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Ghella [55]
3 years ago
13

The Highfield Company is going through a five-year of fast growth at 20% initially, and then it will grow at a perpetual rate of

4%. The required rate of return is 10% and it just paid a dividend of $2. What is the stock price today?
a) 43.88
b) 86.26
c) 66.64
d) 31.5
Business
1 answer:
slava [35]3 years ago
7 0

Answer:

P0 = $66.6429 rounded off to $66.64

Option c is the correct answer

Explanation:

Using the two stage growth model of dividend discount model, we can calculate the price of the stock today. The DDM values a stock based on the present value of the expected future dividends from the stock. The formula to calculate the price of the stock today is,

P0 = D0 * (1+g1) / (1+r)  +  D0 * (1+g1)^2 / (1+r)^2  +  ...  +  D0 * (1+g1)^n / (1+r)^n  +  [(D0 * (1+g1)^n * (1+g2) / (r - g2)) / (1+r)^n]

Where,

  • g1 is the initial growth rate
  • g2 is the constant growth rate
  • r is the required rate of return

P0 = 2* (1+0.2) / (1+0.1)  +  2 * (1+0.2)^2 / (1+0.1)^2  +  2 * (1+0.2)^3 / (1+0.1)^3  

+  2 * (1+0.2)^4 / (1+0.1)^4  +  2 * (1+0.2)^5 / (1+0.1)^5  +

[(2 * (1+0.2)^5 * (1+0.04)  /  (0.1 - 0.04)) / (1+0.1)^5]

P0 = $66.6429 rounded off to $66.64

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Your landscaping company can lease a truck for $7,800 a year (paid at year-end) for 6 years. It can instead buy the truck for $3
Shkiper50 [21]

Answer:

Landscaping Company

a. The present value of the cost of leasing is:

= $37,179.01.

b. It is cheaper to lease than to buy.

c. The present value of the cost of leasing if the lease payments are an annuity due is:

= $39,781.54.

d. It is now cheaper to buy than to lease.

Explanation:

a) Data and Calculations:

Annual cost of leasing a truck = $7,800

Lease period = 6 years

Purchase cost of the truck = $38,000

Salvage value after 6 years = $0

Interest rate on company funds = 7%

N (# of periods)  6

I/Y (Interest per year)  7

PMT (Periodic Payment)  7800

FV (Future Value)  0

Results

PV = $37,179.01

Sum of all periodic payments = $46,800.00

Total Interes = $9,620.99

Present of an Annuity Due:  

Results

PV = $39,781.54

Sum of all periodic payments = $46,800.00

Total Interest = $7,018.46

5 0
3 years ago
What to do if you get tired of friends easily?
Snezhnost [94]

Nothing. You don't have to be close to anyone if you don't want to, maybe talk to them once in a while. Being introverted is okay.

5 0
3 years ago
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Indicate which activities of Stockton Corporation violated the rights of a stockholder who owned one share of common stock. (You
Vlada [557]

Answer and Explanation:

The explanation is as follows;

a. In this, the corporation has violated the right to sell off the stock.

b. Here no rights of the shareholder would be violated as the stockholder do not have the interfere right

c. Here the right is violated with respect to the purchase their proportional common stock share prior made available to the public

d. Here also the right is violated for receiving the timely financial reports

e. Here no rights of the stockholder is  violated because the common stockholder is paid at the last when the creditors payment has been done

6 0
3 years ago
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marin [14]

Answer:

$11,560

$5666.661

Explanation:

Given the following :

Bill received from accountant = $17,000

This year's marginal tax rate = 32%

Next year's marginal tax rate = 37%

After tax return on investment = 11%

After tax cost of bill is paid in December :

Billed amount * this year's tax rate

$17,000 * ( 1 - 0.32)

= $17,000 * 0.68

= $11,560

B) After tax cost of bill was paid in January:

Billed amount * next year's tax rate * PV factor

From the present value factor table;

PV factor (1 years, 11%) = 0.9009

Hence,

$17,000 * 0.37 * 0.9009 = $5666.661

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What is the market approach to consumer protection? in what ways does it fall short of completely protecting consumers?
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Incorporating various types of advertising-related requirements to correct misinformation about materials or potential hazards from various factors is the major strategy the market uses to protect consumers. The process of defending the general public against unethical business activities is known as consumer protection.

Legal provisions for consumer protection are frequently made. These rules are designed to stop companies from using fraud or other specific unfair acts to obtain an edge over rivals or deceive customers. They could also offer more protection to the broader public, even if they are not the intended consumers or producers of the product in question.

To learn more about consumer protection, click here

brainly.com/question/19054234

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