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vredina [299]
3 years ago
10

1) Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 30 percent for the next three years, with the gro

wth rate falling off to a constant 4 percent thereafter. If the required return is 11 percent, and the company just paid a dividend of $2.15, what is the current share price
Business
1 answer:
tankabanditka [31]3 years ago
3 0

Answer:

P0 = $60.23475 rounded off to $60.23

Explanation:

To calculate the market price of the stock today, we will use the two stage growth model of DDM. The two stage growth model calculates the values of the stock today 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+g1) / (1+r)  +  D0 * (1+g1)^2 / (1+r)^2  +  ...  +  D0 * (1+g1)^n / (1+r)^n  +  [(D0 * (1+g1)^n * (1+g2))  /  (r - g2)] / (1+r)^n

Where,

  • D0 is the dividend today
  • g1 is the short term growth rate
  • g2 is the long term or constant growth
  • r is the required rate of return on the stock

P0 = 2.15 * (1+0.30) / (1+0.11)  +  2.15 * (1+0.30)^2 / (1+0.11)^2  +  

2.15 * (1+0.30)^3 / (1+0.11)^3  +  [(2.15 * (1+0.30)^3 * (1+0.04)) / (0.11 - 0.04)] / (1+0.11)^3

P0 = $60.23475 rounded off to $60.23

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Andreyy89

Answer:

Young should report proceeds from the sale of bonds as equal to $864,884

Explanation:

The proceeds on the sale of bonds is equivalent to the present value of all the cash flows that are likely to accrue to an investor once the bond is bought. These cash-flows are the periodic coupon payments that are paid semi-annually and the par value of the bond that will be paid at the end of the 5 years.

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Design thinking can help narrow the gap between businesses and customers perceptions

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brainly.com/question/24596247

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