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alexandr1967 [171]
3 years ago
10

7. Kraft Company expects to give a dividend of $2 next year. Dvidend increases by 4 per cent require a 12% return. What will be

the price of Company A stock today and in three years based on the dividedn growth model
Business
1 answer:
Nat2105 [25]3 years ago
7 0

Answer:

$28.125

Explanation:

Dividend D1= $2

(Dividend is given at the end of 1 year)

Growth g= 4% or 0.04

Required Return r = 12% or 0.12

Step1- Share price of company A today

As per Dividend Growth Model

Share price =Expected dividend/(required return - growth rate)

S0 = Do(1+g) / (r-g)

S0 = D1/(r-g)

S0 = 2/(0.12-0.04)

S0 = $25

Therefore share price of company A today for given details will be $25

Step2 - Expected dividend at the end of 3 years

D4=D0(1+g)^4

( as we already have D1 which is one time growth multiplied, therefore to find dividend at the end of 3rd year we will multiply 1 Less growth multiplier to D1)

D4= D1(1+g)^3

D4 = 2(1+0.04)^3

D4 = $2.25

Step3 - Share price of company A in 3 year

Share price =Expected dividend/(required return - growth rate)

S3 = D4/(r-g)

S3 = 2.25/(0.12-0.04)

S3 = $28.125

Therefore share price of company A in 3 years for given details will be $28.125

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Oakton Furniture provided the following information relevant to its sales for December Year 1 and the first quarter of Year 2: D
Sauron [17]

Answer:

$33,630

Explanation:

Given that the company's collection history shows that 43% of credit sales are collected in month of sale and the remainder (57%) is collected in the following month then, in the month of January, Cash collections in January from December credit sales would be equivalent to 57% of December Credit sales. Using the actual figures,

Cash collections in January from December credit sales would be

= 57% * 59,000

= $33,630

7 0
3 years ago
Consider two very different firms, M and N. Firm M is a mature firm in a mature industry. Its annual net income and net cash flo
Bumek [7]

Answer:

a. Firm M probably has a higher dividend payout ratio than Firm N.

Explanation:

The dividend payout ratio is commonly referred to a portion of the net income of the company which is paid to the various shareholders in dividends. Therefore, if we consider the statements made in the question, Firm M has a higher annual net income while the annual net income of Firm N is fluctuating, we can conclude that the dividend payout ratio of Firm M is more than that of Firm N.

6 0
3 years ago
Why is perceptiveness an important trait to have as an entrepreneur??????
Sergeeva-Olga [200]
It is important trait to have as an entrepreneur, because you have to have different perceptive's of the type of people you are selling to. As in you just can't have one persons point of view.
7 0
3 years ago
Jacques deposited $1,900 into an account that earns 4% interest compounded semiannually. After t years, Jacques has $3,875.79 in
kupik [55]
A year has two semesters, then
n = 2<span>v(t)=p<span><span>(<span>1+<span>r/2</span></span>)</span><span>2t
</span></span></span><span>
3875.79 = 1900∗<span><span>(<span>1+(<span>0.04/2)</span></span>)^</span><span>2t
</span></span></span><span>
2.0398895 = <span><span>(<span>1+<span>0.042</span></span>)^</span><span>2t
</span></span></span>Apply natural logarithm on both sides

<span>ln(2.0398895) = ln<span>[<span><span>(<span>1+<span>0.042</span></span>)^</span><span>2t</span></span>]

Then simplify,
</span></span><span>0.712896 = 2t∗ln(1.02)

</span><span>t = <span>0.712896 / (<span>2∗ln(1.02))
</span></span></span><span><span>
t=18 years

I hope my answer helped you. Have a nice day!</span></span>
3 0
3 years ago
Read 2 more answers
Lisa's opportunity cost rate is 10 percent compounded annually. How much must she deposit in an account today if she wants to re
Goryan [66]

Answer:

Present value = $21,804 (approx)

Explanation:

Given:

Periodic payment = $3,200

Number of period = 12

Interest rate = 10% = 10/100 = 0.1

Present value = ?

Computation of Present value:

Present\ value = PMT[\frac{1-(1+r)^{-n}}{r} ]\\\\Present\ value = 3,200[\frac{1-(1+0.1)^{-12}}{0.1} ]\\\\Present\ value = 3,200[\frac{1-(1.1)^{-12}}{0.1} ]\\\\Present\ value = 3,200[\frac{1-0.318630818}{0.1} ]\\\\Present\ value = 3,200[\frac{0.681369182}{0.1} ]\\\\Present\ value = 21,803.6188

Present value = $21,804 (approx)

8 0
3 years ago
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