Answer: See explanation
Explanation:
a. What stock price is expected 1 year from now?
This will be calculated as:
= P0 × (1 + g)
where,
P0 = $40
g = growth rate = 7%
= P0 × (1 + g)
= 40 × (1 + 7%)
= 40 × (1 + 0.07)
= 40 × 1.07
= $42.80
b. What is the required rate of return?
This will be:
= (D1 / P0) + g
where D1 = D0 × (1+g) = 1.75 × (1+0.07) = 1.75 × 1.07 = 1.8725
= (D1 / P0) + g
= (1.8725 / 40) + 0.07
= 0.1168
= 11.68%
Answer:
Dividend yield is 4.79%
Cost of equity is 11.64%
Explanation:
The dividend yield on Krell Industries share price is the dividend of $1.09 divided by the price of the share today of $22.77
dividend yield=$1.09/$22.77=4.79%
The equity cost of capital can be calculated from the share price formula given below by changing the subject of the formula to cost of equity,r.
stock price=Do*(1+g)/r-g
Do is the dividend paid this year of $1.09
g is the dividend growth of dividend which is computed thus:
g=share price at end of the year-share price now/share price now
g=($24.33-$22.77)/$22.77=6.85%
r is the unknown
stock price is $24.33
24.33=1.09*(1+6.85%)/(r-6.85%)
24.33=1.164665
/r-6.85%
r=(1.164665
/24.33)+6.85%
r=11.64%
Variable cost remains constant per unit at various levels of activity
Answer:
Military equipment.
Explanation:
American industry during wars required enough of industrial power to outstand other countries. To do this, the automobile industry was specifically equipped with raw materials to manufacture war vehicles such as tanks, jeeps, and trucks. Thus, this industry was uniquely suited to the mass production of 'Military Equipment'.
