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kherson [118]
3 years ago
13

Your company is estimated to make dividends payments of $2.1 next year, $3.6 the year after, and $4.2 in the year after that. Th

e dividends will then grow at a constant rate of 6% per year. If the discount rate is 9% then what is the current stock price
Business
1 answer:
asambeis [7]3 years ago
7 0

Answer:

P0 = $122.79185  rounded off to $122.79

Explanation:

The dividend discount model (DDM) can be used to calculate the price of the stock today. DDM calculates the price of a stock based on the present value of the expected future dividends from the stock. The formula for price today under DDM is,

P0 = D1 / (1+r)  +  D2 / (1+r)^2  +  ...  +  Dn / (1+r)^n  +  [(Dn * (1+g) / (r - g)) / (1+r)^n]

Where,

  • D1, D2, ... , Dn is the dividend expected in Year 1,2 and so on
  • g is the constant growth rate in dividends
  • r is the discount rate

P0 = 2.1 / (1+0.09)  +  3.6 / (1+0.09)^2  +  4.2 / (1+0.09)^3  +  

[(4.2 * (1+0.06) / (0.09 - 0.06)) / (1+0.09)^3]

P0 = $122.79185  rounded off to $122.79

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Answer:

Nicole has profit $400 ....,.............

6 0
3 years ago
Read 2 more answers
It will cost $7,500 to acquire a cotton candy cart. Cart sales are expected to be $3,800 a year for four years. After the four y
Allushta [10]

Answer:

It will take 1.97 years to payback the machine.

Explanation:

Giving the following information:

It will cost $7,500 to acquire a cotton candy cart. Cart sales are expected to be $3,800 a year for four years.

We need to determine the amount of time required to payback the machine.

Year 1= 3,800 - 7,500= -3,700

Year 2= 3,800 - 3,700= 100

3,700/3,800= 0.97

It will take 1.97 years to payback the machine.

5 0
3 years ago
Wanda takes $3,000 from her savings account that pays 5 percent interest per year and uses the funds to purchase a computer for
Salsk061 [2.6K]

Answer:

$1,150

Explanation:

Implicit rental rate refers to the cost that a company incurred by spending money as opposed to what that money could earn if it were invested in something else. Therefore since in a year the computer was worth $1000 less and Wanda also lost out on the 5% that the savings account would have generated which would be $150. Then her total cost is that of $1,150

7 0
3 years ago
Orioles Company bought Special Products Division in 2017 and appropriately recorded $741,000 of goodwill related to the purchase
goldfiish [28.3K]

Answer:

No goodwill impairment should be recognized by Orioles in 2018

Explanation:

Data provided in the question:

Goodwill related to the purchase = $741,000

Fair value of Special Products Division = $5,600,000

Goodwill existing on December 31, 2018 = $595,000

Now,

Here, the fair value of division including the goodwill i.e $5,600,000 is lower than the fair value of division excluding the goodwill i.e $595,000

Hence,

There will be impairment loss

Hence,

No goodwill impairment should be recognized by Orioles in 2018

4 0
3 years ago
Is insurance judgment rating based on
Savatey [412]

Answer:

A judgement rating is an insurance rate that an underwriter assigns to a particular risk based on their subjective evaluation of that risk. Judgement ratings are frequently done on an individual basis and rely heavily on the experience, perception, and talent of the underwriter who makes the final evaluation.

3 0
3 years ago
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