1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Shalnov [3]
3 years ago
5

Ashley is considering the purchase of a stock that has just paid a dividend of $0.72, today. The dividend is expected to grow at

a rate of 2.8 percent per year and the market requires a return of 10% on assets of similar risks. What is the price that Ashley should pay for this stock?
Business
1 answer:
arlik [135]3 years ago
7 0

Answer:

$10.28

Explanation:

<u>Step 1. Firstly we use the of the The dividend discount model (DDM)</u>

This calculation is: D1 = D0 x (1 + g)

D1 = $0.72 x (1 + 2.8%) = $0.74.

Where

Do = Dividend now

D1 = Dividend in year 1

g = growth

<u>Step 2 Next, using the Gordon Growth Model, </u>

Price per share is found to be D(1) / (r - g)

Price = $0.74 / ( 10% - 2.8%) = $10.28

where:

Do = Dividend now

D1 = Dividend in year 1

g = growth

r = required return

You might be interested in
6. Suppose that the returns on the stock fund presented in Spreadsheet 6.1 were 240%, 214%, 17%, and 33% in the four scenarios.
Basile [38]

Answer:

Explanation:

Base on the scenario been described in the question, stock variance refers to the volatility that arises from the average. Volatility shows the degree of risk that will be helpful in determining the level of risk an investor should take while purchasing a particular security.

5 0
2 years ago
Assume that Lucas's marginal tax rate is 32 percent and his tax rate on dividends is 16 percent. If a dividend-paying stock (wit
kipiarov [429]

Answer:

The correct answer to the problem is 7.728%

Explanation:

Lucas marginal tax rate = 32 percent

Tax rate on dividends = 16 percent

Dividend yield of a dividend-paying stock (with no growth potential) = 9.20 percent.

To determine the interest rate a municipal bond have to offer for Lucas to be indifferent between the two investments from a cash flow perspective =

Dividend yield multiplied by ( 1- tax rate on dividends)

= 9.20% × (1 - 16%)

= 0.092 × (1 - 0.16)

= 0.092 × 0.84

= 7.728%

3 0
3 years ago
Discuss the pros and cons of four performance appraisal tools​
Tresset [83]

Answer:

Pros and cons are for every method listed below. A person can only see his strength and power during self assessment and he may ignore all his mistakes as it can be his over confidence in himself. Graphic rating may be disappointing as many employees can get same rating and there will not be any difference among them in the pay rise.

Explanation:

There are four major performance appraisal tools

1. Self assessment

2. Graphic Rating

3. Behavioral Checklist

4. 360 degree feedback

5 0
2 years ago
Ariel, a federal government employee, works in acquisition and procurement. Federal policies require that in contracting with su
Rus_ich [418]

Answer:

Programmed decision

Explanation:

The programmed decision is the decision which are taken on a daily basis or we can day to day basis or routine basis. It is likely for solving the structured problems

In the given case, since minimum three bids are received and the bid who has less value meets the specification that results in an acceptance

Therefore this case is of Programmed decision

3 0
3 years ago
The following information is taken from the production budget for the first quarter: Beginning inventory in units 1000 Sales bud
olga2289 [7]

Answer:

The correct answer is 408,000 units

Explanation:

Computing the finished goods units to be produced during quarter is as:

= Desire units - Beginning inventory units

where

Desire units is 3,000

Beginning inventory units is 1,000

So,

=3,000 units - 1,000 units

= 2,000 units

Now, computing the finished goods units as:

Finished goods units = 2,000 units + Sales budgeted for the quarter

Finished goods units = 2,000 units + 406,000 units

Finished goods units = 408,000 units

NOTE: It should be 408,000 not 40800.

7 0
3 years ago
Other questions:
  • A ________ rate means the value of the currency is fixed relative to a reference currency and then the exchange rate between tha
    12·2 answers
  • What does dyslexia affect?
    10·2 answers
  • An energy company is seeking to build a pipeline across multiple Canadian provinces and U.S. states. Though __________________ m
    12·1 answer
  • Which step in the process of measuring external transactions involves assessing the equality of
    11·1 answer
  • Xavi is a painter of landscapes and seashore portraits. He works outside and has no overhead or fixed costs such as a studio. In
    5·1 answer
  • Jane is a roofing contractor. Jane's friend needed a new roof but did not have the cash to pay. Jane's friend instead paid with
    11·1 answer
  • Give an example of one good or service produced in the United States using the command model. Justify your example using researc
    9·1 answer
  • Direct Materials Variances Bellingham Company produces a product that requires 2.5 standard pounds per unit. The standard price
    7·1 answer
  • The following comparative balance sheets and income statement are available for AddieMae Inc.. Prepare a statement of cash flows
    10·1 answer
  • If you don't own a home or a car, your liability is
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!