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viktelen [127]
4 years ago
14

Todd Mountain Development Corporation is expected to pay a dividend of $3 in the upcoming year. Dividends are expected to grow a

t the rate of 10% per year. The risk-free rate of return is 8%, and the expected return on the market portfolio is 18%. The stock of Todd Mountain Development Corporation has a beta of 0.60. Using the constant-growth DDM, the intrinsic value of the stock is _________.
Business
1 answer:
PtichkaEL [24]4 years ago
8 0

Answer:

$75

Explanation:

As per the data given in the question,

Ke = risk free rate of return + beta×(market portfolio - risk free rate of return)

= 8% + 0.60 × (18% - 8%)

= 8% + 6%

= 14%

= 0.14

Now using the constant-growth DDM model :

Intrinsic value of the stock = Dividend ÷ (Ke - expected growing rate)

= $3 ÷ (0.14-0.10)

= $75

Hence, Intrinsic value of the stock is $75.

You might be interested in
Finch Manufacturing Company established the following standard price and cost data. Sales price $ 8.90 per unit Variable manufac
lina2011 [118]

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

Sales price $ 8.90 per unit Variable manufacturing cost $ 3.60 per unit Fixed manufacturing cost $ 2,500 total Fixed selling and administrative cost $ 1,000 total Finch planned to produce and sell 3,000 units. Actual production and sales amounted to 3,200 units.

1) Contribution format income statement:

Sales= 8,900

Variable costs= 3,600

Contribution margin= 5,300

Fixed MOH= 2,500

Fixed selling and administrative= 1,000

Net operating income= 1,800

2) Flexible budget

Sales= 26,700

Variable costs= 10,800

Contribution margin= 15,900

Fixed costs= 3,500

Net operating income= 12,400

7 0
3 years ago
A commercial for a floor-cleaner shows a young mother having to clean her kitchen floor after feeding her toddler. This _____ co
ololo11 [35]

Answer:

The answer is Slice-of-Life commercial

Explanation:

Slice-of-Life commercial is a marketing strategy or advertising technique that present a picture of real-life kind of problems, events or happenings that most people can relate to.  

In this type of commercial, products are advertised in such a dramatic way that they strike viewers or an audience as the solution to real-life kind of problems, events or happenings.

Take for example, the commercial for a floor-cleaner in this question was presented in such a dramatic way that most parents and baby sitters would see it as a means of efficiently getting work done and conserving human strength after feeding a child.

8 0
4 years ago
Which account is an example of a contra-expense account? A. purchases B. purchase returns C. sales D. sales returns
-Dominant- [34]

Answer:

b. purchase returns

5 0
4 years ago
1. The level of prices and the value of money Suppose the price level reflects the number of dollars needed to buy a basket of g
EleoNora [17]

Answer:

Deflation; 10%

8; 9 basket of goods

rises

Explanation:

Given that,

Price of  a basket of goods in year 1 = $10

Price of the same basket in year 2 = $9

There is a fall in the price level from year 1 to year 2, hence, this is known as the deflation in an economy.

Deflation rate:

= [(Price of  a basket of goods in year 1 - Price of the same basket in year 2) ÷ Price of  a basket of goods in year 1] × 100

= [($10 - $9) ÷ $10] × 100

= 10%

In year 1,

$80.00 will buy:

= $80 ÷ Price of  a basket of goods in year 1

= $80 ÷ $10

= 8 baskets of goods

In year 2,

$80.00 will buy:

= $80 ÷ Price of  a basket of goods in year 2

= $80 ÷ $9

= 8.9 or 9 baskets of goods

Therefore, this example indicates that as the price of the goods falls then as a result the value of money rises because with the lower price level, a person can purchase more quantity of goods.

6 0
3 years ago
5.
sineoko [7]
Wait im searching for answers
4 0
3 years ago
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