Using the Gordon Growth Model (a.k.a. Dividend Discount Model), the intrinsic value of a stock can be calculated, exclusive of current market conditions. In this model, the value of the stock is equated to the present value of the stock's future dividends.
<span>Value of stock (P0) = D1 / (k - g)
</span>where
D1<span> = </span><span>expected annual </span>dividend<span> per share in the following year </span>
<span>k = the investor's discount rate or required </span>rate of return
g = the expected dividend growth rate
<u>From the problem:</u>
The value of stock is $10.80
D1 is $0.40
g is 0.08
k is unknown
Solution:
Rearranging the equation for Gordon Growth Model to solve for k:
k = (D1/P0) + g
Substituting the variables with the given values,
k = (0.40/10.80) + 0.08
k = 0.1170
In percent form, this is
0.1170 * 100% = 11.70%.
Thus, the total rate of return on the stock is 11.70%.
Answer:
b. controlling the money supply.
Explanation:
The main function of the federal reserve is to control the money supply. This is accomplished through expansionary or contractionary monetary policies, in which the Federal Reserve influences the amount of economy in the economy by controlling its supply. An open marketing policy, ie selling and buying securities, for example, is used to control the amount of currency in the economy.
Answer:
Present value is nothing but how much future sum of money worth today. It is one of the important concepts in finance and it is a basis for stock pricing, bond pricing, financial modeling, banking, and insurance, etc. Present value provides us with an estimated amount to be spent today to have an investment worth a certain amount of money at a specific point in the future. Present value is also called a discounted value. It is an indicator for investors that whatever money he will receive today can earn a return in the future. With the help of present value, method investors calculate the present value of a firm’s expected cash flow to decide if a stock is worth to invest today or not.
The formula for calculating PV is shown below
PV = CF/ (1+r)n
Here ‘CF’ is future cash flow, ‘r’ is a discounted rate of return and ‘n’ is the number of periods or year.
Example
Let’s say that you have been promised by someone that he will give you 10,000.00 Rs 5 year from today and interest rate is 8% so no we want to know what the present value of 10,000.00 Rs which you will receive in future so,
PV = 10,000/ (1+0.08)5
PV = 6805.83 (To the nearest Decimal)
So present-day value of Rs 10,000.00 is Rs 6805.83
Explanation:
True you should always suspect it and try to fix it
D maybe sorry if wrong i am not the best in history
