1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
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.

You might be interested in
Masterlink Co., in applying the lower of cost or market method, reports its inventory at net realizable value. Which of the foll
nasty-shy [4]

Answer:A. Cost is greater than net realisable value(NRV)

Explanation:

An inventory should not be higher than the price its sale or use and this requires the comparison of inventory cost to it's ( NRV) and whichever is lower will be used as cost of inventory

NRV= Sales price less cost to completion and less estimated cost necessary to make the sales.

4 0
3 years ago
Stickel Company has the following sales​ budget: Month Cash Sales Credit Sales September ​$100,000 ​$200,000 October ​125,000 ​1
NISA [10]

Answer:

$182300

Explanation:

$182300

September credit sales  account for 40% of October accounts receivable since it will be paid one month following sales

October credit sales will account for 50% of account receivable since it is paid in the month of sale

the calculation has been done in the attachment for further explanation

     

Download docx
7 0
2 years ago
Two investors have the following pattern of expected returns (Before-Tax Cash Flows): Investment A: Y1: $5,000; Y2: $10,000; Y3:
Arada [10]

Answer:

Investment A = 11.089%

Investment B = 12.772%

Explanation:

The internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested.

The internal rate of return can be calculated using a financial calculator

For investment A,

Cash flow in year zero = -$110,000

Cash flow in year 1 = $5,000

cash flow in Y2 = $10,000

cash flow in Y3 = $12,000

Cash flow in Y4 = $15,000 + $120,000 = $135,000

Irr = 11.089%

For investment B,

Cash flow in year zero = -$120,000

Cash flow in year one = $2,000

cash flow inY2: $4,000

cash flow in Y3: $1,000

cash flow in Y4: $5,000 + $180,000 = $185,000

IRR = 12.772%

To find the IRR using a financial calacutor:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the IRR button and then press the compute button.

I hope my answer helps you

4 0
2 years ago
Hyde's Headphones sells deluxe headphones for $90 each. Unit variable expenses total $70. The breakeven sales in units is 1000 a
crimeas [40]

Answer:

0.7835 or 78.35%

Explanation:

Budgeted Sales = $90 per unit x 4620 units = $415,800

Break-Even Sales (Revenue) = 1000 units x $90 per unit = $90,000 units

Margin of safety = (Budgeted Sales - Break-Even Sales) ÷ Budgeted Sales

Margin of Safety = ($415,800 - $90,000) ÷ $415,800 = 0.7835 or 78.35%

3 0
3 years ago
What is VAT number?why we need this?
mina [271]

Answer:

what is a vat

Explanation:

7 0
2 years ago
Read 2 more answers
Other questions:
  • Filter the data in place so that only rows where the category value is meals and the cost value is greater than 20 are shown. th
    14·1 answer
  • Which statement best describes the ideal of loyalty to one's supervisor
    14·1 answer
  • If redbox is successful at attracting customers to a location, then mcdonald's could possibly realize
    10·1 answer
  • If a company is considering the purchase of a parcel of land that was acquired by the seller for $96,000 is offered for sale at
    8·1 answer
  • . Find the accumulated present value of a continuous income stream that earns 4.2% interest annually, when $4000 is deposited pe
    14·1 answer
  • The dollar value of all goods and services produced annually in the united states is called _____________
    8·1 answer
  • Teknosa, a multinational technology company sells computers, peripherals, and software overseas. The corporation separates its c
    11·1 answer
  • Green Field Potatoes Co. sells a by-product of its potato processing operation, called a filter cake, to area feed-lots as cattl
    9·1 answer
  • True or False: As the cost of capital decreases, so does the value of the firm. Group of answer choices True False
    12·1 answer
  • The united states is a major trader in ________, the fastest growing segment of world trade.
    7·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!