Lito is working with a discount broker.Which service would Lito not be likely to receive?

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

3 years ago

g In translating the financial statements of a foreign subsidiary into the parent’s reporting currency under the current rate me

Usimov [2.4K]

Answer:

The translation adjustment is a function of the foreign subsidiary's net assets.

3 0

3 years ago

Jory wants to create a diagram to compare and contrast the qualifications of the three Energy pathways. Which qualifications cou

Sedbober [7]

Answer:

answer is the first one

Explanation:

I think

6 0

3 years ago

What is the organization of metropcs?

klio [65]

Metro by T-Mobile is a prepaid wireless carrier brand owned by T-Mobile US. It previously operated the fifth largest mobile telecommunications network in the United States using code division multiple access.

3 0

3 years ago

Phillips industries runs a small manufacturing operation. for this fiscal year, it expects real net cash flows of $197,000. the

Stolb23 [73]

Answer: Present value of the cash flows of the company is $1,158,824.

Explanation: Philips industries have the cash flow for $197,000. The industry needs to find the present value of the cash flow and the cash flows growth is decreasing every year by 6%.

The present value of the cash flows for perpetuity with decreasing growth rate is:

$Present value = Cash flow for year 1 (C1) / (discount rate - growth)$

where, Cash flow for the year 1 (C1) = $197,000

Discount rate (r) = 11%

Growth rate (g) = -6%

$Present value of the cash flows (PV) = $197000/[0.11 - (-0.060)]$

$Present value of the cash flows (PV) = $197000/0.17$

Present value of the cash flows (PV) = $1,158,824

Therefore the present value of the cash flows of the company is $1,158,824.

8 0

3 years ago