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Novay_Z [31]
4 years ago
5

Ackert Company's last dividend was $4.00. The dividend growth rate is expected to be constant at 1.5% for 2 years, after which d

ividends are expected to grow at a rate of 8.0% forever. The firm's required return (rs) is 12.0%. What is the best estimate of the current stock price?a. $87.00b. $89.87c. $80.31d. $104.21e. $95.61
Business
1 answer:
Elza [17]4 years ago
5 0

Answer:

First we need to use the ddm model when the growth rate is constant and find the price then,because the ddm model cannot be used when the growth rate  is not constant and then discount it back to present value at 12% which is the required return.

Last dividend = $4

Dividend one year from now = 4*1.015=4.06

Dividend 2 years from now = 4.06*1.015=4.12

Growth rate 2 years from now = 8%

R= 12%

Price = D*(1+G)/(R-G)

=4.12*(1+1.08)/(0.12-0.08)=4.45/0.04= 111.26

Price of stock 2 years from now $111.26, now we need to discount it to the present value. 111.26/1.12^2=88.69

Best estimate = b. $89.87

Explanation:

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A perpetuity pays $170 per year and interest rates are 8.2 percent. How much would its value change if interest rates increased
weqwewe [10]

Answer:

$320.59 decrease

Explanation:

The computation of the change in the value is shown below:

As we know that

The Value of perpetuity is

= Annual inflows ÷ interest rate

Current value is

= $170 ÷ 0.082

= $2,073.17

And,

New value is

= $170  ÷ 0.097

= $1,752.58

Now change in value is

= $2,073.17 - $1,752.58

= $320.59 decrease

We simply applied the above formula

8 0
3 years ago
In order to avoid project delays, project managers confronted with a resource overload will seek to delay some of the noncritica
Westkost [7]

Answer: True

Explanation:

When a project manager is confronted with resource overload, an activity that is not on the critical path can be delayed in order not to unnecessarily delay the project. The non-critcal activities can be delayed than an amount no longer than the slack period. This levels demand for that worker.

3 0
3 years ago
Here is the ledger for Blossom Company.
Alex777 [14]

Answer:

1/Oct : Cash (Dr.) $8,660

Accounts Receivable (Cr.) $8,660

10/Oct : Equipment & Supplies (Dr.) $9,660

Notes Payable (Cr.) $9,660

20/Oct : Accounts Receivable (Dr.) $2,640

Service Revenue (Cr.) $2,640

Explanation:

Debits $16,960

Cash 6,600

Accounts Receivable 1,840

Supplies 1,840

Equipment 4,660

Dividend 2,020

Credits : $16960

Accounts Payable 4,660

Notes Payable 9,660

Service Revenue 2,640

3 0
3 years ago
During an economic downturn, consumers spend considerably less on goods and services. this results in layoffs that are classifie
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<span>During an economic downturn, consumers spend considerably less on goods and services. this results in layoffs that are classified as CYCLICALLY UNEMPLOYED.</span>
7 0
3 years ago
Indicate whether each of the following examples of behavior is consistent with the way the traditional economic framework sugges
Sliva [168]

Answer:

Some people would be willing to make a large sacrifice in order to help a loved one = Consistent with the Predictions of Traditional Economic Models.

Some people choose to work fewer hours after receiving a raise at work = Consistent with the Predictions of Traditional Economic Models.

Some people prefer to spend an hour doing a task tomorrow to half an hour doing a task today, although the opportunity cost of their time is the same in both periods = Reserved for Behavioral Economics.

Some people treat $70 they earn differently from $70 they win from a lottery ticket = Reserved for Behavioral Economics.

Explanation:

The behaviors of people generally cannot completely be predicted. However, there are certain suggestions made on the behaviors of people by the traditional economic framework as well as the behavioral economists. These suggestions have been used by different professional to qualify the behaviors of people in a certain way (as illustrated in the answers above).

6 0
3 years ago
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