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egoroff_w [7]
2 years ago
10

Presently, Stock A pays a dividend of $1.00 a share, and you expect the dividend to grow rapidly for the next four years at 20 p

ercent. Thus, the dividend payments will be Year Dividend 1 $1.20 2 1.44 3 1.73 4 2.07 After this initial period of super growth, the rate of increase in the dividend should decline to 2 percent. If you want to earn 6 percent on investments in common stock, what is the maximum you should pay for this stock?
Business
1 answer:
brilliants [131]2 years ago
8 0

Answer:

We should pay $46.50 for this stock.

Explanation:

The stock value is the present value of all the future dividends associated with the stock.

Following is the working to calculate the stock value.

Dividend

Year Dividend

_1 ____$1.20

_2 ___ $1.44

_3 ___ $1.73

_4 ___ $2.07

Use following formula to calculate the present value of all the dividends

Present value of Dividend = Dividend value x ( 1 + Expected interest rate )^numbers of years

Now calculate the present value of al the dividends

Year __Working ___________________________ Present values

_1 ____$1.20 x ( 1 + 6% )^-1 ____________________ $1.132

_2 ___ $1.44 x ( 1 + 6% )^-2 ____________________ $1.282

_3 ___ $1.73 x ( 1 + 6% )^-3 ____________________ $1.453

_4 ___ $2.07 x ( 1 + 6% )^-4____________________ $1.640

_5 to onward ___ [$2.07 / ( 6% - 2% )] x ( 1 + 6% )^-4 _ $40.991

Total _____________________________________$46.498

We should pay $46.50 for this stock.

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sesenic [268]
I believe the answer id D) all of the above.

the reason for this is because when you want to learn a skill you want to be able to actively know the skill and use it at will. you also need to be able to do it in an efficient manner and you also need to understand why you need this skill and why it is important for you to learn it.

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5 0
3 years ago
Read 2 more answers
The common stock of sweet treats is valued at $10.80 a share. the company increases its dividend by 8 percent annually and expec
N76 [4]
Using the Gordon Growth Model (a.k.a. Dividend Discount Model), the intrinsic value of a stock can be calculated, exclusive of current market conditions. In this model, the value of the stock is equated to the present value of the stock's future dividends. 

<span>Value of stock (P0) = D1 / (k - g)

</span>where
D1<span> = </span><span>expected annual </span>dividend<span> per share in the following year </span>
<span>k = the investor's discount rate or required </span>rate of return
g = the expected dividend growth rate 

<u>From the problem:</u>
The value of stock is $10.80
D1 is $0.40
g is 0.08

k is unknown

Solution:
Rearranging the equation for Gordon Growth Model to solve for k:

k = (D1/P0) + g

Substituting the variables with the given values, 

k = (0.40/10.80) + 0.08
k = 0.1170

In percent form, this is
0.1170 * 100% = 11.70%.

Thus, the total rate of return on the stock is 11.70%.
3 0
3 years ago
Phoebe, a sales representative, is so excited during her sales presentation that she does not hear the customer's question corre
Westkost [7]

Answer:

<u>Selective Perception </u>

Explanation:

Selective perception refers to a psychological state wherein, an individual perceives and comprehends only that information he/she finds desirable, thereby ignoring the rest of the information during communication.

So, any of the viewpoints or ideas which appear conflicting to one's own are ignored and discarded under such a psychological state.

In the given case, Phoebe got excited during her presentation that she missed out upon hearing customer's questions. In such a state of excitement, her mind only perceived what she desired, thereby ignoring anything which appeared undesirable.

So post providing inappropriate answers, she went on with her presentation , i.e she got carried away in excitement. Such psychological state indicates the operation of selective perception.

6 0
3 years ago
The four level pyramid model revolves around which aspect of an organization? The four-level pyramid model revolves around the _
Damm [24]

Answer:

Hierarchy, Information Systems

Explanation:

The pyramid model of four level in an organization is based on and is depends on the various levels of the hierarchy systems or management in the organization.

These four level is of different types of the Information System in the organization.

1. First level : It is also known as Strategic level or Executive Information Systems.

2. Second level : It is also know as Management Level  or the Decision Support Systems.

3. Third level : Another term is Management Level or Management Information Systems.

4. Fourth Level : It is called the Operational Level or the Transaction Processing Systems.

6 0
3 years ago
Within the relevant range of activity ______. variable costs do not change in total, only per unit fixed costs remain constant i
Vlad1618 [11]

Answer:

False

Explanation:

Within the relevant range of activities, total fixed costs remain constant and fixed costs per unit decrease as total output increases. Total variable costs vary depending on total output, but variable costs per unit should remain constant.

On a long term basis, all costs are variable, that is why it is important to consider the range of activities, i.e. output levels.

6 0
3 years ago
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