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
Lerok [7]
3 years ago
13

Uncle John's Pipe Company has been experiencing several years of financial difficulty and, thus, has considered maintaining its

dividend payment at $2.50 indefinitely. What is the value of its common stock if the required rate of return is 8.5 percent?
Business
2 answers:
Iteru [2.4K]3 years ago
6 0

Answer:

The value of its common stock is $29.41

Explanation:

As the Dividend payment is for indefinite period of time, This is the perpetuity payment. The value of share can be determined  by calculating the present value of perpetuity payment.

The formula for the present value of perpetuity is as follow

Present value of perpetuity = Cash flow / Required Rate of return

In this case the present value of perpetuity is the value of stock cash flows is The dividend payment.

Value of Stock = Dividend / Required Rate of return

Value of Stock = $2.5 / 8.5%

Value of Stock  = $29.41

Mars2501 [29]3 years ago
6 0

Answer: Value of the common stock = $29.41

Explanation:

GIVEN the following ;

Dividend =$2.50

Rate of return (r) = 8.5% 0.085

The question above requires us to calculate the value of common stock which is equivalent to the present value of perpetuity which is the amount of a fixed income or cash flow an individual earns at regular interval for an INDEFINITE period.

RECALL;

PRESENT VALUE of PERPETUITY IS GIVEN BY:

PV of perpetuity = (Dividend or coupon per period ÷ interest rate(r))

PV of perpetuity = ($2.50 ÷ 0.085)

PV of perpetuity = $29.411

PV of perpetuity = $29.41

You might be interested in
Assume that a consumer has a given budget or income of $24 and that she can buy only two goods, apples or bananas. The price of
Sindrei [870]

Answer:

12 bananas or 8 apples are needed to purchased

Explanation:

The computation of the number of bananas or the apples is shown below:

Since the income is $24

And, the price of an apple and the price of banana is $3 and $2 respectively

So, the number of bananas is

= $24 ÷ $2

= 12 bananas

And, the number of apples is

= $24 ÷ 3

= 8 apples

Therefore 12 bananas or 8 apples are need to purchased

7 0
3 years ago
An end-of-aisle price promotion changes the price elasticity of a good from −2 to −3. Suppose the normal price is $34, which equ
Vika [28.1K]

Answer:

MC = $17

P = $25.5

Explanation:

We proceed as follows;

Firstly calculate MC when e = -2, where MR = MC

(P-MC) / P = 1 / IeI

Here P = $34 and e = -2

(34 - MC) / 34= 1/ I-2I

(34 - MC) / 34= 1 / 2

78-2MC = 34

2MC = 34

MC = 34/2

MC = 17

Now, as we have MC, we will calculate the new price when e = -3

(P-MC) / P = 1 / IeI

(P - 17) / P = 1 / I-3I

(P - 17) / P = 1 / 3

3P -51 = P

2P = 51

P = 51/2

P = 25.5

8 0
3 years ago
Supporters of rent control say that it _____ the price of renting an apartment. raises lowers does not change
denis23 [38]

Answer:

The answer is lowers.

Explanation:

Supporters of rent control say that it <u>LOWERS</u> the price of renting an apartment.

Rent control is an administration program that puts a limit on the sum that a landowner can charge for renting a home or for renewing lease  

Rent control laws are typically established by regions and the subtleties differ broadly. All are planned to continue living costs reasonable for lower-salary occupants.

Rent control laws mostly limit the amount a landlord can increase rents on existing tenants.  Therefore Rent control is controversial. In fact, 37 states have laws that forbid local governments from enacting such measures.

6 0
3 years ago
Tom sells his father's watch for $100 to sue. he later finds out from his father that the watch was an expensive rolex. tom want
Daniel [21]

The court would rule in sue's favor because courts seldom inquire into the adequacy of consideration.

In contracts, <em>consideration </em>just means the <em>exchange of things of value</em>. There has to be an exchange of things of value for there to be an enforceable contract, and in this case a watch was exchanged for money. It is rare for courts to rule on how much consideration is expected because people are generally free to set their own prices and not sell if the price is too low. That is not for a court to decide (in most cases).

8 0
3 years ago
Jamal (now age 54) lost his job. he has very specialized skills that are no longer in demand. jamal's unemployment is best class
NISA [10]
His unemployment is best classified as Structural. 
3 0
3 years ago
Other questions:
  • Karl Harris, a marketing critic, is concerned about the pervasiveness of marketing. He points out that advertising messages are
    8·1 answer
  • What does 4. Financial management means
    11·2 answers
  • Ziegler Inc. has decided to use the high-low method to estimate the total cost and the fixed and variable cost components of the
    15·1 answer
  • Clients and interviewers may use __________ to highlight the important issues in their statements. a. verbal underlining, topic
    13·1 answer
  • "Product planners need to think about products and services on three levels. The most basic level is the ________, which address
    7·1 answer
  • Functions of the jse in details
    14·1 answer
  • Amanda, one of Abigail's fellow workers at BOSS, was surprised to learn that her department's schedule was changed from a standa
    9·1 answer
  • Over the past several years it has become increasingly important for firms to improve achievement towards their social and envir
    9·1 answer
  • If the sales revenue is $150,000 and the margin of safety is $30,000, then the break-even
    6·1 answer
  • Fiscal policy refers to the idea that aggregate demand is affected by changes in
    5·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!