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OverLord2011 [107]
3 years ago
8

A company expects to pay a dividend of $3.50 per share one year from today. the dividend is expected to grow at 30 percent per y

ear for three years. Thereafter, the dividend will grow at 4 percent per year in perpetuity. if the appropriate discount rate for the stock is 13 percent, what is the price of the stock today
Business
1 answer:
monitta3 years ago
7 0

Answer: $70

Explanation:

Price = Present value of year 1 dividend + Present value of year 2 dividend + Present value of year 3 dividend + Present value of year 4 dividend + Present value of year 4 price

Year 4 price = Year 4 dividend / ( Required return - Growth rate after 3 years)

= (3.50 * 1.30³ * 1.04) / (13% - 4%)

= $88.856

Price = (3.50 / (1 + 13%)) + ( (3.50 * 1.3) / 1.13²) + ( (3.50 * 1.3²) / 1.13³) + ( (3.50 * 1.3³) / 1.13⁴) + 88.856/1.13⁴

= $69.97

= $70

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The new manufacturing plant of BMW vehicles will be engaged in the process of mass production.        

<h3>What is mass production?</h3>

The process of production, wherein a large proportion of goods or inventories are produced by a business organization to reduce the costs of production, is known as mass production.

Hence, option B states about mass production. Complete question has been added in the image for reference.

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5 0
2 years ago
Gentleman Gym just paid its annual dividend of $3 per share, and it is widely expected that the dividend will increase by 5% per
Roman55 [17]

Answer and Explanation:

The computation of the price that should be sell is shown below:

As we know that

Price = dividend × (1 + growth rate) ÷ (discount rate - growth rate)

a. The price is

= $3 × 1.05 ÷ (15% - 5%)

= $31.50

b. Now the price is

= $3 × 1.05 ÷ (12% - 5%)

= $45

Hence, the above represent the answer in both the cases.

6 0
3 years ago
On January 1, 2017, Hannigan Company issued bonds with a face value of $600,000. The bonds carry a stated interest of 7% payable
mart [117]

Answer:

Explanation:

The journal entries are shown below:

Cash A/c Dr $582,000            ($600,000 × 0.97)

Discount on Bonds Payable A/c Dr $18,000

       To Bonds payable A/c    $600,000

(Being the issuance of the bond is recorded and the remaining balance is debited to the discount on bond payable account)

Cash A/c Dr $612,000            ($600,000 × 1.02)

       To Bonds payable A/c    $600,000

       To Premium on bonds payable A/c $12,000

(Being the issuance of the bond is recorded and the remaining balance is credited to the premium on bond payable account)

6 0
3 years ago
The BRS Corporation makes collections on sales according to the following schedule: 40% in month of sale 56% in month following
DaniilM [7]

Answer:

D. $155,600

Explanation:

The calculations of the budgeted cash collections are shown below:

= June sales × sale month collection percentage + May sales × following month collection percentage  + April sales × second following month collection percentage

= $150,000 × 40% + $160,000 × 56%  + $150,000 × 4%

= $60,000 + $89,600 + $6,000

= $155,600

Simply we multiplied the sales with the collection criteria

5 0
3 years ago
The Comil Corporation recently purchased a new machine for its factory operations at a cost of $328,325. The investment is expec
Solnce55 [7]

Answer: 15%

Explanation:

IRR is the discount rate that makes the NPV equal zero. Required rates of return that are less than the IRR will therefore result in a positive NPV and those that are higher will result in a negative NPV.

Use Excel to find the IRR.

= IRR(-328325,115000,115000,115000,115000)

= 15%

As the required rate of 13% is less than the IRR of 15%, the new machine will have a positive NPV.

6 0
3 years ago
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