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arlik [135]
3 years ago
8

Paunch Burger has a beta of 1.2 and just paid a dividend of $2.30 that is expected to grow at 3.2%. If the risk-free rate is 3%

and the market risk premium is 6%, what should be the price of the stock
Business
1 answer:
AlekseyPX3 years ago
6 0

Answer:

P0 = $33.9085 rounded off to $33.91

Explanation:

Using the constant growth model of dividend discount model, we can calculate the price of the stock today. The DDM values a stock based on the present value of the expected future dividends from the stock. The formula for price today under this model is,

P0 = D0 * (1+g) / (r - g)

Where,  

D0 is the dividend paid  recently

D0 * (1+g) is dividend expected for the next period /year

g is the growth rate

r is the required rate of return or cost of equity

First we need to calculate the required rate of return or r using the CAPM.

Using the CAPM, we can calculate the required/expected rate of return on a stock. This is the minimum return required by the investors to invest in a stock based on its systematic risk, the market's risk premium and the risk free rate.  

The formula for required rate of return under CAPM is,

r = rRF + Beta * rpM

Where,  

rRF is the risk free rate

rpM is the market risk premium

r = 0.03 + 1.2 * 0.06

r = 0.102 or 10.2%

Now using the formula for P0 under the constant dividend growth model,

P0 = 2.3 * (1+0.032)  /  (0.102 - 0.032)

P0 = $33.9085 rounded off to $33.91

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Ugo [173]

Answer: These individuals must enter into a <u>limited partnership.</u>

When a partnership has at least one General Partner and one Limited Partner, the partnership is called a limited partnership.

The general partners bear all the risk of the partnership and are jointly and severally liable for the debts of the partnership.

The limited partner contributes funds, but in not involved in the management of the partnership.

As a result he is not personally liable for the debts of the partnership.

However, he is entitled to a dividend by virtue of his investment. The nature of this dividend is defined and the terms are spelled out clearly in the partnership agreement.

7 0
2 years ago
Explain where each of the following items would appear on a multiple-step income statement.
netineya [11]

Answer:

a. Gain on disposal of plant assets will appear under Other Revenues and Gains.

b. Cost of goods sold will still appear under Cost of Goods Sold.

c. Depreciation expense will appear under Operating Expense.

d. Sales returns and allowances will appear under Sales Revenue.

Explanation:

A multiple-step income statement is an income statement in which the net income reported on the bottom line is calculated using multiple subtractions.

Each of the following items would appear on a multiple-step income statement as explained below.

a. Gain on disposal of plant assets

This will appear under Other Revenues and Gains.

Other Revenues and Gains are revenues from auxiliary operations and gains unrelated to the company's operations, which are reported in the non-operating activities section of the income statement. The following are some of them: Interest from receivable, marketable securities, Gains on Disposal of Plant Assets, etc.

b. Cost of goods sold

This will still appear under Cost of Goods Sold.

Cost of Goods Sold are the direct costs of manufacturing the commodities that a business sells. This figure covers the direct cost of the materials and labor that went into making the good. It does not include indirect costs like distribution and sales force expenditures.

c. Depreciation expense

This will appear under Operating Expense.

Operating Expense is a cost that a company incurs as part of its routine operations. Examples of this include rent, marketing, payroll, insurance, monies allocated for research and development, depreciation expense, and among others.

d. Sales returns and allowances

These will appear under Sales Revenue.

This is the amount of money a corporation makes through selling things or providing services minus sales returns allowances and sales discounts.

4 0
2 years ago
For most people, the purchase of a Ford automobile would employ which type of consumer decision making?
Nostrana [21]

Answer:

Extended decision making

Explanation:

Extended decision making is the decision making which involve the very high level of the purchase, an internal as well as extensive information search which is followed by the complex computation of the alternatives available and thorough evaluation is taken place when the purchase will take place.

So, for most of the people, when the decision of purchase is to be made like for the Ford automobile, the people will choose the extended decision making as it is expensive, infrequently purchased products.

5 0
3 years ago
Target donates millions of dollars each year in education-related grants for arts and cultural experiences, field trips, and rea
melomori [17]

Answer:

<u><em>Philanthropy</em></u>

Explanation:

Target donates millions of dollars each year in education - related grants for arts and cultural experiences , field trips , and reading programs , as well as grants to promote public safety . This is an example of<u> Philanthropy.</u>

Philanthropy means giving things like money or any kind of gift to people for are need of that.

Philanthropy is good , it helps in solving the social problem .

There is a little difference is charity and Philanthropy , that is , Charity is short - term while Philanthropy is long - term. Charity tends to be emotional and have immediate response on the other hand philanthropy is more strategical .

<em>Philanthropy always focuses on eliminating social problem.</em>

8 0
3 years ago
In this market research step, the data are compiled, studied, and interpreted:
Nuetrik [128]

Answer:

Data Preparation/Assembling Analysis

Explanation:

In the data analysis step of Market Research, the data collected in the research are put together, arranged in an organized form, put through detailed review, properly verified by an valid process, interpreted and expounded

In the preparation and analysis step, the data is formatted by editing, coding, transcription and verification to enable accurate analysis of the collected information. Data validation process is put in place to ensure that the proper data that quantifies the desired metrics are obtained.

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4 0
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