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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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Outsourcing is usually engaged in business to beat down the cost of production, it is the act in which a particular company invite another company from outside to carry out some service for them on agreement however, this service is been carried out at home.

It should be noted that one of the benefit of outsourcing is that It eliminates jobs that tend to be repetitious.

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Multidomestic

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Why does an oligopoly only work if there are high barriers to entry in a market?
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Please select the type of shock that would produce the indicated shift.
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The various types of shocks that will be caused are:

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  • A leftward shift in the SRAS curve - Negative supply shock.
  • A rightward shift in the SRAS curve -  Positive supply shock.
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<h3>What causes shocks in the economy?</h3>

When there is a change in the components of demand or supply, there will be a shift in the Aggregate Demand and Supply Curves to show that either demand or supply has changed as a result.

For instance, if there is a weaker harvest for a crop, there will be a leftward shift in the SRAS curve which would lead to a negative supply shock.

In conclusion, supply and demand are prone to shocks.

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