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Novosadov [1.4K]
3 years ago
7

Stocks A and B have the following data. Assuming the stock market is efficient and the stocks are in equilibrium, which of the f

ollowing statements is correct?
A B
Price $25 $40
Expected growth 7% 9%
Expected return 10% 12%
A) The two stocks should have the same expected dividend
B) The two stocks could not be in equilibrium with the numbers given in the question
C) A's expected dividend is $0.50
D) B's expected dividend is $0.75
E) A's expected dividend is $0.75 and B's expected dividend is $1.20
Business
1 answer:
IrinaK [193]3 years ago
5 0

Answer: E) A's expected dividend is $0.75 and B's expected dividend is $1.20

Explanation:

Using the Gordon growth model, you can calculate the expected dividend. The formula is:

Price = Expected dividend/ (expected return - expected growth)

Stock A expected dividend

25 = D/ (10% - 7%)

D = 25 * 3%

= $0.75

Stock B expected divided

40 = D / (12% - 9%)

D = 40 * 3%

= $1.20

Option A, C and B are therefore wrong.

Option E is correct.

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The Golden Goose is considering a project with an initial cost of $46,700. The project will produce cash inflows of $10,000 for
MrRissso [65]

The payback period is 4.06 years.

<h3>What is the payback period?</h3>

Payback calculates the amount of time it takes to recover the amount invested in a project from it cumulative cash flows

Amount recovered in the first year = 46,700 - 10,000 = 36,700

Number of years it would take to recover 36,700 = 1 + (36700 / 12,000) = 4.06 years

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6 0
2 years ago
20. A company is in its first month of operations. On January 1, the company borrows $10,000 from the bank. The bank charges ann
goblinko [34]

Answer and Explanation:

amount borrowed = $10,000

interest rate =12%

interest accrued = $10,000*12%*1/12

                            = $100

date             general journal                          debit                    credit

jan 31            interest expense                       100                      

                        interest payable                                                    100

3 0
3 years ago
In the long run, fiscal policy influences a. saving, investment, and growth; in the short run, fiscal policy primarily influence
Studentka2010 [4]

Answer:

The correct option here is A) .

Explanation:

Fiscal policy is a tool which is used by a government to influence the economy , through the changes in spending and taxation ( of governments ). This policy affects the economy in both short run and long run. Fiscal policy has its effect on aggregate demand for goods and services and is very much capable of influencing savings, investment and growth in the economy through its contractionary and expansionary fiscal policies. So thus from the above information it can be said that the option A is correct.

3 0
3 years ago
ABC Company issues a 3-year bond with a $1,000 Face Value and a 5% Coupon Rate, with coupons paid once a year at the end of ever
AlekseyPX

Answer:

yield to maturity = 9.78%

Explanation:

yield to maturity = {coupon + [(face value - market value) / n]} / [(face value + market value) / n]]

YTM =  {$50 + [($1,000 - $913) / 2]} / [(($1,000 + $913) / 2]] = $93.50 / $956.50 = 0.09775 = 9.78%

The yield to maturity represents the total rate of return that an investor should receive if he/she holds a bond until it matures.

3 0
3 years ago
On January 1, 2021, the Allegheny Corporation purchased equipment for $115,000. The estimated service life of the equipment is 1
Mazyrski [523]

Answer:

1. $11,000 each year

2. $23,000 and $18,400

3. $15,000 and $12,500

Explanation:

The calculation of the depreciation expense for the 2021 and 2022 is shown below:

1. Straight-line method:

= (Purchase value of equipment - estimated residual value) ÷ (estimated service life)

= ($115,000 - $5,000) ÷ (10 years)

= ($110,000) ÷ (10 years)  

= $11,000

In this method, the depreciation is same for all the remaining useful life  i.e for 2021 also the same depreciation is applied i.e $11,000

2. Double-declining balance method:

First we have to determine the depreciation rate which is

= One ÷ estimated service life

= 1 ÷ 10

= 10%

Now the rate is double So, 20%

In year 1, the original cost is $115,000, so the depreciation is $23,000 after applying the 20% depreciation rate

And, in year 2, the $(115,000 - $23,000) × 20% = $18,400

3. Units-of-production method:

= (Purchase value of equipment - estimated residual value) ÷ (estimated production units)

= ($115,000 - $5,000) ÷ ($220,000 units)

= ($110,000) ÷ (220,000 units)  

= $0.5 per units

For 2021, it would be

= Production units in 2021 year × depreciation per unit

= 30,000 units × $0.5

= $15,000

Now for the 2022, it would be  

= Production units in 2022 year × depreciation per unit

= 25,000 units × $0.5

= $12,500

4 0
3 years ago
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