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3 years ago

Using the dividend growth model, explain why a firm would be hesitant to reduce the growth rate of its dividends.

Business

1 answer:

Anna007 [38]3 years ago

4 0

Answer:

If a firm decreases its sustainable growth rate (g), the price of their stock will probably decrease. I will use the following example:

P₀ = Div₁ / (Re - g)

Div₁ = $2
Re = 12%
g = 5%

P₀ = $2 / (12% - 5%) = $28.57

if the growth rate g decreases to 2%, and the rest remains unchanged, then

P₀ = $2 / (12% - 2%) = $20

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3 years ago

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. A tomato farmer has used direct distribution to sell to local consumers through an area farmers' market. Last year, she sold 4

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3 years ago

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2 years ago

Which of the following events would cause GDP for 2019 to increase?

Dominik [7]

Answer:

C In May 2019James buys a 2019 Honda Accord .

Explanation:

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3 years ago

1. Based on the following data, would you recommend buying or renting? (LO 7.1) Rental Costs Buying Costs Annual rent, $7,380 An

UNO [17]

Answer:

Explanation:

a. Let calculate the cost to rent

Buying Costs equal $7,380

Rent equal $9,800

Mortgage payments equal 145 Insurance equal $2,830

Since taxes, insurance, maintenance 39 Interest lost on security deposit and 270 Interest lost on down payment, with a closing costs of -225

Growth in equity equal 1,700

Annual appreciation equal 2,681

Tax savings for mortgage interest of 498

Tax savings for property taxes

$ 7,564

Total rental costs

$ 7,796 Total buying costs

Interest lost on security deposit = $650 × 0.06 = $39

Interest lost on down payment and closing cost = $4,500 × 0.06 = $270

Tax savings for mortgage interest = $9,575 × 0.28 = $2,681

Tax savings for property taxes = $1,780 × 0.28 = $498

(b) cost of renting is less than cost of buying, if cost is the only criteria, renting is better.

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3 years ago