Answer: In January, when the products are delivered.
Answer:
The company's cost of preferred stock for use in calculating the WACC is 9.65%
Explanation:
For computing the cost of preferred stock, the following formula should be used which is shown below
= Annual dividend based on preferred stock ÷ (Price per share × Flotation cost)
where,
Flotation cost = 1- rate
= 1- 4% = 0.96
= $9.50 ÷ ($102.50 × 0.96)
= $9.50 ÷ $98.4
= 9.65%
The flotation cost should be deducted because it is a one time expense. Thus, it would be minus from price per share.
Hence, the company's cost of preferred stock for use in calculating the WACC is 9.65%
Answer: The constant growth model can be used if a stock's expected constant growth rate is less than its required return.
Explanation:
The Constant Growth Model is a stock valuation method.
It assumes that a company's dividends are increasing at a constant growth rate indefinitely.
Formula: Current price = (Next dividend the company is to pay) ÷ (required rate of return for the company - expected growth rate in the dividend.
When expected constant < required return, then the constant growth model can be used.
Hence, the statement is true about the constant growth model :
The constant growth model can be used if a stock's expected constant growth rate is less than its required return.
Answer:
61.09 %
Explanation:
For computing the retention ratio we need to do the following calculations
Beginning Retained earnings = $4,925
And,
Net Income = $938
So, before dividend Retained earnings is
= $4,925 + $938
= $5,863
Now the total amount paid is
= before dividend Retained earnings - ending retained earnings
= $5,863 - $5,498
= $365
Now
The Dividend payout ratio is
= Dividend paid ÷ Net Income
= $365 ÷ $938
= 0.389126
And, finally
Retention ratio is
= 1 - Dividend payout ratio
= 1 - 0.389126
= 0.610874 or 61.09 %
