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
Irina-Kira [14]
3 years ago
15

MGM Resorts Incorporated is expected to grow at an exceptionally high rate over the next 2 years due to the success of Macau cas

ino. Growth in dividends is expected to be 20% for the next 2 years before reverted back to a constant rate of 4% that is expected to continue indefinitely. If MGM Resorts’ paid a $1.20 dividend yesterday (D0=$1.20) and the stock is valued according to a required rate of return of 14%, what is the value of a share of MGM Resorts stock today?
Business
1 answer:
Burka [1]3 years ago
6 0

Answer:

The value of a share of MGM Resorts stock today will be $16.42

Explanation:

In order to calculate the value of a share of MGM Resorts stock today we would have to calculate the following steps:

Step-1, Dividend for the next 2 years

Dividend per share in Year 0 (D0) = $1.20 per share

Dividend per share in Year 1 (D1) = $1.4400 per share [$1.20 x 120%]

Dividend per share in Year 2 (D2) = $1.7280 per share [$1.4400 x 120%]

Step-2, Share Price in Year 2

Dividend Growth Rate after Year 2 (g) = 4.00% per year

Required Rate of Return (Ke) = 14.00%

Share Price in Year 2 (P2) = D2(1 + g) / (Ke – g)

= $1.7280(1 + 0.04) / (0.14 – 0.04)

= $1.7971 / 0.10

= $17.97 per share

Step-3, The Current Stock Price

As per Dividend Discount Model, Current Stock Price the aggregate of the Present Value of the future dividend payments and the present value the share price in year 2

Year      Cash flow ($)        PVF at 14.00%           Present Value of cash flows ($)

                                                                             [Cash flows x PVF]

1            1.4400                   0.877193                           1.26

2           1.7280                  0.769468                          1.33

2            17.97                   0.769468                          13.83

TOTAL   16.42

Hence, the value of a share of MGM Resorts stock today will be $16.42

You might be interested in
Which of these statements about pipeline inventory is best? A. Changing an item's lot size does not directly affect the average
Eddi Din [679]

Answer: Changing an item's lot size does not directly affect the average level of the pipeline inventory.

6 0
2 years ago
If the expected inflation rate is 4 percent and the nominal interest rate is 9 percent, the expected real interest rate is _____
goldenfox [79]

The real interest rate is simply nominal interest rate less the inflation rate. In equation form this is equivalent to:

Real interest rate = Nominal rate – Inflation Rate

Real interest rate = 9% - 4%

Real interest rate = 5%

<span> </span>

7 0
3 years ago
According to gordon allport, personality should be described in terms of:
Gelneren [198K]
The answer to that question is <span>traits
</span><span> gordon allport became famous because he's one of the first to pursue psychological study on personality.
According to Allport, Each individuals have different levels of traits that they develop from the interaction within society that will determine those individuals' overall behavior.</span><span />
5 0
3 years ago
_________ business-like establishments that employ people and produce goods and services with the fundamental goal of contributi
Law Incorporation [45]

Answer:

Nonprofits

Explanation:

Nonprofit business are businesses that have been granted exemption from paying tax by the federal inland revenue. They are formed for the purpose of mutual benefits and not for pursuing owners profits.

3 0
3 years ago
Suppose the real risk-free rate is 3.00%, the average expected future inflation rate is 5.90%, and a maturity risk premium of 0.
never [62]

Answer:

the rate of return that expected on one year treasury security is 9.00%

Explanation:

The computation of the rate of return that expected on one year treasury security is as followS

= Risk free rate + average expected future inflation rate + maturity risk premium

= 3.00% + 5.90% + 0.10%

= 9.00%

Hence, the rate of return that expected on one year treasury security is 9.00%

Therefore the correct option is d.

And, the rest of the options are wrong

5 0
2 years ago
Other questions:
  • A coffee shop uses an online system to engage customers. After each transaction, customers receive a text asking them to rate th
    10·1 answer
  • Investments are different from savings accounts in that they:
    9·2 answers
  • determine if the data is biased or not, every fortieth student who enters the school is asked to name their favorite sport​
    11·1 answer
  • Al's Sport Store has sales of $897,400, costs of goods sold of $628,300, inventory of $208,400, and accounts receivable of $74,1
    9·1 answer
  • A formal written statement of management's plans for the future, expressed in financial terms, is a a.budget b.gross profit repo
    8·1 answer
  • Using the information provided about marketing and advertising law, determine which of the following would be a violation of thi
    9·1 answer
  • Barry has just become eligible for his​ employer-sponsored retirement plan. Barry is 40 and plans to retire at 65. Barry calcula
    14·1 answer
  • The amount of the estimated average income for a proposed investment of $73,000 in a fixed asset, giving effect to depreciation
    5·1 answer
  • Define the word buffer in entrepreneurship ( business ) form .
    10·1 answer
  • Dow CEO Jim Fitterling mentions a(n) _____ in support of companies' efforts to remove plastic waste from the oceans.
    13·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!