1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Liula [17]
2 years ago
14

R. E. Lee recently took his company public through an initial public offering. He is expanding the business quickly to take adva

ntage of an otherwise unexploited market. Growth for his company is expected to be 40 percent for the first three years and then he expects it to slow down to a constant 15 percent. The most recent dividend was $0.75. Based on the most recent returns, the beta for his company is approximately 1.5. The risk-free rate is 8 percent and the market risk premium is 6 percent. What is the current price of Lee's stock
Business
1 answer:
Ilia_Sergeevich [38]2 years ago
8 0

Answer: $77.13

Explanation:

Based on the information given in the question, the current price of Lee's stock will be calculated thus:

First, the required rate of return will be:

= 8% + (1.5 × 6%) = 8% + 9% = 17%

Year 1:

Cash flow: 1.05

Present value: 0.90

Year 2:

Cash flow: 1.47

Present value: 1.07

Year 3:

Cash flow: 2.06

Present value: 1.28

Year 4:

Cash flow: 118.34

Present value: 73.88

The current price of Lee's stock will be:

= 0.90 + 1.07 + 1.28 + 73.88

= 77.13

The current price of Lee's stock is $77.13.

You might be interested in
The wireone company manufactures high-quality coated electrical wire in two departments, weaving and coating. materials are intr
storchak [24]
<h2><u>Answer:</u></h2>

Equal Units; Assigning Costs—Weighted-Average Method [LO2, LO3, LO4, LO5] The WireOne Company makes high caliber covered electrical wire in two offices, Weaving and Coating. Materials are presented at different focuses amid work in the Weaving Department.

After the weaving is finished, the materials are moved into the Coating Department, where strength plastic covering is connected. Chosen information identifying with the Weaving Department amid May are given underneath:

The organization utilizes the weighted-normal strategy. Required: 1. Figure the proportional units of creation. 2. Register the expenses per proportional unit for May. 3. Decide the expense of completion work in procedure stock and of the units exchanged to the Coating Department. 4. Set up a cost compromise between the costs decided in (3) above and the expense of starting stock and expenses included amid the period.

6 0
3 years ago
When it comes to investing, what is the typical relationship between risk and return
Harlamova29_29 [7]
When it comes to investing, the typical relationship between the risks and returns was that the greater the potential risk, the greater the investment return an investor will get. That is why investments are very risky, and an investor must be a risk-taker to attain such success. 
8 0
3 years ago
Read 2 more answers
Mr. Fitzgerald is selling his home to permanently move into a retirement facility near his daughter in a neighboring state befor
AysviL [449]

"Mr. Fitzgerald is selling his home to permanently move into a retirement" He must be automatically dropped from the plan because he is relocating outside of the service region. He will be able to choose a new plan during a special election term. This is further explained below.

<h3>What is prescription drug plan?</h3>

Generally, Prescription drug plans (PDPs) are another name for Medicare Part D. These policies are available on their own from private insurance providers.

In conclusion, He must be automatically dropped from the plan because he is relocating outside of the service region. He will be able to choose a new plan during a special election term.

Read more about prescription drug plan

brainly.com/question/14176332

#SPJ5

6 0
2 years ago
You are selling a product in an area where 30 % of the people live in the city and the rest live in the suburbs. Currently 20 %
irina1246 [14]

Answer:

a). I would adopt the increase in market share in the suburbs by 15 % since the number of final suburbs dwellers who will use my product is (0.0805 x) which is  greater than final city dwellers' (0.075 x)

b). The total percentage of people who are city dwellers who own your product before the new sales drive=46.15%

Explanation:

a). We can make the following expressions;

Total number of both city dwellers and suburb dwellers=x

City dwellers=30% of x=(30/100)×x=0.3 x

Suburb dweller=70% of x=(70/100)×x=0.7 x

Total number of city dwellers who use your product initially=(20/100)×0.3 x=0.06 x

Total number of suburb dwellers who use your product initially=(10/100)×0.7 x=0.07 x

If we increase the market share in the suburbs by 15%

Number of suburb dwellers=0.07 x+(15/100)×0.07 x

Number of suburb dwellers=(0.07 x+0.0105 x)=0.0805 x

If we increase market share in the city by 25%

Number of city dwellers=0.06 x+(25/100)×0.06 x

Number of city dwellers=(0.06 x+0.015 x)=0.075 x

I would adopt the increase in market share in the suburbs by 15 % since the number of final suburbs dwellers who will use my product is (0.0805 x) which is  greater than final city dwellers' (0.075 x)

b). Percentage of city dwellers that own your product

Percentage=(Initial number of city dwellers/Total number of people)×100

Percentage=0.06 x/(0.06 x+0.07 x)=(0.06 x/0.13 x)×100=46.15%

The total percentage of people who are city dwellers who own your product before the new sales drive=46.15%

8 0
3 years ago
For a closed economy, gdp is $18 trillion, consumption is $13 trillion, taxes are $2 trillion and the government runs a deficit
Yakvenalex [24]

Answer:

$3 trillion and $2 trillion, respectively

Explanation:

Private savings in (Income - Taxes) -Consumption

National/Public Savings are (taxes - expenditures)

7 0
3 years ago
Other questions:
  • In its first year of operations, Jetway Airlines incurred and paid Salaries Expense of $40 million. On December 31, it accrued a
    7·2 answers
  • Santos Co. is preparing a cash budget for February. The company has $18,000 cash at the beginning of February and anticipates $6
    14·1 answer
  • The difference between a multinational corporation (MNC) and an international business is that __________.
    15·1 answer
  • If you are willing to purchase a house for $500,000 and you purchase the house for $500,000, this transaction will generate: a.
    8·1 answer
  • Sam has two options this weekend. He could work at his job and earn $9/hour for three hours, or he could go to a show at the the
    9·1 answer
  • Fiji, Inc. started 2025 with $12,000 in assets and $2,500 in liabilities. Fiji had issued 50 shares of stock when it went into b
    7·1 answer
  • Rogers Company reported net income of $35,000 for the year. During the year, accounts receivable increased by $7,000, accounts p
    14·1 answer
  • Two securities have a covariance of 0.022. If their correlation coefficient is 0.52 and one has a standard deviation of 15%, wha
    15·1 answer
  • On January 22, Zentric Corporation issued for cash 342,000 shares of no-par common stock at $20. On February 14, Zentric issued
    15·1 answer
  • Measuring performance relative to planned objectives and standards is part of:.
    10·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!