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Dmitrij [34]
2 years ago
8

Gentleman Gym just paid its annual dividend of $3 per share, and it is widely expected that the dividend will increase by 5% per

year indefinitely. a. What price should the stock sell at if the discount rate is 15%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What price should the stock sell at if the discount rate is 12%.
Business
1 answer:
Roman55 [17]2 years ago
6 0

Answer and Explanation:

The computation of the price that should be sell is shown below:

As we know that

Price = dividend × (1 + growth rate) ÷ (discount rate - growth rate)

a. The price is

= $3 × 1.05 ÷ (15% - 5%)

= $31.50

b. Now the price is

= $3 × 1.05 ÷ (12% - 5%)

= $45

Hence, the above represent the answer in both the cases.

You might be interested in
Cash $207,200 Salaries and wages expense (sales) $318,080 Inventory 599,200 Salaries and wages expense (office) 387,520 Sales re
yawa3891 [41]

Answer:

 condenced income statement  

   

net sales                                  4699520

cost of sales                          (3097360)

opening stock     599200  

purchase            3120320  

returns                   ( 16800 )

frieght in                     80640  

closing stock             (686000)  

gross profit                              1602160

other incomes                      299040

purchase discount  30240  

rent income                268800  

expenses                               (1092448 )

office salary                 387520  

sales salary                 31808  

sales discount         38080  

commission                 92960  

selling costs                 77280  

telephone costs         19040  

accounting service 36960  

utility costs                35840  

insurance                26880  

mascellaneous         8960  

advertising               60480  

delivery costs               104160  

casuality loss               78400  

depreciation-office 53760  

depreciation-sales         40320  

   

operating profit                        808752

interest expense         197120     (  197120 )

profit before tax                          611632

tax expense                                (122326.4)

profit after tax                                           <u>489305.6</u>

Explanation:

To get the net sales we take sales and minus sales return. The unearned sales are not to be recorded until they are earned and its performance obligation is satisfied. The balance sheet items such as common stock, cash do not belong in the statement of comprehensive incomes. T o calculate tax expense we take profit before tax and multiply by the tax rate.

8 0
3 years ago
Gary did not pay his past three payments on his mortgage. What is the possible consequence he is facing?
Lapatulllka [165]

Answer: Foreclosure

Foreclosure refers to a bank’s act of taking possession of a mortgaged property when the mortgage holder fails to make the monthly mortgage payments.  

Foreclosure occurs when a home owner does not pay his monthly loan instalments for three consecutive months.

It is a legal process in which the home owner loses the ownership of the property and the banker gets the right to sell off the property in order to make up the loss on account of non payment.



6 0
3 years ago
n investor is considering a $10,000 investment in a start-up company. She estimates that she has probability 0.39 of a $23,000 l
alexdok [17]

Answer:

The expected profit is -$13,162.

I would not recomend the investor to make this investment.

Explanation:

The expected profit can be calculated multypling the probabilities of every outcome and the profit of each outcome, and substracting the total invevstment.

The outcomes are:

1) probability 0.39 of a $23,000 loss,

2) probability 0.24 of a $8700 profit,

3) probability 0.12 of a $31,000 profit, and

4) probability 0.25 of breaking even

NOTE: It is assumed that the outcomes does not include the initial investment.

Then, the expected profit of this investment is:

E(P)=[0.39*(-23,000)+0.24*8,700+0.12*31,000+0.25*0]-10,000\\\\E(P)=[-8,970+2,088+3,720+0]-10,000\\\\E(P)=-3,162-10,000\\\\E(P)=-13,162

6 0
3 years ago
What is the residual value of a leased vehicle
strojnjashka [21]
The vehicles worth at the end of its lease.
6 0
3 years ago
On January 1, 2021, Strato Corporation borrowed $2 million from a local bank to construct a new building over the next three yea
VLD [36.1K]

Answer:

Period                           Installment    Interest Paid   Capital Paid   Balance

January 1, 2021                                                                                $2,000,000

December 31, 2021       $776,067       $160,000         $616,067    $1,383,933

December 31, 2021       $776,067         $110,715         $665,352       $718,581

December 31, 2021       $776,067         $57,486          $718,581                     0

Explanation:

<u>Step 1</u>

First clearly identify the parameters of the Loan

PV = $2,000,000

N = 3

PMT = - $776,067

P/YR = 1

i = 8%

FV = $0

<u>Step 2</u>

Since there is no missing parameter, we can then move on to construct our loan amortization schedule.

Period                           Installment    Interest Paid   Capital Paid   Balance

January 1, 2021                                                                                $2,000,000

December 31, 2021       $776,067       $160,000         $616,067    $1,383,933

December 31, 2021       $776,067         $110,715         $665,352       $718,581

December 31, 2021       $776,067         $57,486          $718,581                     0

8 0
2 years ago
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