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Andrei [34K]
3 years ago
5

Beatrice Markets is expecting a period of intense growth and has decided to retain more of its earnings to help finance that gro

wth. As a result, it is going to reduce its annual dividend by 30 percent a year for the next 2 years. After that, it will maintain a constant dividend of $2.50 a share. Last year, the company paid $3.60 as the annual dividend per share. What is the market value of this stock if the required rate of return is 14.5 percent?
Business
1 answer:
VLD [36.1K]3 years ago
3 0

Answer: $16.69

Explanation:

Using the Dividend growth model, the value is:

= [Dividend 1/ (1 + required return)] + [Dividend 2/ (1 + required return)²] + [Terminal value / (1 + required return)²]

Terminal value = Dividend after 2 years / (required return - growth)

= 2.50/ (14.5% + 0%)

= $17.24

Dividend 1 = 3.60 * ( 1 -30%)                                Dividend 2 = 2.52 * ( 1 -30%)

= $2.52                                                                                     = $1.76

Market value = (2.52 / 1.145) + (1.76 / 1.145²) + (17.24/1.145²)

= $16.69

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3 years ago
Your local pawn shop loans money at an annual rate of 23 percent and compounds interest weekly. What is the actual rate being ch
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Answer:

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3 years ago
Dome Metals has credit sales of $270,000 yearly with credit terms of net 90 days, which is also the average collection period. A
bixtya [17]

Answer:

Net change in income = $8,100

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Given:

Current credit sales= $270,000 per year.

Average collection period= 90 days

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3 years ago
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3 years ago
A minor has the legal right to repudiate
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any individual under the age of 18 years. ... This rule is subject to several types of contracts which a minor will be bound by, and his right to repudiate such contracts.

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