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lianna [129]
3 years ago
7

Crisp Cookware's common stock is expected to pay a dividend of $1.75 a share at the end of this year (D1 = $1.75); its beta is 0

.6. The risk-free rate is 5.8% and the market risk premium is 5%. The dividend is expected to grow at some constant rate, gL, and the stock currently sells for $80 a share. Assuming the market is in equilibrium, what does the market believe will be the stock's price at the end of 3 years (i.e., what is )? Do not round intermediate calculations. Round your answer to the nearest cent.
Business
1 answer:
DedPeter [7]3 years ago
4 0

Answer:

P3 = $96.9425 rounded off to $96.94

Explanation:

To calculate the market price of the stock three years from today (P3), we will use the constant growth model of DDM. The constant growth model calculates the values of the stock based on the present value of the expected future dividends from the stock. The formula for price today under this model is,

P0 = D1)  /  (r - g)

Where,

  • D1 is the dividend expected for the next period
  • g is the constant growth rate
  • r is the required rate of return on the stock

To calculate the price of the stock today (P0), we use the dividend expected for the next period (D1). So, to calculate the price at the end of 3 years (P3) we will use D4.

We first need to calculate r using the CAPM equation. The equation is,

r = rRF + Beta * rpM

Where,

  • rRF is the risk free rate
  • rpM is the market risk premium

r = 0.058 + 0.6 * 0.05  

r = 0.088 or 8.8%

Using the price formula for DDM above and the values for P0, D1 and r, we can calculate the g to be,

 

80 = 1.75 / (0.088 - g)

80 * (0.088 - g) = 1.75

7.04 - 80g = 1.75

7.04 - 1.75 = 80g

5.29/80 = g

g = 0.066125 or 6.6125%

We first need to calculate D4.

D4 = D1 * (1+g)^3

D4 = 1.75 * (1+0.066125)^3

D4 = 2.12061793907

Using the formula from DDM for P3, we can calculate P3 to be,

P3 =  2.12061793907 / (0.088 - 0.066125)

P3 = $96.9425 rounded off to $96.94

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ikadub [295]

Answer:

money deposited after end of 3rd year is $4877.75  

Explanation:

given data

initial amount  = $10000

rate = 5%

time = 3 year

after 7 year account balance = $20000

solution

we consider here money deposited after end of 3rd year is = x

first we get here compounded amount after 3 years as

compounded amount = initial amount × (1+r)^{t}    ................1

compounded amount = 10000 × (1+0.05)^{3}

compounded amount = $11576.25

so at 7 year account balance is

account balance = ( compounded amount + x )  × (1+r)^{t} ....................2

$20000  = ( $11576.25 + x ) × (1+0.5)^{4}  

solve it we get

x =  $4877.75  

so money deposited after end of 3rd year is $4877.75  

7 0
3 years ago
The net of a triangular prism is shown below.
harkovskaia [24]

The perimeter is the sum of all three sides of the triangle. In this case it is 18.

<u>Explanation:</u>

In geometry, a triangular crystal is a three-sided crystal; it is a polyhedron made of a triangular base, a deciphered duplicate, and 3 faces joining comparing sides. A privilege triangular crystal has rectangular sides, else it is angled.

A triangular prism has two triangular bases and three rectangular sides and is a pentahedron since it has five countenances. Outdoors tents, triangular rooftops and "Toblerone" wrappers - chocolate pieces of candy - are instances of triangular prisms.

6 0
3 years ago
Omega Inc. expects its net income to be $525,000 this year. The firm's dividend payout ratio is 60 percent. The firm is financed
REY [17]

Answer: $700,000

Explanation: Retained earnings is the amount of earnings left with the company after paying for dividends of common stockholders.

Retained earnings break even can be computed as follows :-

Break\:even=\frac{retained\:earnings}{equity\:ratio}

where,

retained earnings = net income (1- payout ratio)

                              = $525,000 (1 - 60%)

                              =  $210,000

therefore,

Break\:even=\frac{210,000}{0.3}

=$700,000

3 0
3 years ago
Agile project management involves ____ whereas traditional project management involves _______. Multiple Choice known and stable
Ainat [17]

Answer:

For comprehension purposes, I would write the question again with options attached below:

Agile project management involves ____ whereas traditional project management involves _______. Multiple Choice

a. known and stable scope, unknown requirements

b. high certainty, projects with unstable scope

c. projects with high predictability, project with unknown or unstable requirements

d. iterative and incremental delivery, upfront planning with high predictability

e. high uncertainty, projects with unknown requirements

The correct answer is option d. (iterative and incremental delivery, upfront planning with high predictability)

So, Agile project management involves <u>iterative and incremental delivery </u>whereas traditional project management involves <u>upfront planning with high predictability</u>.

Explanation:

Agile project management involves iterative and incremental delivery as Agile project management allows making changes to the product which then opens ways for iteration. Agile life cycles are composed of several iterations because of changes that might arise due to feedback during the production process of the project.

Traditional project management is highly predictable and it doesn't give room for changes as project cycles and stages are planned ahead. It's a rigid process.

5 0
2 years ago
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leva [86]

Answer:

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Breakeven point (units) = Fixed cost/ weighted average cost per unit

7 0
3 years ago
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