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Anvisha [2.4K]
3 years ago
13

You are considering buying shares of stock in the Steel Mill. The forecast for the firm is steady growth over the next decade. T

he firm just paid its annual dividend of $1.42 per share and has plans to increase that amount by 4 percent annually indefinitely. You require a 12.5 percent return on this type of security. What is your estimate of the value of this stock ten years from now?
Business
2 answers:
allsm [11]3 years ago
8 0

Answer:

The stock price will be $25.72 in ten years from now.

Explanation:

The stock price in ten years from now will be equal to the present value of perpetual growth dividend stream from the stock; with the first dividend in the stream is the eleventh year dividend which is calculated as: Dividend in Year 0 x (1+growth rate)^11 = 1.42 x 1.04^11 = $2.186.

So, the stock price will be calculated as:

Stock price = 2.186/ ( 12.5% - 4%) = $25.72.

So, the answer is: The stock price will be $25.72 in ten years from now.

Lena [83]3 years ago
3 0

Answer:

The stock price ten years from now is $25.72

Explanation:

D0 = $1.42

g = 4%

r = 12.5%

V = ?

The growth is 4% annually indefinitely so this is a perpetuity and since we looking for the price of stock ten from now it means that our year zero is year ten and the PV of perpetuity formula is as follows

D1/r - g

Calculate D1 a dividend of $1.42 was just paid so we have to calculate dividend in year eleven and discount it to calculate price value in year ten

1.42 ×1.04^11 =2.1860

substitute in formula

2.1860/0.125-0.04

=$25.717/25.72

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The post-closing trial balance consists only of Group of answer choices Asset and liability accounts. Nominal accounts. Revenue
mariarad [96]

Answer:

Permanent accounts

Explanation:

The post-closing trial balance consists only of permanent accounts. These permanent accounts are assets, liabilities, and equity. Permanent accounts are not closed when an accounting period ends. Temporary accounts (revenue, expense, dividend) on the other hand is a direct opposite as they are closed or cleared to zero when an accounting period ends.

4 0
3 years ago
etermine the degree of operating leverage for each approach at current sales levels. (Round answers to 2 decimal places, e.g. 2.
viktelen [127]

Answer: $1,376,000.

Explanation:

So, we are given the following data or parameters or information which is going to assist us in solving this question effectively;

(1). The current approach and automated approach for Contribution Margin Ratio is 25 % and 50 % respectively.

(2). The current approach and automated approach for Break-even point in Sales Dollar is $ 1,248,000 and $ 1,312,000 respectively.

(3). The current approach and automated approach for Degree of Operating Leverage is 4.18 and 5 respectively.

(4). The current and automated approach for Decline in net income for a 10 % decline in sales is 41.8 % and 50 %.

(5). The current and automated approach for level of Sales where net income will be same under both options is $ 1,376,000 and $ 1,376,000 Respectively.

(6). The current approach and automated approach for Margin of Safety Ratio is 24% and 20% respectively.

Note that;

(1). BP = TFC / CMR

Where BP= Break-even point in sales dollar, TFC = Total Fixed Cost and CMR= Contribution Margin Ratio.

(2). MSR = ( ASD - BSD) / ASD × 100.

Where MSR= Margin of Safety Ratio,ASD=Actual Sales dollars, BSD= Break-even Sales dollars , and ASD = Actual Sales dollars.

(3). CMR = CM ÷ Sales × 100.

CMR = Contribution margin ratio, CM =Contribution Margin.

(4). DOL = CM ÷ NI.

Where DOL = Degree of Operating Leverage, CM = Contribution Margin and NI = Net Income.

Decline in net income for a 10 % decline in sales = OL x 10.

Where OL => Operating Leverage.

We then say that V = level of sales.

=> V x 25 % - 312,000 = V x 50 % - 656,000.

=> 0.25 V = 344,000.

V = $ 1,376,000.

4 0
2 years ago
Margin of Safety Head-First Company plans to sell 5,000 bicycle helmets at $75 each in the coming year. Unit variable cost is $4
valina [46]

Answer:

Margin of safety - Units =3350

Margin of safety - Sales Revenue = $251250

Explanation:

Margin of Safety indicates how much sales may decrease before a loss can be made.

<u>Margin of safety - Units</u>

Margin of safety - Units = 5000-1650 =3350

<em>Margin of Safety as a % = 3350/5000 ×100 = 67%</em>

<u>Margin of safety - Sales Revenue</u>

Expected Sales = (5000 × $75) =$375000

Margin of Safety = $375000 × 67% = $251250

3 0
3 years ago
Which of the following statements is true of an efficient supply chain? a. It works efficiently even when demand for goods and s
bulgar [2K]

Answer:

The correct answer is letter "B": It is designed for efficiency and low cost by minimizing inventory and maximizing efficiencies in process flow.

Explanation:

Efficient supply chains aim to produce high-quality products by reducing manufacturing costs to maximize revenues. As part of the improvement, efficiency relies on reducing the waste of the production process or shipping the goods earlier than planned.

5 0
3 years ago
Consider a city of 200 people (100 rich and 100 poor) and two neighborhoods (100 people in each). Both groups generally prefer t
Mekhanik [1.2K]

Answer:

Explanation:

Step 1. Given information.

  • City of 200 people
  • 100 rich, 100 poor.

Step 2. Formulas needed to solve the exercise.

  • P(poor) = 0.9x^2
  • P(rich)= 35x-0.1x^2

Step 3. Calculation and step 4. Solution.

P(poor) = p (rich)

0.9x2 = 35x - 0.1x2

1x2 = 35x

x = 35

x is the percentage of rich above 50%, thus there are 35% rich people above 50%.

P (poor) = 1102.5

P (rich) = 1102.5

The equilibrium premium is $1,102.5

3 0
3 years ago
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