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daser333 [38]
3 years ago
9

The Back Room just paid an annual dividend of $1.50 a share. The firm expects to pay dividends forever and to increase the divid

end by 4.5 percent annually. What is the expected value of this stock six years from now if the discount rate is 12 percent
Business
1 answer:
umka2103 [35]3 years ago
6 0

Answer:

$26.05

Explanation:

according to the constant dividend growth model

price = d1 / (r - g)

d1 = next dividend to be paid = d0 x (1 + growth rate)

d0 = dividend that was just paid

r = cost of equity

g = growth rate

1.5 x (1.045^6) / 12 - 4.5 = $26.05

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Burka [1]

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The answer is A.

Explanation:

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3 0
3 years ago
A good that is both nonexcludable and nonrival-in-consumption is called a
Natalka [10]

Answer:

The answer is: Public goods

Explanation:

Public goods are provided by government entities and many times they are given for free or at a very low subsidized price. Public goods are non-excludable since everyone is entitled to use them (e.g. streetlight). Also public goods have no rivals that compete with them (e.g. law enforcement). Most of the public goods are free, but some exceptions exist like the US Mail.

4 0
3 years ago
Vroom Vacuums sells the Tornado vacuum cleaner. Each Tornado has a one-year warranty that covers any product defects. When custo
Alik [6]

Answer:

1. The obligation to transfer the vacuum cleaner in lieu of the price.

2. To honour one year warranty for any product defect that is part of the purchase contract and an inherent obligation.

Explanation:

The contract for purchase of a vacuum cleaner has two performance obligations;

1. The obligation to transfer the vacuum cleaner in lieu of the price.

2. To honour one year warranty for any product defect that is part of the purchase contract and an inherent obligation.

it may be noted that the extended warranty is a separate performance obligation as it can be purchased at the same time of original purchase or later and separate consideration is payable for that and there is no direct co-relation of the extended warranty obligation with the initial purchase.

5 0
3 years ago
The rate of return on the common stock of Flowers by Flo is expected to be 14% in a boom economy, 8% in a normal economy, and on
tatuchka [14]

Answer:

variance of the returns is 0.00144

Explanation:

Given data

boom economy = 14% = 0.14

normal economy = 8% = 0.08

recessionary economy = 2% = 0.02

boom probabilities = 20% = 0.20

normal probabilities = 60% = 0.60

recessionary probabilities = 20% =0.20

to find out

the variance of the returns

solution

we know variance of the returns is sum of standard deviation

expected return = boom return × boom probability

expected return boom = 0.14 × 0.20 = 0.028

expected return = economy × economy probability

expected return economy  = 0.08 × 0.60 = 0.048

expected return = recession × recession probability

expected return recession = 0.02 × 0.20 = 0.004

total expected return = 0.028 + 0.048 +  0.004 = 0.08

for boom economy

standard deviation = probability × (return - 0.08)²

standard deviation = 0.20 × (0.14 - 0.08)²   = 0.00072    ..................1

for normal economy

standard deviation = probability × (economy - 0.08)²

standard deviation = 0.60 × (0.08 - 0.08)²   = 0    ..................2

for recession economy

standard deviation = probability × (recession - 0.08)²

standard deviation = 0.20 × (0.02 - 0.08)²   = 0.00072    ..................3

variance of the returns is sum of standard deviation

variance of the returns = 0.00072 + 0 + 0.00072

variance of the returns is 0.00144

4 0
3 years ago
Which of the following statements about the recording of interest on notes receivable is correct?
Vadim26 [7]

Answer:

c. Interest on notes receivable is recognized when it is earned, which is not necessarily when the interest is received in cash.

Explanation:

Accrual principle of accounting is applied when it comes to recording of interest on notes receivable.

Accrual principle states that revenue or expense is recognized when it incurs or occurs not when it is paid or received.

Thus, Interest on notes receivable is recognized when it is earned, which is <u>not necessarily when the interest is received in cash</u>.

5 0
3 years ago
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