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Kay [80]
3 years ago
12

g announced that it plans to cut its dividend from $2.50 to $1.50 per share (next year) and use the extra funds to expand its op

erations. Prior to this announcement, Zeke's dividend growth rate was zero per year and Zeke's stock was trading at $25.00 per share. With the new expansion, JRN's dividends are expected to grow at 4% per year indefinitely. If Zeke’s risk is unchanged by the expansion, what is the value of a share of Zeke after the
Business
1 answer:
mote1985 [20]3 years ago
7 0

Answer:

The value of the Share of Zeke after the new Expansion is $25.

Explanation:

As there was no growth in the dividend before change, Price of the share from a stable dividend payment can be calculated by following formula.

Price  = Dividend / Required rate of return

As we have the share price and the dividend amount we need to calculate the required rate of return.

Required rate of return = Dividend / Price

Placing value in the formula

Required rate of return = $2.50 / $25.00 = 0.1 = 10%

After New Expansion

Dividend = $1.50

Growth rate = 4%

The share price can be calculated by the dividend growth formula, as follow

Price of share = Dividend / (Rate of return - growth rate)

Price of share = $1.50 / (10% - 4%)

Price of share = $1.50 / 6%

Price of share = $25

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Here are incomplete financial statements for BLOSSOM, Inc. Calculate the missing amounts
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Answer:

(A) net income: 20,000

(B) COGS = 55,000

(C) Common Stock = 30,000

Explanation:

(A) with the RE statemtn we sovle for RE

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net income = 27,000 - 12,000 + 5,000 = 20,000

(B) With the net income we solve for COGS

COGS= revenues - net income - salaries and wages

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(C) now we solve for common stock

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anzhelika [568]
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Hi-Tek is a young start-up company that is currently retaining all of its earnings. The company plans to pay a $2 per share divi
ziro4ka [17]

Answer:

Option (a) is correct.

Explanation:

Given that,

Dividend pay in year 7, D7 = $2 per share

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Present value of the future dividend at year 6:

= D7 ÷ (ke - g)

= $2 ÷ (0.16 - 0.022)

= $14.49

Therefore, the present value of dividend now is as follows;

= Present value of the future dividend at year 6 × (1 + ke)^{-6}

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On September 1, 2019, Westwood Builders borrowed $200,000 from Colorado State Bank by issuing a 7-month, $200,000, 6% note. West
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Answer:

A.

Notes Payable 200,000

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Explanation:

The Journal entry is shown below:-

Notes payable Dr,       $200,000  

Interest payable Dr,     $7,000  

       To Cash                        $207,000  

(Being pay off the note and interest at maturity is recorded)

Therefore for recording the pay off the note and interest at maturity we simply debited the notes payable and interest payable as it decreases the liability and we credited the cash as it also decreasing the assets.

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