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omeli [17]
3 years ago
13

"Expected Return Ecolap Inc. (ECL) recently paid a $0.46 dividend. The dividend is expected to grow at a 14.5 percent rate. At a

current stock price of $44.12, what is the return shareholders are expecting
Business
1 answer:
skad [1K]3 years ago
4 0

Answer:

  • <u>15.7%</u>

Explanation:

The <em>price</em> of a <em>stock</em> can be modeled by the present value of the stream of future <em>dividends</em> discounted at a rate equal to the<em> return expected</em>.

The equation, when the dividends are expected to <em>grow</em> at a constant rate, less than the return rate is:

        Price_0=\dfrac{Div_1}{r-g}

Where:

  • Price₀ is the <em>current price</em>: $44.12
  • Div₁ is the <em>dividend </em>to be paid a year from now: $0.46 × 1.145 = $0.53
  • g is the expected constant <em>growth rate</em>: 14.5% = 0.145
  • r is the <em>expected return</em>

Then, you can solve for r:

      r=\dfrac{Div_1}{Price_0}+g

        r=\dfrac{\$ 0.53}{\$ 44.12}+0.145=0.157=15.7\%

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8 0
3 years ago
Monetarists believe that changes in the supply of money Question 24 options: do not affect aggregate demand. affect aggregate de
s344n2d4d5 [400]

Answer: affect aggregate demand directly.

Explanation:

Monetarists believe that money supply is very important in determining the economic growth of an economy and this is why they advocate for monetary authorities to get involved in the monetary system in order to guide the growth of the economy.

To monetarists, the supply of money influences consumption as well as investment and so directly affects aggregate demand because both consumption and investment are components of aggregate demand. For instance, an increase in money supply increases both consumption and investment and so increases aggregate demand.

5 0
3 years ago
Workers in europe get approximately ______ weeks of vacation a year, whereas workers in the united states average approximately
kupik [55]
In Europe, here are 22 paid vacation days and 13 paid when on holidays. Summing up, that could be a total of 4 weeks of vacation. While on the other hand, the United States as only 16 vacation days, both paid and unpaid, and that could be a total of around 2 weeks of vacation only.
5 0
3 years ago
The management of Ro Corporation is investigating automating a process. Old equipment, with a current salvage value of $24,000,
Margaret [11]

Answer:

36.26%

Explanation:

Simple rate of return:

return/investment

<u>return:</u>

In this case, it will be the cost saving for the new machine: 161,000

<u>investment</u>

We will decrease the investment by the recovery from the old machine.

468,000 new machine - 24,000 salvage value of new   = 444,000

<u>Then, proceed to calculate:</u>

161,000/444,000 = 0.3612 = 36.26%

Consideration:

Is important to state that this rate, do not consider the time value of money, neither the cash flow of the project.

3 0
3 years ago
Bethesda Biosys issues an IPO on a best-efforts basis. The company's investment bank requires a spread of 18 percent of the sell
Andrej [43]

Answer:

Bethesda Biosys

Issue of an IPO:

Net proceeds for the issuer is $82 million, if all the 4 million shares are bought by investors.

Explanation:

a) Calculations:

The spread is $4.5 (18% of $25) per share, since average selling price is $25.

Therefore, the net proceed per share is $20.50 ($25 - 4.50).

And the Total Net Proceeds = $82 million ($20.50 * 4 million), assuming that all four million shares were bought by the public.

Note that the question did not provide the necessary information to make the final decision.

b) During the issue of securities, especially an IPO, underwriters, such as investment banks, pay an issuing company for the securities and then sell the securities to the public.  There is always a difference per share price that they are willing to pay the issuer and what they will collect from the investing public.  That difference is called the underwriting spread or simply the spread.

c) Best-Efforts Basis: According to investopedia.com, underwriting on best-effort basis is "an agreement between an underwriter and an issuer in which the underwriter agrees to place as much of an offering with investors as possible, but is not responsible for any portion of the offering it fails to sell."

4 0
3 years ago
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