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Gnesinka [82]
3 years ago
7

Assume today is December 31, 2019. Imagine Works Inc. just paid a dividend of $1.25 per share at the end of 2019. The dividend i

s expected to grow at 15% per year for 3 years, after which time it is expected to grow at a constant rate of 6% annually. The company's cost of equity (rs) is 9.5%. Using the dividend growth model (allowing for nonconstant growth), what should be the price of the company's stock today (December 31, 2019)
Business
1 answer:
lidiya [134]3 years ago
5 0

Answer:

Value of stock = $47.99

Explanation:

<em>The price of a stock using the dividend valuation model is the present value of the the future dividend expected from the stock discounted at the required rate of return.</em>

Year                                   Present Value  

1    1.25× 1.15^1 × 1.095^(-1) =1.31

2    1.25× 1.15^2 × 1.095^(-2) = 1.38

3.    1.25× 1.15^3 × 1.095^(-3)= 1.45

Present value of Dividend in Year 4 and beyond

This will be done in two steps

Step 1

PV in year 3 terms  

= Dividend in year 4× (1.06)/(0.095-0.06)

1.25× 1.15^3 × 1.06/(0.095-0.06)=57.57

PV in year 0 terms =

PV in year 3 × 1.095^(-3)

=57.5759 × 1.095^(-3)= 43.852

Value of stock = 1.3  + 1.38 + 1.45  + 43.852= $47.99

Value of stock = $47.99

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EastWind [94]

The individual that makes the investment that has highest risk is Norville because he invested 75 percent of his portfolio in stocks.

<h3>What investment are considered high risk?</h3>

High risk investment refers to an investment that have large chance of loss of capital and high chance of a devastating loss.

Daphne invests in mutual funds which offeres low risk, Velma  and Fred spread their risk to reduce loss if any occur.

Therefore, the Option B is correct.

Read more about High risk investment

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4 0
3 years ago
Read 2 more answers
C&amp;A uses an assembly line of 20 stations to make a product. The cycle time is 5 minutes per unit. Step 6 is the most error-p
algol [13]

Answer:

C. 70 minutes

Explanation:

The computation of the information turnaround time is shown below:

But before that first we have to find out the remaining stations which is

= Total stations - error stations

= 20 stations - 6 stations

= 14 stations

Now the information turnaround time is

=  Remaining number of stations × cycle time per unit

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7 0
3 years ago
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vodomira [7]

Answer:

B. Opportunity Cost

Explanation:

Comparative Advantage is when an economy can produce certain goods & services at a lower opportunity cost than other trading economies.

Opportunity cost is the cost of next best option forgone while choosing a particular option.

Comparative advantage (production ability at lower opportunity cost) implies: Economy can produce a good/ service by sacrifising lesser amount of other good, than the other economy.

Example : Production Possibilities of 2 countries, 2 goods :-

                   Good X       Good Y     Opportunity Cost (Goods Ratio)

Country A     10                30               1:3    (10/30)

Country B      5                 10                1:2   (5/10)

Country A can produce Good Y by sacrifising 3 units of Good X, Country B can produce Good Y by sacrifising 2 units of Good X. So, B can produce good Y at lesser opportunity cost than A. Hence, country B has comparative advantage in good Y.

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Papessa [141]
Richard Stallman was the free software foundation to promote open development.

Have a good day! :D
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Shona is buying a rug for her room. Store A has the rug for $45 with a 10% discount. Store B has the same rug for $46 and is off
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