

within 5 year is expected to fall to 20

We solve for the dividend by multiplying the dividends by the grow rate of 9%

We solve for the earning after 5 years:

Principal \: (1+ r)^{time} = Amount

Principal 2.50

time 5.00

rate 0.09000

2.5 \: (1+ 0.09)^{5} = Amount

Amount 3.85

Then we multiply by 20 to get the value of the stock:

$ 3.85 x 20 = $ 77

We solve the horizon value:

\frac{D_1}{r-g} = PV\\\frac{D_0(1+g)}{r-g} = PV\\

\frac{1.5(1+0.09)}{0.11 - 0.09} = PV\\

PV $ 81.75

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A $2,000 cash dividend is planned in 2019. No dividend was paid in 2018. 1,000 shares of 5% cumulative $10 par value preferred s
Irina-Kira [14]

Answer:

C) $1000

Explanation:

First lets calculate the cumulative preferred stock dividend for 2 years

(1000 * 10 ) * 5% = 500 / year

so for 2 years = $1000 since it is cumulative and not paid in one year is added to next year.

Total dividend payable = $2000

so for common stock whatever is left over is paid thus,

Common stock share = Total - Preferred cumulative = 2000 - 1000 = $1000

Hope that helps.

4 0
3 years ago
As a result of conducting a gap analysis, the potential entrepreneur proved there was a need for the business. This is called do
Vera_Pavlovna [14]

Answer:

due diligence

Explanation:

Due diligence refers to an entrepreneur or a business man/woman basically doing their homework, i.e. investigating thoroughly about a business opportunity before deciding to accept a business proposal, enter a new market, or start a new business.

Many times, management is required by law to perform due diligence before entering a new business or signing certain contracts, but it is just common sense that before you start a new business you will try to find out if the business is feasible or not.

7 0
3 years ago
Which of the following options is a better purchase for a bicycle?
Bess [88]

Answer:

Option 3: $12 down with equal payments of $5 for 12 months

Explanation:

In option 1 :

The cost is $ 88,

In option 2 :

Down payment = $ 5,

Weekly payment = $ 8,

Number of weeks = 10,

So, the total cost = 5 + 8 × 10 = 5 + 80 = $ 85,

In option 3 :

Down payment = $ 12,

Monthly payment = $ 5,

Number of months = 12,

So, the total cost = 12 + 5 × 12 = 12 + 60 = $ 72,

In option 4 :

Down payment = $ 20,

Monthly payment = $ 20,

Number of months = 12,

So, the total cost = 12 + 20 × 12 = 12 + 240= $ 252

∵ 72 < 85 < 88 < 252

Hence, option 3 is better.

6 0
3 years ago
In 2005, BridgePort Brewing Company expanded sales of its BridgePort India Pale Ale, and BridgePort Black Strap Stout into Alaba
Rina8888 [55]

Answer: organizing

Explanation:

When the brewery allocated resources to increase its production and distribution, the management function that it'll have relied on is organizing.

First and foremost, we should note that the management functions usually include:

• planning,

• organizing,

• leading, and

• controlling.

The organizational skills is vital in order for the company to runs smoothly. Organizing has to do with the establishment of internal processes in order to know the workers that fits a particular position.

Also, the management makes sure that everyone are organized and that workers are working hard towards the accomplishment of company's goals.

7 0
2 years ago
You are given the following long-run annual rates of return for alternative investment instruments: U.S. Government T-bills 3.10
Dvinal [7]

Answer:

The real rate of return is 0.10%

Explanation:

For computing the real rate of return, we need to apply the formula which is shown below:

( 1 + nominal rate) = ( 1 + real rate) × (1 + inflation rate)

So,

The real rate = {(1 + nominal rate) ÷  (1 + inflation rate)} - 1

                     = ((1 + 3.10%) ÷  (1 + 2%)} - 1

                     = (1.031 ÷ 1.02) - 1

                     = 1.0107 - 1

                     = 0.10

The Government T-bills is only the nominal rate so we considered this only

5 0
3 years ago
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