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Hoochie [10]
3 years ago
6

S&P Enterprises will pay an annual dividend of $2.08 a share on its common stock next year. The firm just paid a dividend of

$2.00 a share and adheres to a constant rate of growth dividend policy. What will one share of S&P common stock be worth ten years from now if the applicable discount rate is 8 percent?
Business
1 answer:
MrMuchimi3 years ago
3 0

Answer:

The price of the stock will be $76.97

Explanation:

We first need to determine the constant growth rate on dividends.

Growth rate (g) = (D1 - D0) / D0  

Growth rate (g) = (2.08 - 2.00) / 2   =  0.04 or 4%

To calculate the price of a stock today whose dividends are growing at a constant rate, we use the constant growth model of DDM. The price of the stock today under this model is,

P0 = D1 / ( r - g )

Where,

  • D1 is the dividend expected for the next year
  • r is the required rate of return
  • g is the growth rate

Thus, to calculate the price of the stock today at t=10, we will use the dividend expected in Year 11 or D11.

D11 = D0 * (1+g)^11

Where P10 is the price 10 years from today.

P10 = 2 * (1+0.04)^11 / (0.08 - 0.04)

P10 = $76.97

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Assets, costs, and current liabilities are proportional to sales. Long-term debt and equity are not. The company maintains a con
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Missing information:

<u>Balance sheet </u>

Current assets $3,300 Current liabilities $2,200

Fixed assets       $10,200 Long-term debt $3,750

                          Equity                 $7,550

Total               $13,500 Total               $13,500

<u>Income statement</u>

Sales $6,600

Costs $5,250

Taxable income $1,350

Taxes (34%) $459

Net income $891

Answer:

$1,350.60

Explanation:

external financing needed = [(assets / sales) x ($ Δ sales)] - [(current liabilities / sales) x ($ Δ sales)] - [profit margin x forecasted sales x (1 - dividend payout ratio)]

EFN = [($13,500 / $6,600) x $1,188] - [($2,200 / $6,600) x $1,188] - [(0.135 x $7,788 x (1 - 0.35)]

EFN = $2,430 - $396 - $683.40 = $1,350.60

External financing refers to the amount of money that a business must either borrow or raise capital in order to keep operating as they have been doing so.

8 0
3 years ago
Eric has plans to go to a play and already has a $50 nonrefundable, nonexchangeable, and nontransferable ticket. Now Ginny, whom
KengaRu [80]

Answer:

Correctly ignored a sunk cost.

Explanation:

In economics a sunk cost is one that an individual has already paid for and cannot recover. For example when payment is made for rent it is no longer recoverable.

In this instance Eric has already bought a $50 ticket that is nonrefundable, nonexchangeable, and nontransferable. This is a sunk cost.

Eric wants to go to the concert with Ginny who he wanted to date for a long time.

He will correctly ignore the sunk cost of going to the play because any more time spent on the play will not help recover the $50 already spent.

7 0
2 years ago
A company pays its employees $2,900 each Friday, which amounts to $580 per day for the five-day workweek that begins on Monday.
Readme [11.4K]

Answer:

$2,320

Explanation:

Calculation to determine what amount of salaries earned but unpaid at the end of the accounting period is:

Ending salaries earned but unpaid=$2,900-$580

Ending salaries earned but unpaid=$2,320

($2,900-580)

Therefore the amount of salaries earned but unpaid at the end of the accounting period is: $2,320

5 0
3 years ago
The difference between a secured loan and an unsecured loan is _____.
PSYCHO15rus [73]
D. a secured loan requires collateral and an unsecured loan does not
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n an elimination reaction, the non-preferred geometry in which the β hydrogen and the leaving group are on the same side of the
nasty-shy [4]

Answer:

Explanation:

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6 0
3 years ago
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