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
Lyrx [107]
2 years ago
12

If the book value per share is $40 and the market price is 52.50 per share calculate the required rate of return on the stock.

Business
1 answer:
pav-90 [236]2 years ago
7 0

Answer:

0.11 or 11%

Explanation:

The computation of the required rate of return is given below:

Required Rate of Return is

= Next Year Dividend ÷ Current Market Price + Growth Rate

= $3.15 ÷ $52.50 + 0.05

= 0.06 + 0.05

= 0.11 or 11%

working note

Given that

Current Market Price = $52.50

As we know that  

Growth Rate = Return on Equity × Retained Earning Ratio

Now  

Return on Equity = EPS ÷ Book Value of Share

= $5 ÷ 40

= 12.50%

So,  

Retained Earning Ratio is

= 1 - Dividend Payout Ratio

= 1 - 0.60

= 0.40

And,

Dividend Payout Ratio = DPS ÷ EPS

= $3 ÷ $5

= 0.60

Now

Growth Rate = 12.50% × 0.40

= 5%

So,

Next Year Dividend = Dividend Recently paid × (1 + growth rate )

= $3 × 1.05

= $3.15

You might be interested in
Imagine that odyssey national is a brand new bank, and that its required reserve ratio is 10 percent. if it accepts a $1,000 dep
Snezhnost [94]
Hi there
Excess reserve balance is
1,000−1,000×0.1=900

Hope it helps
8 0
3 years ago
Read 2 more answers
A company looking to expand internationally with little risk would choose?
leva [86]

Answer:

  • Licensing
  • Franchising

Explanation:

There are no options but Licensing as well as Franchising are some of the least riskiest ways to expand internationally.

With Licensing, the company looking to expand simply sells licenses to various companies in different countries giving them the right to use their image. Basically, the company the license is sold to gets access to the seller's intellectual property but then can run their business with a significant degree of autonomy.

Franchising represents another way to expand with little risk. It involves a company giving a license to another company to sell and sometimes produce their products as well as image rights. The company will give the franchisee (company that gets the license) the knowledge and training required to maintain the franchise and in exchange, franchisee pays a fee.

Both of these methods ensure that the name and brand of a company spread internationally whilst making money from it. Risk is minimized because the investment in other countries is low to nothing.

3 0
3 years ago
Domain names that end in .edu are:
marysya [2.9K]
Edu means education so normally it is a college or other school website
6 0
3 years ago
Social security and medicare are
Ber [7]
Social safety programs that Americans pay into during their working years through taxes. Both are designed to assist older Americans and distribute benefits to the disabled and their families.

Hopes This Helps
4 0
3 years ago
Read 2 more answers
During the adjusting process two transactions were missed. The first is for unearned rent revenue of which $450 was earned durin
masya89 [10]

Answer:

3. net income is understated by $175

Explanation:

There were two transactions omitted. The first transaction is unearned rent revenue of which $450 was earned. This earned rent revenue increases income by $450. While the second transaction was accrued interest payable of which $275 is owed. This interest payable increases liabilities by $275.

Therefore, from the above, income or revenue is understated by $450, while expenses is understated by $275.

Therefore, net income is understated by income less expenses, thus 450 - 275 = $175. This also implies that liabilities are overstated by $175.

4 0
3 years ago
Other questions:
  • Strategically , a company may phase out or sell an sbu. this is known as
    15·1 answer
  • In the presentation we learned that "one exchange rate is the reciprocal of another exchange rate"
    5·1 answer
  • It is Juan's 26th birthday and on his 26th birthday, he deposited $7,000 in a retirement account. Each year thereafter, he depos
    6·1 answer
  • What is the effective annual rate​ (EAR) of a mortgage that is advertised at 8.5​% ​(APR) over the next twenty years and paid wi
    8·1 answer
  • A Lexus automobile priced in Japan for export at 3000000 at a time when the exchange rate is 100 now costs $30000 in the United
    7·1 answer
  • A petroleum refinery stockpiles crude oil so that it can easily switch between producing home heating oil and gasoline, dependin
    9·1 answer
  • Members of 67 countries attended a conference on economic development hosted by an international organization based in Gent, Bel
    13·1 answer
  • On June 25, Snap Repair Service extended an offer of $170,000 for land that had been priced for sale at $194,000. On July 9, Sna
    15·1 answer
  • _____ are words that are specific to an employer’s needs or industry and improve your chances of having your résumé considered.
    6·1 answer
  • If gross margin on a product is 25% what is the corresponding markup percentage​
    8·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!