Answer:
$16.21
Explanation:
Worth of the stock is the present value of all the cash flows associated with the stock. Dividend is the only cash flow that a stock holder receives against its investment in the stocks. We need to calculate the present values of all the dividend payments.
Dividend Payment $1.10
Growth rate first 3 years 10%
Growth rate first 4 years 3.2%
Required rate of return 12%
Dividend Discount Factor PV Factor
First year Dividend $1.21 0.892857143 $1.08
Second year Dividend $1.33 0.797193878 $1.06
Third year Dividend $1.46 0.711780248 $1.04
Fourth year Dividend $1.61 0.635518078 $1.02
Stock value after fourth year = $18.89 0.635518078 <u>$12.00 </u>
Stock Value <u>$16.21 </u>
Answer:
It depends upon the economical situation. For example if we talk about USA, the labour here costs more than China, whereas in USA machines are less costly than China which means USA can only benefit globally if its products have lower cost from China (China is the biggest competitor of USA) by using fewer labour and relying more on machines.
It sounds like Olivia has a franchise since the donut recipe is the parent company secret and Olivia must pay a percentage of her earnings to that same company so that means she is attached to that company and must abide by its regulations.
