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Pavlova-9 [17]
2 years ago
12

Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends.

However, investors expect Computech to begin paying dividends, beginning with a dividend of $0.50 coming 3 years from today. The dividend should grow rapidly - at a rate of 49% per year - during Years 4 and 5; but after Year 5, growth should be a constant 9% per year. If the required return on Computech is 16%, what is the value of the stock today? Round your answer to the nearest cent. Do not round your intermediate calculations.
Business
1 answer:
Arturiano [62]2 years ago
5 0

Answer: $8.81

Explanation:

To solve this, add the present values of the dividends from years 3, 4 and 5 and then add the present value of the terminal value of the stock at year 5.

Year 3 dividend = $0.50

Year 4 dividend = 0.50 * (1 + 49%) = $0.745

Year 5 dividend = 0.745 * 1.49 = $1.11005

= Dividend in year 3 / (1 + required rate of return)³ + Dividend in year 4 / (1 + required rate of return)⁴ + Dividend in year 5 / (1 + required rate of return)⁵ +   (Dividend in year 5 * (1 + growth rate) / ( required rate of return - growth rate ) ) / (1 + required rate of return)⁵

= 0.5 / 1.16³ + 0.745/1.16⁴ + 1.11005/1.16⁵ + ( 1.11005 / (16% - 9%)) / 1.16⁵

= $8.81

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In 1969, Malcolm bought a Pontiac Firebird for $2,500. If the price index was 36.7 in 1969 and the price index was 235 in 2013,
Ilya [14]

Answer:

Option (d) $16,008.17

Explanation:

Data provided in the question:

The price of the Firebird in 1969 = $2,500

Price index in 1969 = 36.7

Price index in 2013 = 235

Now,

The price of the Firebird in 2013 dollars will be

= [ Price index in 2013 ÷ Price index in 1969 ] × The price of the Firebird in 1969

= [ 235 ÷ 36.7 ] × $2,500

= 6.40327 × $2,500

= $16,008.17

Hence,

Option (d) $16,008.17

6 0
2 years ago
Kaplan Corp. is evaluating the purchase of a small firm, Pahl Corp., which manufactures ornamental gadgets, products involving a
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Answer: The correct answer is "A. Question marks".

Explanation: This firm would be placed in the "Question marks" category of bussiness in the BCG matrix.

The questions are those that still do not know what their evolution will be (usually those that are in the development or launch phase), but which can become star products.

7 0
2 years ago
Noreen is deciding whether to purchase Sport-Ease sneakers or a store brand. She has purchased other Sport-Ease shoes in the pas
Masja [62]

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C. greater perceived value.

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6 0
3 years ago
The consumer price index for Planet Econ consists of only two items: books andhamburgers. In 2010, the base year, the typical co
Stels [109]

Answer:

The consumer price index for 2015 on Planet Econ is 1.25

Explanation:

The formula for computing the consumer price index is given below:

= (Total cost in the current year) ÷ (total cost in the base year)

where,

Total cost in the current year equals to

= (Base year book quantity × current year book price) + (base year hamburgers quantity × current year hamburgers price)

= 10 books × $30 + 25 hamburgers × $3

= $300 + $75

= $375

we use the base year quantity for computing the total cost for the current year.

And, the Total cost in the base year equals to

= (Base year book quantity × base year book price) + (base year hamburgers quantity × base year hamburgers price)

= 10 books × $25 + 25 hamburgers × $2

= $250 + $50

= $300

Now put these values to the above formula

So, the answer would be

= $375 ÷ $300

= 1.25

Hence, The consumer price index for 2015 on Planet Econ is 1.25

4 0
3 years ago
Classify each characteristic as relating to a fixed exchange rate regime or a flexible, or floating, exchange rate regime.a. sig
marshall27 [118]

Answer:

(A) Fixed exchange rate regime

(B) Fixed exchange rate

(C) Flexible exchange rate

(D) Flexible exchange rate

Explanation:

(A) A fixed exchange rate regime signals a commitment not to engage in inflationary policies. NOTE: Inflationary policies are a type of monetary policies (the type used to pump money into the economy). See answer (D).

(B) A fixed exchange rate regime provides certainty about the value of a currency, for example, when the exchange rate between Philippine Pesos and Arab Emirate Dollars is fixed at 10PHP - 1AED, traders in this currency will be certain that at any planning time in business, investment or consumption, 10 PHP will be equal to 1 AED.

(C) Flexible exchange rate distorts incentives for importing and exporting goods and services. What are these incentives? On the government side, it is either the revenue that government makes from import tariffs and duties OR the subsidy that government pays on exported goods. On the importer/exporter side, it is the custom duties paid by importers on imported goods AND the subsidies enjoyed by exporters on exported products. A flexible exchange rate distorts or fluctuates these incentives.

(D) Flexible exchange rate enables policy makers to engage in monetary policy. Now, monetary policy is a tool used by ministers of finance or policy makers in every country; to regulate (increase or reduce or bring back to normal) spending and investment. If the exchange rate between or among countries were fixed, monetary policies would have limited application or usefulness when implemented. A flexible exchange rate encourages and enables engagement in or use of monetary policies.

8 0
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