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s2008m [1.1K]
3 years ago
7

Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 24 percent for the next three years, with the growth

rate falling off to a constant 7 percent thereafter. If the required return is 11 percent, and the company just paid a dividend of $2.05, what is the current share price
Business
1 answer:
Licemer1 [7]3 years ago
3 0

Answer:

$84.18

Explanation:

The current share price can be determined using the two-stage dividend growth model.

In the two-stage dividend growth model, the first stage is characterised by high growth rate. In the second stage, the high growth rate falls to a steady or normal growth rate

dividend in Y1 = 2.05 x 1.24 = 2.54

dividend in Y2 = 2.05 x 1.24^2 = 3.15

dividend in Y3 = 2.05 x 1.24^3 = 3.91

Y3 = (3.91 X 1.07) / (0.11 - 0.07) = 104.59

Find the present value of these cash flows

(2.54 / 1.11) + (3.15 / 1.11²) + (3.91 / 1.11³) + (104.59/1.11³) = 84.18

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Answer:

If banks hold excess reserves, then the money multiplier will be smaller.

Explanation:

It is easier to understand using an example:

required reserve rate = 5%

money multiplier = 1 / 5% = 20

if $100 are injected in to the economy and they are deposited in the banking system, the money supply will increase by $100 x 20 = $2,000. But this calculation only works if banks lend 100% of the loanable funds, but if instead banks only lend $90, instead of $95 ($100 x 95%), then the money multiplier will be 1 / 10% = 10. In this case, the money supply will only increase by half

7 0
3 years ago
Radon Corporation manufactured 34 comma 10034,100 units during March. The following fixed overhead data pertain to​ March:
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Answer:

$38,750 Favorable

Explanation:

Fixed overhead absorption rate:

= Fixed Overhead Costs for March (static budget) ÷ Production(static budget)

= $387,500 ÷ 31,000

= 12.5 per unit

Fixed overhead production−volume ​variance:

= Amount actually applied - Amount budgeted

= (12.5 × 34,100) - $387,500

= $426,250 - $387,500

= $38,750 Favorable

                                                                                     

3 0
3 years ago
A research __________ is any material that can be used to locate information about a given topic.
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A research source or a research literature could specify to any material wherein it can be used to gather and locate information from a given subject or topic. In addition, the information gathered from these sources must be properly cited and paraphrased so as to avoid plagiarism.
7 0
3 years ago
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What is one key advantage to an employer-sponsored retirement plan?
irinina [24]

Answer:

An employee's funds grow tax deferred in the plan. They don't pay taxes on investment earnings until they withdraw their money from the plan. An employee will pay income taxes and possibly an early withdrawal penalty if they withdraw their money from the plan.

Explanation:

I hope this helps. :D

8 0
2 years ago
I collect baseball cards. I do not sell any cards and I let my collection grow. The number of cards in my collection grows at 5%
Elena L [17]

Answer: 14.4 years

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You can use the Rule of 72 to find out.

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The formula is:

= 72 / Growth rate in whole numbers

= 72 / 5

= 14.4 years

Approximately 14.4 years

7 0
2 years ago
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