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expeople1 [14]
3 years ago
9

Xytex Products just paid a dividend of $2.27 per share, and the stock currently sells for $32. If the discount rate is 15 percen

t, what is the dividend growth rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Growth rate
Business
1 answer:
Minchanka [31]3 years ago
6 0

Answer:

g = 0.0738255 or 7.38255% rounded off to 7.38%

Explanation:

Using the constant growth model of dividend discount model, we can calculate the price of the stock today. The DDM values a stock based on the present value of the expected future dividends from the stock. The formula for price today under this model is,

P0 = D0 * (1+g) / (r - g)

Where,

  • D0 * (1+g) is dividend expected for the next period /year
  • g is the growth rate
  • r is the required rate of return or cost of equity

Plugging in the values of P0, D0 and r in the formula, we can calculate the value of g to be,

32 = 2.27 * (1+g) / (0.15 - g)

32 * (0.15 - g) = 2.27 + 2.27g

4.8 - 32g = 2.27 + 2.27g

4.8 - 2.27 = 2.27g + 32g

2.53 = 34.27g

g = 2.53 / 34.27

g = 0.0738255 or 7.38255% rounded off to 7.38%

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Answer:

a. If Quisco develops the product in house, its earnings would fall by $500 × (1 – 35%) = $325 million.  With no change to the number of shares outstanding, its EPS would decrease by   to $0.75. (Assume the new product would not change this year’s revenues.)

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Explanation:

a. If Quisco develops the product in house, its earnings would fall by $500 × (1 – 35%) = $325 million.  With no change to the number of shares outstanding, its EPS would decrease by   to $0.75. (Assume the new product would not change this year’s revenues.)

b. If Quisco acquires the technology for $900 million worth of its stock, it will issue $900 / 18 = 50 million new shares.  Since earnings without this transaction are $0.80 × 6.5 billion = $5.2 billion, its EPS with the purchase is .

c. Acquiring the technology would have a smaller impact on earnings. But this method is not cheaper. Developing it in house is less costly and provides an immediate tax benefit.  The earnings impact is not a good measure of the expense.  In addition, note that because the acquisition permanently increases the number of shares outstanding, it will reduce Quisco’s earnings per share in future years as well.

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To begin with, in the field of behavioral psychology and business management the concept known as "Reinforcement" refers to the action or process of changing or keeping someone's behavior by the action of having an specific reaction that will be negative or positive accepted by the individual whose behavior we are looking to change or maintain. Therefore that the reinforcement is followed by a particular stimulus that the individual normally has when making the action that we want to change or keep.

The negative reinforcement refers to the process of producing a consequence with the purpose of avoiding or trying to stop certain stimulus so that the individual will stop that behavior in order to avoid the consequence.

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To learn more about Bartering here

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