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
Which of the following is an implicit cost in Jim's business venture?
lozanna [386]

Answer:

D) i and iii

Explanation:

Implicit cost refers to economic costs that are not directly attributed to the business but are nevertheless important in making informed decisions. In this case the opportunity costs are implicit cost. They are:

  • Salary forgone which should have been earned at another job, and
  • Interest lost from savings account.  
3 0
3 years ago
NEED HELP. Put them in order by number
MAXImum [283]

I believe it is the following:

4

1

5

2

3



4 0
3 years ago
org303 According to the textbook, the most important reason for organizations to rely on research is that it ultimately
Leviafan [203]

Answer:

Explanation:

The most important reason for organizations to rely on research is that it ultimately provides the organization with insight on how a specific decision will perform in the target market and what effects it will have on the company. This is because research provides valuable information such as a target population's interests, hobbies, spending behaviors, needs, likes/dislikes, etc. All of which are factors that help determine if that population will buy a certain product and increase the organizations revenue.

7 0
3 years ago
How do we track stock market performance?
Lynna [10]
Go to the stock market holders, or look it up online

Hope this helps!
3 0
2 years ago
Read 2 more answers
A company sold a machine that originally cost $250,000 for $120,000 when accumulated depreciation on the machine was $100,000. t
Ghella [55]
$250000-$100000=$150000
$150000-$120000=$30000

So it's a gain, a gain of $30000
Hope this helps.
7 0
3 years ago
Other questions:
  • Rob and Lori purchased a home for $350,000 with an additional $5,000 in related purchase costs and then added a garage at a cost
    5·1 answer
  • True or false? under medicare part a, a beneficiary can have an unlimited number of benefit periods.
    13·1 answer
  • A company issued 70 shares of $30 par value preferred stock for $4,000 cash. The journal entry to record the issuance is:
    9·1 answer
  • A researcher interested in what factors make an employee best suited for a given job would most likely identify as a(n) ________
    10·1 answer
  • Lean systems try to:
    13·1 answer
  • In 2011 oil production in Libya was interrupted by political unrest. At the same time, the demand for oil by China continued to
    8·1 answer
  • Guys please help, List the economic activities to delivering evening news bulletin to your television or radio​
    5·1 answer
  • Economics is the study of how people try to satisfy unlimited wants and needs with limited resources.Question 20 options:TrueFal
    14·1 answer
  • Bob lives in Miami and runs a business that sells guitars. In an average year, he receives $793,000 from selling guitars. Of thi
    13·1 answer
  • Suppose physical capital per worker increased to $60,000 between 1990 and 2000, and output per worker increased by $45,000 over
    10·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!