The balance between supply and demand is called

United Birdseed is expected to pay the following dividends over the next three years: After year 3, dividends are expected to gr

elena-14-01-66 [18.8K]

The question is incomplete. See the complete one below:

Dividends per share at time 1: Div 1 1.00

Dividends per share at time 2: Div 2 1.20

Dividends per share at time 3: Div 3 1.44

Growth Rate after time 3 forever: g 0.05

Discount Rate: r 0.10

Find the price per share of United Bird Seed at time 0

Answer:

Stock price = $24.703

Explanation:

The Dividend Valuation Model is a technique used to value the worth of an asset. According to this model, the value of an asset is the sum of the present values of the future cash flows would arise from the asset discounted at the required rate of return.

In this question, the cash flows are the dividends as given in the question and the rate of return (discount rate) is 10%

The Present Value of a future cash flow is the amount that needs to be invested today at a particular rate of return to equal the same cash flow in the future. Present value means the value in year 0 or now

The idea is premised on the concept of the time value of money. The idea that $1 today is not the same as $1 tomorow. The $1 of today is worth more than that of tomorrow; and because of the opportunity to earn interest.

So if an asset (e.g a stock) promises some cash flows in the future, those cash flows need to be brought to their present values and then be added to arrive at the value of the asset

The process of calculating the present value of a future sum is called discounting. So to calculate the stock price in this question, we shall discount the future dividends using the required rate of return and then add them together.

This is done as follows:

PV of Div. in year 1= 1.00/(1.10)= 0.909

PV of Div. year 2= 1.20/(1.10)²= 0.992

PV of Div in year 3= 1.44/(1.10)³=0.082

PV (in year 3) of Div payable in year 4 and beyond = (1.44×1.05)/(0.10-0.05)= 30.24.

PV (in year 0) of Div payable in year 4 and beyond= 30.24/(1.10)³= 22.720

Stock price = Sum of the PV of the future dividends

=0.909+0.992+0.082+22.720= $24.703

6 0

2 years ago

One significant component of ____ can be the investment a seller makes in equipment or in the hiring of skilled employees to sup

ryzh [129]

Answer:

B. Transaction cost

Explanation:

Transaction costs speak to the work required to put up a good or service for sale to the public, offering ascend to whole businesses committed to encouraging trades.

8 0

3 years ago

Balls and Bats, Inc. purchased equipment on January 1, 2005, at a cost of $100,000. The estimated useful life is 4 years with a

BigorU [14]

Answer and Explanation:

The computation of two different depreciation schedules is shown below:-

a. Using the Double-declining balance method

Year Equipment Cost Depreciation rate Amount

2005 $90,000 50% $45,000

2006 $45,000 50% $22,500

2007 $22,500 50% $11,250

2008 No depreciation as it is lower that straight line method that is $22,500 also we took the double rate of 25% so we consider 50%

b. Using the straight line method

Straight Line Depreciation Method:

$100,000 - $10,000

= $90,000

Year Equipment Cost Depreciation rate Amount

2005 $90,000 25% $22,500

2006 $90,000 25% $22,500

2007 $90,000 25% $22,500

2008 $90,000 25% $22,500

Depreciation rate is

= 1 ÷ 4 years

= 25

2. The double declining method reduced the net income while the straight line method increased the net icnome

5 0

3 years ago

San Lorenzo General Store uses a periodic inventory system and the retail inventory method to estimate ending inventory and cost

muminat

Answer:

The average cost of ending inventory is $37,259 and cost of goods sold for october is 24,166

Explanation:

In order to calculate the average cost of ending inventory, we would have to calculate first the cost to retail ratio with the following formula:

cost to retail ratio=Total cost/Total retail

According to the given data, the total cost=$61,425, and the total retail= $87,100, Hence:

cost to retail ratio=$61,425/$87,100= 70.5%

Also, we have to calculate the ending inventory at retail=$87,100+$1,700-$1,050-$37,00=$52,850

Therefore, the average cost of ending inventory= $52,850×70.5%

=$37,259

To calculate the cost of goods sold for october we would have to use the following formula:

cost of goods sold=Beginning inventory+purchases-ending inventory

=$40,000+$21,425-$37,259

=$24,166

6 0

3 years ago

EcoSacks manufactures cloth shopping bags. The controller is preparing a budget for the coming year and asks for your assistance

Sidana [21]

Answer:

ECOSACKS

Production Budget

Sales 540,000

closing inventory(FG) 210,000

750,000

Opening Inventory(FG) ( 120,000)

Production 630,000

Materials Purchase budget 

cotton canvas

yards yards

Material usage 630,000 126,000

Material purchase cost $2,520,000 $1,512,000

 Labor Budget 

labor hour(630,000*0.5) 315,000

Labour cost (315,000*18) $5,670,000

 Overhead budget

Production unit 630,000

Overhead cost ( 630,000*$3.40) $2,142,000

Explanation:

8 0

2 years ago

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