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Artemon [7]
2 years ago
12

Todd Mountain Development Corporation is expected to pay a dividend of $3 in the upcoming year. Dividends are expected to grow a

t the rate of 11% per year. The risk-free rate of return is 8%, and the expected return on the market portfolio is 18%. The stock of Todd Mountain Development Corporation has a beta of 0.80. Using the constant-growth DDM, the intrinsic value of the stock is _________. Multiple Choice 8.80 11.11 27.27 60.00
Business
1 answer:
PilotLPTM [1.2K]2 years ago
7 0

Answer:

the intrinsic value of the stock is $60

Explanation:

The computation of the intrinsic value of the stock is as follows:

But before that the cost of equity is

The Cost of Equity is

= Risk Free Rate + Beta × (Market Return - Risk Free Rate)

= 8% + 0.80 × (18% - 8%)

= 16%

Now

Intrinsic Value is

= Next year Dividend  ÷ (Rate of Return - Growth rate)

= $3 ÷ (16% - 11%)

= $60

hence, the intrinsic value of the stock is $60

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An llc offers personal liability protection while also keeping the advantage of __________.
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3 years ago
Wheldon Wheels Inc. (WW) is a US-based manufacturer that exports car parts to Taiwan. WW expects to receive 20,000,000 Taiwan do
ra1l [238]

Answer: Enter into a futures contract

Explanation:

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Exchange rates between currencies fluctuates every day in the market which presents a problem of uncertainty because when exchange rate changes the value of the transaction changes and that will increase or decrease a company's profits in each transaction.

Wheldon Wheels Expects to receive 20 000 000 Taiwan dollars in 90 days, since the company is in The united states the amount of 20 000 000 of Taiwan Dollars Receivable will need to be converted into US dollars. The Problem is, The exchange rate may decrease or increase in the next 90 days which will affect how much Wheldon Wheels receives in dollars.

Wheldon Wheels inc may Protect them selves against Exchange rate Fluctuations by entering into A Future Contracts with a Bank or exchange dealer. Futures Contract will provide Wheldon Wheels inc with an opportunity to sell 20 000 000 Taiwan Dollars in 90 days at a fixed predetermined exchange rate. The Dealer Promises to Buy 20 000 000 Taiwan Dollars in 90 days at a Predetermined Fixed exchange rate.

example

suppose the (WW) enters into a Futures contract to sell 20 000 000 Taiwan Dollar in 90 days at an Fixed exchange rate of $1 = 1.5 Taiwan dollar, if the market exchange rate in 90 days is $1 =  1.3 Taiwan dollar Wheldon Wheels inc would be protected. The Exchange rate for the 20 000 000 Taiwan Dollar transaction would remain at $1 = 1.5 Taiwan dollar

5 0
3 years ago
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2 years ago
Net operating income computed under variable costing would exceed net operating income computed using absorption costing if: Mul
klasskru [66]

Answer:

Units sold exceeds units produced

Explanation:

The net operating income under variable costing system is always higher than absorption costing system when units sold exceeds units produced. As variable cost doesn't include fixed manufacturing overhead unlike absorption costing, when the net operating income under it now exceed that of absorption, it's definitely am increase in sales that's responsible for that.

8 0
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