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Nadya [2.5K]
3 years ago
7

Global Tek is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 16 percent

a year for the next four years and then the growth slows down to a rate of 3.5 percent per year indefinitely. The company just paid its annual dividend in the amount of $0.20 per share. What is the current value of one share of this stock if the required rate of return is 15.5%?
Business
1 answer:
Tpy6a [65]3 years ago
8 0

Answer:

The value of the stock is $2.558

Explanation:

We need to calculate the present value of future cash flows to calculate the Stock value

First Calculate each year's Dividend

Use the following formula to calculate the expected dividend

Expected Dividend = Current Dividend x ( 1 + Growth rate )^n

Year ______ Working _________ Dividend

1 ______ $0.20 x ( 1 + 16% )^1 ____ $0.232

2______ $0.20 x ( 1 + 16% )^2 ____ $0.269

3______ $0.20 x ( 1 + 16% )^3 ____ $0.312

4______ $0.20 x ( 1 + 16% )^4 ____ $0.362

5______$0.362 x ( 1 + 3.5% ) _____$0.375

Now calculate the present value of each year's dividend using following formula

PV = Dividend / ( 1 + required rate of return )^numbers of years

Year _____ Working ______________________ PRESENT VALUES

1 ______ $0.232 / ( 1 + 15.5% )^1 _____________ $0.201

2______ $0.269 / ( 1 + 15.5% )^2 _____________$0.202

3______ $0.312 / ( 1 + 15.5% )^3 _____________ $0.203

4______ $0.362 / ( 1 + 15.5% )^4 _____________$0.203

5______$0.375 / (15.5% - 3.5% ) ) / ( 1 + 15.5% ) __$1.749

Now calculate the sum of present value of all the dividends

Value of stock = $0.201 + $0.202 + $0.203 + $0.203 + $1.755

Value of stock = $2.558

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Answer: The law of demand

Explanation:

The tabular representation (demand schedule is down below)

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2000                                                   0.5

1500                                                   0.75

1000                                                     1

750                                                      1.25

From the table above and the graphical representation attached, <u>the law of demand</u> is confirmed. The law of demand states that the price of a good and the quantity demanded are inversely proportional.

Notice that when the price of the juice increases, the demand decreases and when the price decreases, the demanded increases. This shows that majority of consumers will be more willing to make purchases when there is a decrease in price.

Check the attachment for the graphical representation.

Download xlsx
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3 years ago
Imitability of a resource can occur through _?
stich3 [128]

Answer:

economic depletion

Explanation:

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Answer:

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In the last two years, BMW AG, the Bavarian auto maker, has developed a car made primarily from carbon-fibers that is not only l
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2 years ago
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Answer:

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