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Svetach [21]
2 years ago
7

Over the next three years, Distant Groves wl pay annual dividends of $.65, S.70, and $.75 a share, respectively. After that, div

idends are projected to Increase by 2 percent per year. What is one share of this stock worth today at a required return of 14.5 percent?
a) $5.49
b) $5.94
c) $5.68
d) $5.55
e) $5.86
Business
1 answer:
hichkok12 [17]2 years ago
5 0

Answer:

c) $5.68

Explanation:

The worth of this stock today is the present value of the future dividends which is computed by discounting future dividends as well as the terminal value using the required rate of return of 14.5% as the appropriate discount rate as shown thus:

Year 1 dividend=$.65

Year 2 dividend=$0.70

Year 3 dividend=$0.75

terminal value of dividends=Year 3 dividend*(1+g)/Ke-g

g=dividend terminal growth rate=2%

Ke=required rate of return=14.5%

terminal value of dividends=$0.75*(1+2%)/(14.5%-2%)=$ 6.12  

Share price=$.65/(1+14.5%)^1+$.70/(1+14.5%)^2+$.75/(1+14.5%)^3+$6.12/(1+14.5%)^3

share price=$5.68  

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1 year ago
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lawyer [7]

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8 0
3 years ago
Using the information below, compute the raw materials inventory turnover:
fredd [130]

Answer:

The raw material inventory turnover is 9.2 times or 40 days

Explanation:

This problem requires us to compute raw material inventory turnover. The inventory turnover ratio is calculated by dividing the inventory used for a period by the average inventory for that period. Average inventory is used instead of ending inventory because many companies' merchandise fluctuates greatly throughout the year.

So RM inventory turnover = RM used/Average inventory

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** (365/9.2) = 40 days

5 0
2 years ago
helene, corp. reports a net operating loss in year 1 of $20,000. in year 2, the company reports income of $10,000. what amount o
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When a business' running costs are higher than its gross income, it experiences an operating loss (or revenues in the case of a service-oriented company).

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3 0
11 months ago
Sweet Stuff Sugar Source ships product all over the world. Since the product it ships has a low value-to-weight ratio, transport
dedylja [7]

Answer:

a large percentage of the total cost

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When a product has a high value to weight ratio it means it is expensive and the weight is light. For products with low value to cash ratio they are cheap but have large weight.

Low value to weight ratio goods are more expensive to transport and they do not make up the high transportation cost because they are also cheap.

In this scenario Sweet Stuff Sugar Source ships low value to weight goods all over the world. So their transportation cost will be high and it will make up a large percentage of total cost.

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