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algol13
4 years ago
5

Martin's Inc. is expected to pay annual dividends of $2.50 a share for the next three years. After that, dividends are expected

to increase by 3% annually. What is the current value of this stock to you if you require a 9% rate of return on this investment?
Business
1 answer:
blagie [28]4 years ago
7 0

Answer:

The stock current intrinsic value is: $39,46

Explanation:

We solve using the gordon model for dividend growth to valuate the price of the stock:

\frac{dividend_1}{return-growth} = Intrinsic \: Value

d0 = 2.50

d1 = 2.50 x 1.03 = 2.575

\frac{2.575}{0.09-0.03} = Intrinsic \: Value

Value: 42,91666666666667‬

This value is three years therefore, we need to discount:

\frac{Principal}{(1 + rate)^{time} } = PV

Maturity  $42.9167

time  3.00

rate  0.09000

\frac{42.9166666666667}{(1 + 0.09)^{3} } = PV  

33.1395

We also have to calcualtethe present value of the first, second and third year dividends

discount rate 0.09

# Cashflow  Discounted

1 2.5              2.29

2 2.5              2.1

3 2.5              1.93

PV            6.32

We ad this to the PV of the infinite future dividends growing at 3%

6.32 + 33.1395 = 39,4595‬

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Answer:

Services

Explanation:

In the game of economics, services are actions that other people value. Services are something which people get and it helps to improve the utility level of a customer. Services are valued by people because it satisfies their needs and wants. Moreover, this is why people pay a lot of money to get better services because it plays an important to fulfil human wants.

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4 years ago
Greg n. mankiw principles of macroeconomics 5th:
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What happens on the money balances market (the demand and supply for money) when the Federal Reserve conducts an open market pur
Papessa [141]

Answer:

Increased Money supply and decreased rates

Explanation:

When the Federal reserve buys the bonds on the Open market operations, the cash is disbursed by the Fed to the seller of bonds which in case increases the money that is supplied in the market and hence the quantity of money held by general public. The interest rate will ultimately decrease as the money supply is more and people tend to spend more than save.

Hope this clear things up.

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8 0
4 years ago
Read 2 more answers
Suppose Maestro'sMaestro's had cost of goods sold during the year of $ 230 comma 000$230,000. Beginning merchandise inventory wa
sveticcg [70]

Answer:

The answer is: Maestro's inventory turnover was 5.75 times

Explanation:

In order to find the inventory turnover we use the following formulas:

  • Inventory turnover = COGS / Average inventory
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First we find the average inventory:

  • Average inventory = ($35,000 + $45,000) / 2 = $40,000

Now we can calculate the inventory turnover:

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6 0
3 years ago
"A customer buys 100 shares of ABC at $90, depositing the Regulation T requirement. She holds the position for two months, durin
Karolina [17]

Answer:

$4,600

Explanation:

Calculation for the adjusted debit balance at the end of the two month period

Using this formula

Adjusted debit balance = (Number of shares × Shares amount ÷ Numbers of months) + Interest amount

Let plug in the formula

Adjusted debit balance= (100 shares ×$90÷2 months) +$100

Adjusted debit balance = ($9,000÷ 2 months) +$100

Adjusted debit balance=$4,500+$100

Adjusted debit balance=$4,600

Therefore the adjusted debit balance at the end of the two month period will be $4,600

7 0
4 years ago
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