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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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Tonto Company purchased property for $125,000. The property included a building, equipment and land. The building was appraised
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Answer:

The cost allocated to the building is $ 62,068.97  

Explanation:

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3 years ago
In a perfectly competitive industry, the short-run supply curve for the market is the:
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Answer:

b. marginal cost curve above the average variable cost curve.

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A perfect competition maximises profit where price equals marginal cost.

I hope my answer helps you

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Consider the following two situations: (1) you buy a Porsche produced in Germany, (2) you buy a Volkswagen produced in the U.S.
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Answer:

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