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levacccp [35]
3 years ago
10

Investors require an after-tax rate of return of 10% on their stock investments. Assume that the tax rate on dividends is 30% wh

ile capital gains escape taxation. A firm will pay a $2 per share dividend 1 year from now, after which the firm's stock is expected to sell at a price of $30.
Required:
a. Find the current price of the stock.
b. Find the expected before-tax rate of return for a 1-year holding period.
c. Now suppose that the dividend will be $3 per share. If the expected after-tax rate of return is still 10%, and investors still expect the stock to sell at $20 in 1 year, at what price must the stock now sell?
d. What is the before-tax of return? Why is it now higher than in part (b)?
Business
1 answer:
IgorC [24]3 years ago
6 0

Answer:

a. $28.5

b. 12.28%

c.  $29.18

d. 13.09%

Explanation:

a. let current price = p

p*1.10 = 2(1-0.3)+30

= 1.4+30/1.10

= 31.4/1.10

= 28.5

the current price of the stock is approximately 28.5 dollars

b. (30+2 /28.5)-1

= 32/28.5 - 1

= 0.1228

= 12.28%

expected before tax rate is 12.28%

c. 3(1-0.3)+30 / 1.10

= 3*0.7+30/1.10

= $29.18

d. before tax rate of return

= (3$ + 30-29.18)/29.18

= 0.1309

= 13.09%

it is now higher here given that given that a greater dividend causes more tax burden.

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Answer:

Hilton Brews

The organizational growth strategy used by Hilton Brews is:

B. Diversification.

Explanation:

Diversification strategy is the corporate strategy that Hilton Brews has adopted to take advantage of the increased health benefits of teas by introducing a new line of organically grown and processed teas.  Diversification strategy is different from other corporate growth strategies which Hilton Brews could have adopted, including market expansion, market penetration, and product development.

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3 years ago
As a student in the Principles of Management class of Ama Ghana University, you are expected to have experiential knowledge so t
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Answer:

The organization structure is not clearly defined, Managers are performing duties in various departments at a time.

Explanation:

San Consulting is one of the finest consulting firm in the Greater Accra Region. The firm is always a first choice for individuals who want to pursue their career in business. The Organizational structure of San Consulting is not clearly defined. San's profits are falling because management practices are not according to the other competitive organizations. The managers working at San are facing excess workload and pressure for their work. Their job descriptions is not clearly defined and they are forced to work in multiple departments at the same time due to which they are losing focus on their own work.  

Questions 1: Planning, organizing, leading and controlling

Question 2: The organizational structure needs to be set and every employee should have their defined job role so they are able to complete work with efficiency.

Question 3: The profits of San consulting will rise as there will be less duplication of work and every employee will be able to focus on their own task and will work with efficiency.

Question 4: Matrix. The matrix organizational structure is not suited in this organization. The right organizational structure for San consulting will be Functional Structure.

Question 5:

(i) The profits for San Consulting will decline

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5 0
3 years ago
The bank statement contained two bank memoranda:1. A credit of $2,242.00 for the collection for Bogalusa Company of an electroni
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Answer:

Cash                         2,157 debit

bank service expense 85 debit

   account receivables 2,242 credit

Explanation:

To record the bank memorand:

The collection in behalf of the firm will increase cash

The new print the checks will be considered either miscellaneuos expense or bank service expense either way, will decrease cash.

Net cash variation: 2,242 - 85 = 2,157

For the Company errors another entry will be made looking for errors between our numebrs and the bank.

5 0
3 years ago
The management of Krach Corporation would like to investigate the possibility of basing its predetermined overhead rate on activ
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Answer:

<em>16,800 dollars.</em>

Explanation:

<em>Overhead rate predetermined at availability. </em>

= Approximate overhead processing times / Capacity machine hours.

= $33,600 / 24,000.

= $1.4 per hour on machine.

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3 0
3 years ago
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Financial Statements of a Manufacturing Firm The following events took place for Sorensen Manufacturing Company during January,
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Answer:

A. $185,000

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Explanation:

A. Preparation of the January income statement for Sorensen Manufacturing Company

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Income statement

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Cost of goods sold $675,000

Gross profit $525,000

Operating expense

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Administrative expense $125,000

Total operating expense $340,000

($215,000+$125,000)

Operating income $185,000

($525,000-$340,000)

B. Calculation to Determine the inventory balances at the end of the first month of operations.

Sorensen Manufacturing Company

Inventory Balances For the Month Ended January 31

Raw material =$250,000-$180,000

Raw material =$70,000

Work in process =$180,000+$450,000+$180,000-$760,000

Work in process =$50,000

Finished goods =$760,000-$675,000

Finished goods=$85,000

7 0
3 years ago
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