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3 years ago

Use the information about Company X below to help answer this question:

Business

1 answer:

Harman [31]3 years ago

5 0

Answer:

b. $12.67

Explanation:

The value of the company is the present value of its future dividends payments discounted at the company's cost of equity.

Year 1 dividend=current year dividend*(1+12%)

Year 1 dividend=$60m*(1+12%)=$67.20m

Year 2 dividend=$67.20m*(1+12%)=$75.26m

Year 3 dividend=$75.26m*(1+12%)=$ 84.30m

Year 4 dividend=$ 84.30m*(1+12%)=$ 94.41m

Year 5 dividend=$ 94.41m*(1+12%)=$105.74m

the terminal value of dividends=Year 5 dividend*(1+terminal growth rate)/(cost of equity)

the terminal value of dividends=$105.74m*(1+8%)/(16%-8%)=$1427.49m

value of the company=$67.20/(1+16%)^1+$75.26/(1+16%)^2+$ 84.30/(1+12%)^3+$ 94.41/(1+16%)^4+$105.74/(1+16%)^5+$1427.49/(1+16%)^5

value of the company=$956.00 m

value of one share=$956.00 m/75m=$12.75(the correct option is $12.67 the difference is due to rounding error)

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(Document A, provided by the website "Ducksters" on its history category. https://www.ducksters.com/history/islam/ )

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(Document A, provided by the website "Ducksters" on its history category. https://www.ducksters.com/history/islam/

Document B, provided by the website "Khanacademy". https://www.khanacademy.org/humanities/world-history/medieval-times/spread-of-islam/a/the-rise-of-islamic-empires-and-states)

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Answer:

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Contribution margin per unit = Sales per unit - [Direct material per unit + Direct labor per unit + Variable selling cost per unit]

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