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Finger [1]
3 years ago
14

A start up company has declared that it will not pay any dividends on its stock over the next 9 years because it requires all of

its earnings to be plowed back into the business to fuel growth. The firm will pay a $14 per share dividend 10 years from today and will increase the dividend by 3.9% per year thereafter. If the required rate of return on this stock is 12.5%, what is the current share price
Business
1 answer:
Mice21 [21]3 years ago
5 0

Answer:

$56.40

Explanation:

Value of the share = D10/(r-g)

Value of the share = 14/(0.125-0.039)

Value of the share = 14/0.086

Value of the share = $162.79

The current price of the share = Value of the share / (1+R)^9

The current price of the share = 162.79/1.125^9

The current price of the share = 162.79/2.88650757819

The current price of the share = 56.39687254937967

The current price of the share = $56.40

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Europe has eight different companies selling devices similar to the Epi pen. If these devices were available for use in the U.S. market, you would expect price elasticity of demand to become less elastic. This would also lead Mylan to charge a lower price.

Price elasticity of demand is the ratio of the share trade in quantity demanded of a product to the proportion exchange in rate. Economists hire it to understand how deliver and call for alternate whilst a product's fee changes.

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How is price elasticity measured?

Price elasticity measures the responsiveness of the quantity demanded or supplied of a good to a alternate in its rate. It's miles computed as the proportion change in quantity demanded or supplied divided through the percentage exchange in rate.

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Price elasticity of demand compares trade in intake to alternate in charge. Price elasticity of demand measures the trade in consumption of a terrific as a result of a exchange in rate. It's miles calculated by dividing the percent trade in consumption by means of the percentage change in price.

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