Answer:
None of the options are correct as the price today will be $26.786
Explanation:
The price of a stock whose dividends are expected to grow at a constant rate forever can be calculated using the constant growth model of the dividend discount model approach (DDM). The DDM bases the value of a stock on the present value of the future expected dividends from the stock.
The formula for price under constant growth model is,
P0 = D1 / (r - g)
Where,
- D1 is the dividend expected for the next period
- r is the required rate of return or cost of equity
- g is the growth rate in dividends
However, as the constant growth rate in dividends is to be applied from Year 2 onwards, we will use the D2 to calculate the price at Year 1 and we will then discount this further for one year to calculate the price today.
P1 or Year1 price = 2 * (1+0.05) / (0.12 - 0.05)
P1 or Year 1 price = $30
The price of the stock today or P0 will be,
P0 = 30 / (1+0.12)
P0 = $26.786
Answer: -$487.50
Explanation:
Last year income = Sales - Operating Costs - Depreciation - Interest
= 10,500 - 6,250 - 1,300 - ( 5,000 * 6.5%)
= $2,625 - tax
= 2,625 - ( 2,625 * 35%)
= $1,706.25
This year income = Sales - Operating Costs - Depreciation - Interest
= 10,500 - 6,250 - (1,300 + 750) - ( 5,000 * 6.5%)
= $1,875
= 1,875 - ( 1,875 * 35%)
= $1,218.75
Difference = This year income - Last year
= 1,218.75 - 1,706.25
= -$487.50
It should be noted that wars in Iraq and Afghanistan have benefited some sectors of the U.S. economy such as those that manufacture arms, but has decreased growth in others such as tourism.
Wars in Iraq and Afghanistan serves as one of the descruction war in Iraq, where many lost their lives, however, US benefited from this because US manufactures ammunition.
Therefore, wars in Iraq and Afghanistan have benefited some sectors of the U.S. economy.
Learn more about war in Iraq at;
brainly.com/question/12420197
