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Zanzabum
3 years ago
14

Springboro Tech is a young start-up company. No dividends will be paid on the stock over the next 15 years, because the firm nee

ds to plow back its earnings to fuel growth. The company will pay a $15 per share dividend in 16 years and will increase the dividend by 4 percent per year thereafter. What is the current share price if the required return on this stock is 8 percent
Business
1 answer:
maxonik [38]3 years ago
7 0

Answer:

The price of stock today is $118.22

Explanation:

To calculate the price today, we will use the dividend growth model and discount back the cashflows. The first dividend will be received in year 16 so $15 received in year 16 will be dicounted back to year zero at 8% cost. Besides after that the growth rate becomes constant so the terminal value will be calculated at the end of year 16 and will be discounted back to year zero also using same 8% discount rate and 16 year as power.

P0 = 15 / (1+0.08)^16 + [15*(1+0.04) / 0.08-0.04] / (1+0.08)^16

P0 = $118.22

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Question Workspace Check My Work You have savings of $100. You plan to save another $100 at the beginning of each year for 5 yea
kolezko [41]

Answer:

Total sum due after 5 years = $2,626.9

Explanation:

The sum of 100 that is invested per period(quarterly)for certain number of period is referred is referred  to as an annuity. The total sum that the investment would worth after if interest rate is compounded quarterly for the investment period is referred to as the future value of annuity.

The total sum due can be computed in two stages. The first is to determined how much the annuity investment would worth after 5 years. And the second is to determine how much the single sum of $100 would worth after 5 years.

This done as follows:

The future Value of annuity is computed using the formula below:

FV = A×( (1+r)^n - 1)/r)× (1+r)

A- periodic cash flow invested

r- interest rate per period

n- number of period

FV = future value

r= 8/4= 2%

n= 5×4= 20

FV= 100×(1.02^20 -1)/0.02)×(1.02)= 2478.3

Step 2 : The future value of the value of the Initial lump sum of $100 already existing

FV= A× (1+r)∧n

= 100×(1.02)^20 =148.59

The sum due after the end of the investment period =

2478.3 + 148.59=$2,626.9

Total sum due after 5 years = $2,626.9

7 0
3 years ago
Asa works as an order-taker at Simply Salads, a fast-food restaurant. He does not cook food, or even package the final order, bu
Softa [21]

Answer:

Hierarchical organizational structure

Explanation:

Hierarchical organizational structure is the type of organization structure where the level of management are divided according to function and services they are performing.

though, the level of management is divided into top level management (the planning executives: boards of member, executives, shareholders), middle (determined how the plan and organization goal will be implemented: managers) and lower level (implement the plan: the supervisor, foreman or shift manager), then will have the workers.

this management system involves decision and authority being transfer from level to level.

in the case: Asa is in the worker level, while her shift manager is in the lower level and general manager is in the middle level.

6 0
3 years ago
Suncoast Healthcare is planning to acquire a new x ray machine that costs $200,000. The business can either lease the machine us
miskamm [114]

Answer:

a. what is Suncoast's current debt ratio?

debt ratio = liabilities / equity = $400,000 / $600,000 = 0.67

b. what would the new debt ratio be if the machine were leased? if it is purchased?

if X-ray machine is leased, debt ratio = $400,000 / $600,000 = 0.67

if X-ray machine is purchased, debt ratio = $600,000 / $600,000 = 1

c. is the financial risk of the business different under the two acquisition alternatives?

yes, because a higher debt ratio means that the company is under a higher financial stress since it has more outstanding loans, which increases the financial risk.

7 0
3 years ago
Stranahan Company allocates overhead based on machine hours. Estimated overhead costs for the year total $217,000 and the compan
castortr0y [4]

Answer:

Allocated MOH= $7,000

Explanation:

<u>First, we need to calculate the predetermined overhead rate:</u>

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= 217,000 / 31,000

Predetermined manufacturing overhead rate= $7 per machine hour

<u>Job 45:</u>

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Allocated MOH= 7*1,000

Allocated MOH= $7,000

5 0
3 years ago
Foreign aid is intended to result in what?
nalin [4]
<span>Foreign aid is intended to result in development.

</span>
5 0
3 years ago
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