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fenix001 [56]
2 years ago
15

Using a dividend discount model, what is the value of a stock that pays an annual dividend of $5 that is not expected to grow, a

nd the discount rate is 10%? What will be the value of the stock if the dividend is expected to grow 5% per year?
Business
1 answer:
Alenkasestr [34]2 years ago
5 0

Answer:

a. <u>Value of the stock without growth rate</u>

= D1 / (r - g)

= $5 / (10% - 0)

= $5 / 10%

= $5 / 0.10

= $50

b. <u>Value of the stock with growth rate</u>

= D1 / (r - g)

= $5 / (10% - 5%)

= $5 / 5%

= $5 / 0.05

= $100

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If a company is eliminating certain models of a product and cutting back on expenditures, the product is most likely in the ____
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I would have to say decline
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What other inspiring realizations helped Andrew Feld come up with the idea for his startup? List and rank them in order accordin
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6 0
2 years ago
What's the future value of an investment of $1 a year for each of 4 years, at the end of the last year? Suppose the interest rat
Wewaii [24]

Answer:

4.51

Explanation:

We have to calculate fva. The future value of annuity

Here is the formula

Fva = A [( + I)^n-1/I]

Where a = annuity

I = interest rate

N = number of years

Inserting into formula

1[(1+0.08)^4 - 1/0.08]

= 1[(1.36049 - 1)/0.08]

= 4.51

Therefore the future investment is $4.51

3 0
3 years ago
In a certain year, the aggregate amount demanded at the existing price level consists of $100 billion of consumption, $40 billio
valkas [14]

Answer:

The answer is: decrease government spending or increase tax rates.

Explanation:

Nominal GDP is currently $170 billions (= $100 billions + $40 billions + $20 billions + $10 billions).

Since full employment GDP = $120 billions, the nominal GDP is much higher ($170 billions > $120 billions). So the government must try to cool the economy and the two main ways it can do it is by reducing government spending or by raising taxes which will lower private consumption.

5 0
3 years ago
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