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oee [108]
3 years ago
5

Exercise Bicycle Company is expected to pay a dividend in year 1 of $1.20, a dividend in year 2 of $1.50, and a dividend in year

3 of $2.00. After year 3, dividends are expected to grow at the rate of 10% per year. An appropriate required return for the stock is 14%. The stock should be worth ________ today.
A) $33.00
B) $39.86
C) $55.00
D) $66.00
E) $40.68
Business
1 answer:
prisoha [69]3 years ago
3 0

Answer:

E.  $40.68

Explanation:

The computation of the stock worth today is shown below:

= (Dividend in year 1 ÷ 1 + required rate of return^number of years ) + (Dividend in year 2 ÷ 1 + required rate of return^number of years) + (Dividend in year 3 ÷ 1 + required rate of return^number of years)  + (Dividend in year 3 ÷ 1 + required rate of return^number of years) × (1 + growth rate) ÷ (required rate of return - growth rate)

= $1.2 ÷ 1.14 + $1.5 ÷ 1.14^2 + $2 ÷ 1.14^3 + $2 ÷ 1.14^3 × (1 + 10%) ÷ (14%-10%)

= $40.68

We simply applied the above formula

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Demand is variable and the company wants to build a safety stock into R. The average daily demand is 15, the lead time is 3 days
olya-2409 [2.1K]

Answer:

Average daily demand (d) = 15

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Reorder point = d × L + (Z × standard deviation of demand during lead time)

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3 years ago
Kelly Enterprises' stock currently sells for $35.25 per share. The dividend is projected to increase at a constant rate of 4.75%
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Answer:

The answer is option e. $44.46

Explanation:

The stock's  expected price after 5 years can be expressed as;

FV=CV(1+RRR)^n

where;

FV=future value of stock/expected price after 5 years

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In our case;

FV=unknown

CV=$35.25 per share

DGW=4.75%=4.75/100=0.0475

n=5 years

replacing;

FV=35.25(1+0.0475)^5

FV=35.25(1.0475)^5

FV=44.46

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