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STALIN [3.7K]
3 years ago
7

Sid Glasses recently paid a dividend of $1.70 per share, is currently expected to grow at a constant rate of 5% and has a requir

ed return of 11%. Sid Glasses has been approached to buy a new company. Sid estimates if it buys the company, its constant growth rate would increase to 6.5%, but the firm would also be riskier, therefore increasing the required return of the company to 12%. Should Sid go ahead with the purchase of the new company
Business
1 answer:
Sergeu [11.5K]3 years ago
8 0

Answer:

Sid should buy the company

Explanation:

given data

dividend = $1.70 per share

constant rate = 5%

required return = 11%

growth rate increase = 6.5%

increasing the required return = 12%

solution

we get here intrinsic value of the company in both by use Gordon Growth Model that is here present value

PV = ( Do × (1 + g) ) ÷ (r - g)   .......................1

here Do is current dividend and g is growth rate and r is required rate of return

so here put value in current case

PV = ( 1.7 × (1 + 0.05) ) ÷  (0.11 - 0.05)

solve it we get

PV = $29.75    .............................2

and

now put value for buying company case

so

PV = ( 1.7 × ( 1 + 0.065)) ÷  ( 0.12 - 0.065)

solve it we get

PV = $32.92     ..............................3

so Sid should go ahead buying the company

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Sam and Joan made an offer of $250,000 asking the seller to pay all closing costs. They will put 10% down and pay one discount p
Archy [21]

Answer:

$27,500

Explanation:

Discount points are also called mortgage points and are fees paid as prepaid interest rate on a mortgage property.

One discount point is equivalent to 1% of the loan amount.

In the given scenario a down payment of 10% was made.

Also they are pay one discount point to close.

So total down payment to be made is 10% + 1% = 11%

Amount is cash for closing = 0.11 * 250,000 = $27,500

3 0
2 years ago
Derst Inc. sells a particular textbook for $39. Variable expenses are $28 per book. At the current volume of 49,000 books sold p
Liono4ka [1.6K]

Answer:Annual fixed expenses = $ 539,000

Explanation:

Given;

break even point on books sold= $49,000

sales price per unit = $39

variable cost= $28

Using the formulae,

Break-Even point (units) = Fixed Costs ÷ (Sales price per unit – Variable costs per unit) or in sales

49,000   =Fixed cost / ( 39-28)

Fixed cost = 49,000  x 11

               = $ 539,000

Annual fixed expenses = $ 539,000

7 0
3 years ago
Since your first birthday, your grandparents have been depositing $1,000 into a savings account on every one of your birthdays.
irina1246 [14]

Answer:

$25,650

Explanation:

The formula for calculating the future value of an annuity is:

F = P x ([1 + I]^N - 1 ) / I

where:

  • P = payment amount = $1,000
  • I = interest rate = 4%
  • N = number of payments = 18

F = $1,000 x ([1 + 4%]^18 - 1 ) / 4% = $1,000 x (1.04^18 - 1 ) / 4% = $1,000 x (2.026 - 1 ) / 4% =  $1,000 x 1.026 / 4% = $25,650

4 0
3 years ago
When the engineers from fm global (factory mutual) conduct inspections at industrial facilities, whose interests are they hired
WINSTONCH [101]

When the engineers from FM Global (factory mutual) conduct inspections at industrial facilities, the interest they hired is to protect the companies that insure the properties.

FM Global is one of the global's biggest commercial and business assets coverage and chance management agencies, focusing on assets safety. we've currently ranked #447 on the Fortune 500 list of America's largest companies.

Malcolm C. Roberts is responsible for the strategic and operational direction of FM Global, one of the world's largest industrial property insurers and which insures nearly US$10.2 trillion in business belongings in greater than a hundred thirty international locations.

"FM international" is the communicative name of the organization, while the felony call is "manufacturing facility Mutual coverage organization". FM international has been named the "first-rate property Insurer inside the international” by means of Euromoney mag.

Learn more about FM Global here brainly.com/question/8304017

#SPJ4

4 0
2 years ago
​________ is defined as the extent to which your authority is accepted on grounds of​ competence, vision, or other qualities. A.
lora16 [44]

Answer:

A. Legitimacy

Explanation:

Legitimacy  is defined as the extent to which your authority is accepted on grounds of​ competence, vision, or other qualities. This term is used mostly in the context of political science, mainly describing the right and acceptance of an authority and mostly deals with systems of governments or regimes where there are established individuals appointed authority.

5 0
3 years ago
Read 2 more answers
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