Answer:
The value of this stock today should be $6.22
Explanation:
The company will start paying dividends 2 years from today that is at t=2. The dividends received 2 years from today can be denoted as D2. The constant growth model of DDM will be used to calculate the price of this stock at t=2 as the growth rate in dividends is constant forever.
The price at t=2 will then be discounted back to its present value today to calculate the price of this stock today.
The price of this stock at t=2 will be,
P2 = D2 * (1+g) / (r - g)
P2 = 0.6 * (1+0.04) / (0.12 - 0.04)
P2 = $7.8
The value of this stock today should be,
P0 = 7.8 / (1+0.12)^2
P0 = $6.218 ROUNDED OFF TO $6.22
Answer:
c. An agency relationship
Explanation:
An agency relationship is a mutual relationship, in which one person (i.e the principle ) gives a permission to an agent so as to act on their behalf.
In this relationship the agent must consent to the instructions of the person i.e the principle.
Here in the question, Stefanie acting as Principal who has directed the agent (which is the bank in the given case ) to execute a task.
A) Are small businesses
There are more small businesses in existence than any other type of business.
Answer:
Change in Net worth= $133.62
Explanation:
The two lease options require that the leasee ( the tenant) commit himself to pay a series of equal amount of rent installment at the different time period in the future.
These series of equal periodic cash flows occurring in the future are called annuities.
To have a meaningful comparison, the two annuities should be compared based on their present values. So we compute the present value of the two using the formula below:
Present Value (PV) =( A × (1- (1+r)^(-n))/r
Option 1:Current lease
PV = 500 × 1-(1+0.05)^(12)
= 500 × 8.863251636
= $4,431.62
Option 2: New Offer
This will be done in two steps:
PV of lease in year 3
PV =700 × (1-(1+0.05)^(-9))
= 700 × 7.107821676
=4,975.47
PV of lease in year 0
PV = FV × (1+r)^(-3)
=4,975.47 × 0.8638
=$4,298.00
My net worth would change by the amount of the difference between the two PV of the two annuities:
Difference in PV = $4,431.62-$4,298.00
Change in Net worth= $133.62
