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KATRIN_1 [288]
2 years ago
14

The Gecko Company and the Gordon Company are two firms whose business risk is the same but that have different dividend policies

. Gecko pays no dividend, whereas Gordon has an expected dividend yield of 5 percent. Suppose the capital gains tax rate is zero, whereas the income tax rate is 25 percent. Gecko has an expected earnings growth rate of 8 percent annually, and its stock price is expected to grow at this same rate.Required:If the aftertax expected returns on the two stocks are equal (because they are in the same risk class), what is the pretax required return on Gordon’s stock? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)Pretax return %
Business
1 answer:
julia-pushkina [17]2 years ago
5 0

Answer:

10.67%

Explanation:

Gecko Company

Gecko = Expected Earnings growth rate = 8% annually

As there are no Capital gains tax, thus after Tax returns = Pretax returns

= 8%

Expected Dividend yield of Gordon = 5%

After tax returns = 5(1-.25)

=5(0.75)

= 3.75%

Assuming the pay out ratio = 100%

Gordon’s required pretax return = 8/ (1-.25)

=8/0.75

= 10.67%

At pretax return of 10.67% on Gordon the after tax returns on both the stocks are equal.

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Answer:

have greater marginal utility than existing substitute products

Explanation:

Utility is the satisfaction derived from consuming a good or service.  Products or services that meet or exceed customers' expectations are deemed to have a high utility value. Goods that do not adequately address customers' needs are considered to be of low utility value.

Goods and services deemed to be of high utility value are always in high demand. Consumers will be willing to pay more for such commodities. A product with high utility value will outsell its competitors in the market.

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3 years ago
why is government intervention often crucial when dealing with both positive and negative externalities?
Dennis_Churaev [7]

Answer:

Because the government can use her sovereign power to both mitigate negative externalities as well as encourage positive externalities.

Explanation:

A positive externality occurs when the transaction between a producer and end user benefits a third party that did not take art in the process.

A very Good example is Education. There is a third party benefit to the society when we have more educated citizens.

A negative externality happens when the business transaction between a manufacturer and consumer affects a third party adversely. a typical example is cigarettes. When cigarettes is consumed by the end user, the smoke can affect the health of a third party that was not part of the initial transaction.

To deal with both positive and negative externalities, government intervention is very crucial.

Government encourages positive externalities like education by subsidizing the cost of attending a school. They also enact laws that make basic education compulsory.

In the case of negative externalities, Government can intervene with a ban on producing harmful goods and also set a legislation about smoking in public laces to mitigate  the health complications caused by third party inhalation.

6 0
3 years ago
GenBrands, a foreign maker of washing machine tubs and pumps, sells its parts to several washing machine manufacturers in the Un
Leya [2.2K]

This is called private branding (or private labeling)

For better understanding, we have to understand what the term private branding (or private labeling) means

  • Private branding (or private labeling) is simply known as when a company produces a particular product and thereafter sells the product to a retailer who later on resells it after registering or branding it under its own name.
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  • A brand  is often regarded as the name,design etc that set apart an organization or product from other companies (mostly its rivals) in the eyes of the customer.

From the above, we can therefore say that the answer that this is called private branding (or private labeling) is correct

Learn more about private branding (or private labeling) from:

brainly.com/question/17372249

6 0
2 years ago
Eric and Deborah are partners at a law firm. They are trying to determine which of them has a comparative advantage in typing th
Sergio [31]

Answer:

Eric's opportunity cost of typing pages is <u>$25</u> per page.

Based on all of these facts, <u>Deborah</u> has a comparative advantage in typing pages.

Explanation:

Eric's opportunity cost of typing is $500 / 20 pages = $25 per page.

Since's Deborah's opportunity cost of typing pages is 20% less than Eric's, then she has a comparative advantage in typing pages.

The person, business or country with the lowest opportunity cost has the comparative advantage in producing that good.

6 0
2 years ago
A customer touch point for abacus airlines would be an item such as ________. a mechanic's ability to service the airplanes the
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<span>A customer touch point for abacus airlines would be an item such as reservation desk. 

A customer touch point is a point in the process where a consumer and the organization exchange information, finish providing the service, or handle transactions. At the reservation desk, the customer and the business are focusing on the business and service transactions.  </span>
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