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DerKrebs [107]
3 years ago
8

Countess Corp. is expected to pay an annual dividend of $4.57 on its common stock in one year. The current stock price is $73.59

per share. The company announced that it will increase its dividend by 3.70 percent annually. What is the company's cost of equity
Business
2 answers:
nydimaria [60]3 years ago
7 0

Answer:

The company's cost of equity is 9.91%

Explanation:

The cost of Equity is the investor's required return and according to the given information D1 =$4.57, SP =$73.59, g = 3.70% The DDM model which derives the current price of the stock by discounting it future dividends will be used in this calculation

SP = D1/ r - g

73.59 = 4.57/r -3.70%

73.59*(r-3.70%) =4.57

73.59*(r-3.70%)/73.59=4.57/73.59

r- 3.70% = 4.57/73.59

r = 4.57/73.59 +3.70

r =0.0991/9.91%

   

Serjik [45]3 years ago
3 0

Answer:

The cost of equity is 9.91%

Explanation:

The constant growth model of the DDM is used to calculate the price of the share or the fair value per share based on a constant growth in dividends and the required rate of return which is also known as cost of equity.

Plugging in the available values in the formual we can calculate the cost of equity or the required rate of return.

73.59 = 4.57 / (r - 0.037)

73.59 * (r - 0.037) = 4.57

73.59r - 2.72283 = 4.57

73.59r = 4.57 + 2.72283

r = 7.29283 / 73.59

r = 0.0991 or 9.91%

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Answer:

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The effective annual interest rate is <u>the interest rate that is actually earned or paid on an investment, loan</u> or other financial product.

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Wyatt Oil is contemplating issuing a 20-year bond with semiannual coupons, a coupon rate of 7%, and a face value of $1000. Wyatt
enyata [817]

Complete question:

Security Term (years) Yield (%)

Treasury 2 0 5.5%

AAA Corporate 2 0 7.0%

BBB Corporate 20 8.0%

B Corporate 2 0 9.6%

Wyatt Oil is contemplating issuing a 20-year bond with semiannual coupons, a coupon rate of  7%, and a face value of $1000. Wyatt Oil believes it can get a BBB rating from Standard and  Poor's for this bond issue. If Wyatt Oil is successful in getting a BBB rating, then the issue price  for these bonds would be closest to:

A) $891 B) $901 C) $1,000 D) $800

Answer:

If Wyatt Oil is successful in getting a BBB rating, then the issue price  for these bonds would be closest to:  $901

Solution:

Given,

FV = 1000,

N = 40,

I = 4,

PMT = 35

Compute PV ,

PV = FV \frac{1}{( 1+r)^{n} }

PV = 901.04

If Wyatt Oil is successful in getting a BBB rating, then the issue price for these bonds would be closest to: $901

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yanalaym [24]

Answer:

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Since in the question the GDP reported in quarter 3 was $12 billion and the same is to be considered as a GDP because it reflected the market value of all final goods and services

Therefore, the correct option is c.

3 0
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