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vredina [299]
3 years ago
13

A stock is currently selling at 80 per share to yield an annual nominal interest rate of 10%, compounded semi-annually. The stoc

k is expected to pay dividends at the end of each year forever. The next dividend (payable one year from now) is 2 and is expected to increase at a rate of X% per year. Calculate X.
Business
1 answer:
Leni [432]3 years ago
5 0

Answer:

X is 7.75%

Explanation:

The yield on a stock is determined by dividend and stock appreciation in the market.

First, we need to calculate the effective annual yield

Effective annual yield = ( 1 + Nominal interest rate/periods per year )^numbers of compounding periods annually - 1

Effective annual yield = ( 1 + 10%/2 )^2 - 1

Effective annual yield = 1.1025 - 1

Effective annual yield = 0.1025

Effective annual yield = 10.25%

Now use the following formula to calculate the X

Price of the share = Expected dividend / ( Effective annual yield - Growth rate )

Where

Price of share = 80

Expected Dividend = 2

Effective annual yield = 10.25%

Growth rate = X

Placing values in the formula

80 = 2 / ( 10.25% - X )

0.1025 - X = 2 / 80

0.1025 - X = 0.025

-X = 0.025 - 0.1025

-X = -0.0775

X = 0.0775

X = 7.75%

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2 years ago
Apple hosts a large number of forums, which become customers' primary source of product information after warranties expire and
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D. online communities

Explanation:

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3 years ago
Question #3
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It is a trade surplus
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3 years ago
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On August 1, Steffen Computers, Inc. purchased thirty computer chips on account from a company located in Taiwan for 520,000 Tai
Vsevolod [243]

Answer:

(C) debit to Foreign-Currency Transaction Loss-$1040

Explanation:

Foreign currency related Financial assets and financial liabilities are usually revalued with any difference as a result of the exchange rates posted as a gain or loss in the income statement.

On transaction date, cost of assets

= 520000 * $0.034

On payment date, the amount paid

= 520000 * $0.036

The amount paid is higher than the liability recorded before hence the difference is recognized as a loss on foreign exchange.

= 520000 * $0.036 - 520000 * $0.034

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While at the first meeting of a new networking group, the leader announces that everyone will be asked to stand and make a few r
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I will tell him

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head high

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2 years ago
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