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Nezavi [6.7K]
4 years ago
5

Burton Corp. is growing quickly. Dividends are expected to grow at a rate of 32 percent for the next three years, with the growt

h rate falling off to a constant 6.2 percent thereafter. If the required return is 14 percent and the company just paid a dividend of $2.85, what is the current share price?
Business
1 answer:
Nostrana [21]4 years ago
4 0

Answer:

P0 = $71.7850 rounded off to $71.79

Explanation:

The two stage growth model of DDM will be used to calculate the price of the stock today. The DDM values a stock based on the present value of the expected future dividends from the stock. The formula for price today under this model is,

P0 = D0 * (1+g1) / (1+r)  +  D0 * (1+g1)^2 / (1+r)^2  +  ...  +  D0 * (1+g1)^n / (1+r)^n  +  

[(D0 * (1+g1)^n  *  (1+g2) /  (r - g2))  /  (1+r)^n]

Where,

  • g1 is the initial growth rate
  • g2 is the constant growth rate
  • D0 is the dividend paid today or most recently
  • r is the required rate of return

P0 = 2.85 * (1+0.32) / (1+0.14)  +  2.85 * (1+0.32)^2 / (1+0.14)^2  +  

2.85 * (1+0.32)^3 / (1+0.14)^3  +  

[(2.85 * (1+0.32)^3  *  (1+0.062)  / (0.14 - 0.062))  /  (1+0.14)^3]

P0 = $71.7850 rounded off to $71.79

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Land O’Lakes makes a light butter with canola oil that has 60 percent less cholesterol and 50 percent less fat and calories than
nika2105 [10]

Answer: Competitive advantage.

Explanation:

It is the advantage a company has over their competitors that allows them to produce goods and services of the same or even better quality and benefit as their competitors but at lower price level. This is important because it gives a company an edge over their competitors.

Competitive advantage is characterised by customer services, quality product and service, quality braiding, good distribution network.

4 0
3 years ago
What are the advantages of collecting payment at the time of service?
My name is Ann [436]

<span>Your business can make a profit but still not have enough cash on hand if you don’t collect payment at the time of service.  At one given time, you may not have enough cash to pay your bills or payroll, Collecting payment at the time of service will ensure that you have enough cash coming in when you need to pay cash out. </span>

The best example is hospitals. These days, insured <span>patients are no longer allowed to walk out of the hospital without paying because of high administrative costs and low collection rates.</span>

8 0
3 years ago
Lin Co., a distributor of machinery, bought a machine from the manufacturer in November for $10,000. On December 30, Lin sold th
Arisa [49]

Answer:

B. $0

Explanation:

he transaction between Lin and Zee appears to be a conditional sale. The reason being that zee hardware has the right to return the machine if unable to resell it. According to their agreement, should Zee hardware return the machine, its obligation to Lin will be zero.

As per Lin's assessment, and based on their previous transactions,  the probability of Zee returning the machine is very high. Lin is sure that Zee hardware will not sell the machine. For this reason, Lin should not record the transactions as a sale.

3 0
4 years ago
Peggy is the revenue manager at a 1500 room hotel. For next Friday Peggy's PMs shows 300 check-outs, 900 stayovers, 250 transien
skelet666 [1.2K]

Answer:

option (A) 150

Explanation:

Data provided in the question:

Number of rooms in the hotel = 1500

Number of checkouts = 300

Number of stayovers = 900

Number of transient arrivals = 250

Group block that begins a three stay on that day = 200

Now,

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= Total number of rooms - ( stayovers + transient arrivals + group block)

= 1500 - ( 900 + 250 + 200)

= 150

Hence,

the correct answer is option (A) 150

7 0
4 years ago
You started your first job after graduating from college. Your company offers a retirement plan for which the companycontributes
Nesterboy [21]

Answer:

The correct answer is D.

Explanation:

Giving the following information:

Annual deposit= 5,000*1.25= $6,250

n= 35 years

i= 0.08 annual

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FV= {A*[(1+i)^n-1]}/i

A= annual deposit

FV= {6,250*[(1.08^35)-1]}/0.08= }$1,076,980.02

3 0
4 years ago
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