All categories

2 years ago

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

hotel in Florida has instituted a policy to hire individuals living in close proximity to the hotel premises to reduce instances

Nady [450]

Answer:

Disparate impact.

Explanation:

Types of Discrimination :

-DisparateTreatment. Defendant discriminates overtly against all members of protected class.

-Disparate Impact. Defendant’s apparently non-discriminatory practices result in disproportionately heavy impact on protected class.

Disparate Impact characteristics:

-Indirect discrimination

-Unequal consequences or results

-Decision rules with racial / sexual consequences

-Unintentional discrimination

-Neutral, color-blind actions

-Same standards, but different consequences for different groups

3 0

3 years ago

A business that purchases products in large quantities from producers and then sells it to another entity is known as a _____.

BigorU [14]

A business that purchases products in large quantities from producers and then sells it to another entity is know as a distributor.

Distributors, distribute items to smaller retailers normally. They work as a warehouse with large quantities to sell to others in smaller quantities.

7 0

3 years ago

Ainat [17]

Answer:economic requirement

Explanation:Product adaptation is the process of modifying an existing product so it is suitable for different customers or markets. An adaptation strategy is particularly important for companies that export their products because it ensures that the product meets local cultural and regulatory requirements.

Product adaptation is the process of modifying an existing product so it is suitable for different because it ensures that the product meets local cultural and regulatory requirements.

8 0

3 years ago

Read 2 more answers

Which of the following is not a common type of meeting?

geniusboy [140]

Answer:

running is the answer for your question

5 0

3 years ago

Learned Corporation has provided the following information: Cost per Unit Cost per Period Direct materials $ 5.30 Direct labor $

Sonja [21]

Answer:

$119,200

Explanation:

The Absorption Costing method is recommended by GAAP or IFRS for financial reporting instead of Variable Costing method.

Thus to calculate product costs under absorption costing, we add the total of all manufacturing costs (Variable and Fixed),

Non - Manufacturing costs are treated as Period Costs which are expensed in the Income Statement.

Direct materials ($ 5.30 x 8,000 units) $42,400

Direct labor ($ 3.75 x 8,000 units) $30,000

Variable manufacturing overhead ($ 1.35 x 8,000 units) $10,800

Fixed manufacturing overhead $ 36,000

Total Product Cost $119,200

therefore,

The total amount of product costs incurred to make 8,000 units is $119,200.

5 0

2 years ago