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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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3 years ago
Ula purchased stock in Purple, Inc., six years ago for $150,000. Purple has assets with a value of $225,000 ($175,000 basis) and
elena55 [62]

Answer:

$15,000 gain

Explanation:

Assets with a value of $225,000

Remaining asset (cash) to Ula ($25,000)

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3 0
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Charity Hospital is holding its annual gala in a fancy downtown hotel. Tickets are $200 each, and the organization estimates tha
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Frances is stranded amidst classic case of an ethical dilemma. The ethical dilemma is an ethical perspective which puts a person in a state of to do or not. This is common and everyone undergoes through this phase for more than once in his/her lifetime.

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