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KiRa [710]
3 years ago
6

a. Computer stocks currently provide an expected rate of return of 16%. MBI, a large computer company, will pay a year-end divid

end of $2 per share. If the stock is selling at $50 per share, what must be the market's expectation of the growth rate of MBI dividends? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. If dividend growth forecasts for MBI are revised downward to 5% per year, what will be the price of the MBI stock? (Round your answer to 2 decimal places.) c. What (qualitatively) will happen to the company's price–earnings ratio? The P/E ratio will decrease. The P/E ratio will increase.
Business
1 answer:
shepuryov [24]3 years ago
5 0

Answer:

a)

$50 = $2 / (16% - g)

16% - g = $2 / $50 = 4%

g = 16% - 4% = 12%

expected growth rate = 12%

b)

P₀ = $2 / (16% - 5%)

P₀ = $2 / 11%

P₀ = $18.18

c)

P/E ratio = share price / EPS

since the share price decreases from $50 to $18.18, the P/E ratio will decrease. When you are dividing a number, if the numerator decreases while the denominator remains still, the answer will decrease.

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The account balances and income statement of Winfrey Towing Service on June 30, 2018, follow:
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Answer:

1. WINFREY TOWING SERVICE

Statement of Comprehensive Income

                                           $

Service revenue               10,800

Rent expense                    (550)

Salaries expense              (1,900)

Dividends paid                  <u>(4,000)</u>

Net income                        <u> 4,350</u>

Statement of Retained Earnings

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Retained earnings c/f       8,250

2. Statement of retained earnings report changes in retained earnings of a company in a given accounting year.

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In this question, we need to obtain the net income of the company, which  is service revenue minus expenses minus dividend. Then, the statement of retained earnings is prepared by taking cognisance of the retained earnings brought forward and add the net income for the year.

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<h2>Answer</h2>

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<h3>Explanation</h3>

Calculating GDP via the income approach of the established approaches, the income generated by all factors of production is the most accurate answer for the Gross Domestic Product (GDP) of a country. This therefore establishes that the income generated by factors in the household in exchange of the services or products they have provided to consumers, represent the value of the total goods and services sold in the economy.


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Answer:

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