A home electrical system is joined to the electric company's system at the junction of the

Pharmecology just paid an annual dividend of $2.00 per share. It’s a mature company, but future EPS and dividends are expected t

lesantik [10]

Answer:

a. Current Stock Price is $ 30.67

b. Current Stock price using forecasted real dividend and a real discount rate is $ 69.00

Explanation:

a. The question belongs to dividend discount model. It is used to calculate intrinsic price of the stock. This model assumes that price of stock or share is equal to net present value of its future dividends.

Price of Stock = (Current year Dividend x ( 1+ growth rate)) / (nominal cost of capital - growth rate)

Current year Dividend = $ 2

Nominal Cost of Capital = 10.25 % or .1025

Growth rate = 3.50 % or 0.0350

Price of Stock = ( $2 x (1 + 0.035) / (.1025 - .035))

Price of Stock = $ 2.07 / ( .1025 - 0.0350) = $ 30.67

b. Price of Stock = Current year Dividend + (Dividend x( 1+ growth rate)) / (real cost of capital - growth rate)

Real Cost of Capital = [ (1 + nominal cost of Capital) / ( 1 + inflation rate)-1 ]

Inflation rate = 3.50 % or .0350

Real Cost of Capital = [ ( 1 + .1025) / ( 1 + .0350) - 1 ] = 0.0652 or 6.50 %

Price of Stock =(Dividend x ( 1 + growth rate)) / ( Real cost of Capital - Inflation rate)

Price of Stock = ($ 2 x ( 1 + 0.0350)) / (0.0650 - 0.0350)

Price of Stock = $ 69

7 0

2 years ago

Marks Consulting purchased equipment costing $45,000 on January 1, Year 1. The equipment is estimated to have a salvage value of

Tasya [4]

Answer:

B) Debit to accumulated depreciation for $22,500.

Explanation:

As for the information provided,

Depreciation under straight line method for each year = ($45,000 - $5,000)/8 = $5,000 for each year.

Depreciation for 4 years = $5,000 $\times$ 4 = $20,000

Depreciation in 5th year for 6 months = $5,000/2 = $2,500

Total depreciation till 1 July Year 5 = $20,000 + $2,500 = $22,500

Carrying value of equipment in books as on date of sale = $45,000 - $22,500 = $22,500

Sale price = $20,000

Profit or loss on sale of equipment = $20,000 - $22,500 = - $2,500

So therefore, there is loss of $2,500

Thus, option c and option d are invalid.

Further cash received on sale is debited and not credited thus, option a is also invalid.

As the total accumulated depreciation = $22,500

The correct entry will include debit to accumulated depreciation of $22,500.

Thus, option b is correct.

6 0

3 years ago

What are three important skills for teamwork and collaboration?

Gelneren [198K]

1. Communication
2. Loyalty
3. Honesty

7 0

2 years ago

Trey owns 250 shares of common stock in a toy–store company. this means that he owns a percentage of the company based on the pr

madreJ [45]

Vote is the correct answer

4 0

2 years ago

What measuring tool is used to measure the distance in which a part can move freely?

Levart [38]

The answer is a tape measure. A tape measure or measuring tape is a flexible ruler and used to measure distance. It consists of a ribbon of cloth, plastic, fiber glass, or metal strip with linear-measurement markings.

5 0

2 years ago

Read 2 more answers