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alisha [4.7K]
3 years ago
6

Moody Farms just paid a dividend of $4.00 on its stock. The growth rate in dividends is expected to be a constant 6 percent per

year indefinitely. Investors require a return of 15 percent for the first three years, a return of 13 percent for the next three years, and a return of 11 percent thereafter. What is the current share price?
Business
1 answer:
Dimas [21]3 years ago
3 0

Answer:

the current share price is $73.31

Explanation:

The computation of the current share price is shown below:

P0 = [{D0 × (1 + g)} ÷ (1 + r1)] + [{D0 × (1 + g)^2} ÷ (1 + r1)^2] + [{D0 × (1 + g)^3} ÷ (1 + r1)^3] +  [{D0 × (1 + g)^4} ÷ {(1 + r1)^3(1 + r2)}] + [{D0 × (1 + g)^5} ÷ {(1 + r1)^3(1 + r2)^2] +  [{D0 × (1 + g)^6} ÷ {(1 + r1)^3(1 + r2)^3] + [{D0 × (1 + g)^7} ÷ {(rC - g)(1 + r1)^3(1 + r2)^3]

= [($4 × 1.06) ÷ 1.15] + [($4 × 1.062) ÷ 1.152] + [($4 × 1.063) ÷ 1.153] + [($4 × 1.064) ÷ (1.153 × 1.13)] + [($4 × 1.065) ÷ (1.153 × 1.132)] + [($4 × 1.066) ÷ (1.153 × 1.133)] +  [($4 × 1.067) ÷ {(0.11 - 0.06)(1.153 × 1.133)}]

= $3.69 + $3.40 + $3.13 + $2.94 + $2.76 + $2.59 + $54.82

= $73.31

hence, the current share price is $73.31

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Answer:

The change in the cash realizable value from the balance 12/31/17 to 12/31/18 was $37,840 increase.

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Cash realizable value of accounts receivable is simply the amount that is deemed recoverable after factoring the portion that is uncollectible.

The effects of the transactions during the year are as follows:

Sales on account:

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Credit Sales revenue                                     $145,400

<em>(To recognize the sales on account)</em>

Collections on account:

Debit Cash                                                      $100,000

Credit Accounts receivable                           $100,000

<em>(To recognize collections on account)</em>

Write-off:

Debit Allowance for doubtful accounts            $3,960

Credit Accounts receivable                               $3,960

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