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Svet_ta [14]
3 years ago
7

g ABC common stock is expected to have extraordinary growth in earnings and dividends of 21% per year for 2 years, after which t

he growth rate will settle into a constant 4%. If the discount rate is 14% and the most recent dividend was $4, what should be the approximate current share price (in $ dollars)
Business
1 answer:
inna [77]3 years ago
3 0

Answer: $49.87

Explanation:

Based on the information given,

D1 = $4 × (100% + 21%) = $4 × 1.21 = $4.84

D2 = $4.84 × 1.21 = $5.8564

Value after year 2 will be:

= (D2 × Growth rate) / (Discount rate -Growth rate)

= ($5.8564 × 1.04) / (0.14 - 0.04)

= $6.09/0.1

= $60.9

Then, the current share price will be:

= 4.84/1.14 + 5.8564/1.14² + 60.9/1.14³

= 4.25 + 4.51 + 41.11

= $49.87

You might be interested in
Makers Corp. had additions to retained earnings for the year just ended of $261,000. The firm paid out $194,000 in cash dividend
gladu [14]

Answer:

a. $3.5 per share

b. $1.49 per share

c. $38.38 per share

d. 1.93 times

Explanation:

The computation is shown below:

a. Earning per share = (Net income) ÷ (Number of shares)

where,

Net income =  Additions to retained earnings + cash dividends

                    = $261,000 + $194,000

                    =  $455,000

So, the earning per share equal to

= $455,000 ÷ 130,000 shares

= $3.5 per share

b. Dividend per share = (Total dividend) ÷ (number of shares)

= ($194,000) ÷ (130,000 shares)

= $1.49 per share

c. Book value per share = (Total equity) ÷ (number of shares)

= ($4,990,000) ÷ (130,000 shares)

= $38.38 per share

d. Market to book ratio = (Market price per share) ÷ (book value per share)

= $74 ÷ $38.38

= 1.93 times

7 0
3 years ago
Linda and her mom want to start a company selling homemade brownies to large supermarket chains. To get started, they have creat
kirill [66]

Answer:

server

Explanation:

According to my research on information technology and business structures, I can say that based on the information provided within the question in this situation they do not need a server for their business. A server is a separate computer hardware that manages a database and allows easy access to the data. Most business need one especially when running a website but since Linda and her mom are working from their basement and are okay with their computers then they will not need a server.

I hope this answered your question. If you have any more questions feel free to ask away at Brainly.

6 0
3 years ago
Supplemental liquidity providers (slps) trade securities on behalf of:
ivanzaharov [21]

SLPS trade securities on their own behalf (not for someone else).

5 0
3 years ago
What is primary socialization​
Ostrovityanka [42]

Answer:

Primary socialization occurs early in a child's life and is primarily due to the influence of family and close friends. Through primary socialization, a child learns basic societal norms and customs. Toilet training is an example of primary socialization.

Explanation:

8 0
2 years ago
According to the Bureau of Economic​ Analysis, during the recession of 2007minus​2009, household saving as a fraction of disposa
luda_lava [24]

Answer:

A) decrease MPC​, increase MPS​, and decrease the multiplier so that changes in planned investment will have a smaller impact on equilibrium output.

Explanation:

When you receive money, e.g. get paid by your employer, the first thing you do is pay for your basic necessities which are classified as autonomous spending. Then hopefully you will have some money left which is classified as disposable income. You can do two things with your disposable income, either spend it or save it.

The proportion that you spend is called the marginal propensity to consume (MPC) and the remaining part that you save is called the marginal propensity to save (MPS). If the MPS was 1% in 2007 and increased to 5% in 2009, then the MPC was 0.99 in 2007 and 0.95 in 2009.

The formula to calculate the economic multiplier is 1 / MPS:

  • the economic multiplier in 2007 = 1 / 1% = 100
  • the economic multiplier in 2009 = 1 / 5% = 20
6 0
2 years ago
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