Answer:
The value of this stock today should be $6.22
Explanation:
The company will start paying dividends 2 years from today that is at t=2. The dividends received 2 years from today can be denoted as D2. The constant growth model of DDM will be used to calculate the price of this stock at t=2 as the growth rate in dividends is constant forever.
The price at t=2 will then be discounted back to its present value today to calculate the price of this stock today.
The price of this stock at t=2 will be,
P2 = D2 * (1+g) / (r - g)
P2 = 0.6 * (1+0.04) / (0.12 - 0.04)
P2 = $7.8
The value of this stock today should be,
P0 = 7.8 / (1+0.12)^2
P0 = $6.218 ROUNDED OFF TO $6.22
If country A allocates more resources to producing capital goods than does country B so less consumption goods will be getting by company B but will have more in the future. In addition to macroeconomics, economics is the study of allocating limited resources in order to satisfy a list of unlimited wants. Economics tries to examine situations in which individuals choose how to do things, when to do things and with whom to do.
Answer:
The price of the bonds = $951.963
Explanation:
<em>The value of the bond is the present value (PV) of the future cash receipts expected from the bond. The value is equal to present values of interest payment plus the redemption value (RV) discounted at the yield rate </em>
Value of Bond = PV of interest + PV of RV
The PV of interest payment
A ×(1- (1+r)^(-n))/r
A- interest payment, r- interest rate, n- number of years
Interest payment = 100
PV = 100× (1- 1.12^(-3))/0.12= 240.183
PV of redemption value
PV = RV× (1+r)^(-n)
RV- Redemption value - 1,000, r- interest rate, number of years, number of years- 3
PV = 1000× 1.12^(-3) = 711.7802
The value of bond = 240.18 + 711.78= 951.963
The price of the bonds = $951.963
