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
lord [1]
3 years ago
10

Carnes Cosmetics Co.'s stock price is $51, and it recently paid a $3.00 dividend. This dividend is expected to grow by 25% for t

he next 3 years, then grow forever at a constant rate, g; and rs = 16%. At what constant rate is the stock expected to grow after Year 3? Do not round intermediate calculations. Round your answer to two decimal places.
Business
1 answer:
Novay_Z [31]3 years ago
6 0

Answer:

The answer is 6.17%.

Explanation:

We apply the Dividend Model for solving the questions.

Denote g as the constant dividend growth rate after 3 years which needs to be found.

The principle in the Dividend model is: Current share price = Projected present value of all expected future dividend discounted at company's cost of equity rs =16%.

Thus Current share price = Present value of Dividend paid in Y1 + Present value of Dividend paid in Y2 + Present value of Dividend paid in Y3 + Present value of dividend perpetuity growth after Y3.

=> 51 = (3 x 1.25) / 1.16^1 + (3 x 1.25^2)/ 1.16^2 + (3 x 1.25^3)/1.16^3 + [3 x 1.25^3 x (1+g)]/(0.16-g)/1.16^3 <=> [5.8594 x (1+g)]/(0.16-g)/1.16^3 = 40.5298 <=> [5.8594 x (1+g)]/(0.16-g) = 63.2628 <=> 5.8594 + 5.8594g = 10.1220 - 63.2628g <=> 69.1222g = 4.2626 <=> g = 6.17%.

Thus, the constant rate the stock's dividend expected to grow after Year 3 is 6.17%

You might be interested in
What is the best Honda dirt bike?
Illusion [34]

Answer:

KTM 350 full-size 450s, the 350 remains the bike for the common man. The KTM 350, along with its blood brother the Husqvarna FC350, appeals to the rank-and-file rider who doesn’t want to deal with 60 horsepower. The 350s have steadily improved over their lifespan and are currently better than ever.

Explanation:

7 0
3 years ago
Orlando Company, which applies overhead to production on the basis of machine hours, reported the following data for the period
astraxan [27]

Answer:

$37,600 favorable

Explanation:

Variable overhead spending variance can be computed as;

= (Actual hours worked × Actual variable overhead rate) - ( Actual hours worked - Standard variable overhead rate)

= ( 18,800 hours × $77,700/12,000) - (18,800 hours × $4.5)

= [(18,800 × $6.5) - (18,800 × $4.5)]

= $122,200 - $84,600

= $37,600 favorable

6 0
3 years ago
Which of these are disadvantages of self-employment?
777dan777 [17]
Financial insecurity, discouragement, legal issues, long hours
4 0
3 years ago
To what degree, if at all, is a significant deficiency related to a material weakness? It is less severe than a material weaknes
Brut [27]

Answer: It is less severe than a material weakness

Explanation:

A SIGNIFICANT DEFICIENCY is described as a deficiency or an amalgamation of deficiencies that are NOT as severe as a MATERIAL WEAKNESS ( which is quite serious and must be reported to the Audit Committee and be reflected in the financial statements) but still important enough for those people in charge of the company's financial records to take notice.

5 0
3 years ago
David, an Alabama resident, files suit in an Alabama court against QuickAds, an internet company based in Georgia that provides
Wewaii [24]

Answer:

B) not likely to have jurisdiction over the case because QuickAds is based in Georgia.

Explanation:

US laws do not recognize the legal existence of foreign or out of state companies, a company only exists in the state at which it was chartered. Although the internet has complicated things, since boundaries have faded, but some conditions must be met before a state court can serve a foreign company.  

For a foreign company to be served by a state court, it must carry on “continuous and systematic” affiliations with residents of the state which makes them “essentially at home”. The company's operations must be substantial enough to make the company at home, i.e. it must carry a significant amount of business within the states boundaries.

Apparently this is not the case with QuickAds, so Alabama state courts will not have jurisdiction over it.

4 0
3 years ago
Other questions:
  • A quantitative job evaluation procedure that determines a job's relative value on the basis of quantitative assessments of speci
    10·1 answer
  • A country has a total civilian population (over age 16) of 300 million. Of this population, 225 million are employed, 25 million
    6·1 answer
  • Redline Editorial Services sent a $1,000 invoice to a customer for copyediting a booklet. According to the terms of the invoice,
    14·1 answer
  • Which of the following is a health hazard an insulation worker is likely to encounter on the job?
    8·2 answers
  • Suppose you deposit ​$1400 cash into your checking account. By how much will checking deposits in the banking system increase as
    13·1 answer
  • The following data have been recorded for recently completed Job 450 on its job cost sheet. Direct materials cost was $2,057. A
    9·1 answer
  • Walker Clothing Store has a balance in the Accounts Receivable account of $390k at the beginning of the year and a balance of $4
    8·1 answer
  • West Corp. issued 15-year bonds two years ago at a coupon rate of 7.3 percent. The bonds make semiannual payments. If these bond
    9·1 answer
  • Why should we be careful about what we post on social media and the internet?
    12·1 answer
  • there is a growing emphasis on strategic supply management processes and less on purchase transactions.
    11·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!