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Natasha2012 [34]
3 years ago
7

Red Sun Rising just paid a dividend of $2.58 per share. The company said that it will increase the dividend by 20 percent and 15

over the next two years, respectively. After that, the company is expected to increase its annual dividend at 3.6 percent. If the required return is 12 percent, what is the stock price today
Business
1 answer:
vladimir1956 [14]3 years ago
7 0

Assuming  the required return is 12 percent, the stock price today is $40.61.

Given:

Dividend=$2.58 per share

Increase in Dividend=20% and 15%

Number of year=2 years

Increase in Annual Dividend=3.6%

Required return=12%

P2=Stock price today

Now let calculate the stock price today

P2 = [$2.58(1+0.20)]/(1+.12) + [$2.58(1+.20)(1+.15)]/(1+.12)^2 + {[$2.58(1+.20)(1+.15)(1+.036)]/(0.12 − 0.036)}/(1+.12)^2

P2 = [$2.58(1.20)]/1.12 + [$2.58(1.20)(1.15)]/1.12^2 + {[$2.58(1.20)(1.15)(1.036)]/(0.12 − 0.036)}/1.12^2

P2=($3.096/1.12)+ ($3.5604/1.2544)+ [($3.68857/0.084)/1.2544]

P2=$2.7643+$2.838329+($43.91155/1.2544)

P2=$2.7643+$2.838329+$35.0060

P2=$40.61

Inconclusion assuming the required return is 12 percent, the stock price today is $40.61.

Learn more here:

brainly.com/question/24314972

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The question is reproduced in the table below for clarity                        

                               Oven                                  Contribution

                         Hours Required                 Margin Per Unit

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Coffee Cakes        0.3                                        $5

Answer:

Total contribution margin = $ 60,000.00

Explanation:

<em>When a business is faced with a problem of shortage of a resource which can be used to produced more than one product type, to maximize the use of the resource , the business should allocate it for production purpose in  such a way that it maximizes the contribution per unit of the scare resource.</em>

Therefore Crane Company should alocate the oven hours to maximise the contribution per unit of oven hour. This is done as follows:

Step 1

<em>Calculate he contribution per oven hour and rank the product</em>

                                                                      cont/hr                   ranking

Muffin                        $4/0.2 hour =              20                     <em> 1st</em>

Coffee cakes                 $5/0.3 hour=        16.67                      2nd

<em>Because Muffin generates the highest contribution per hour of Oven, Crane should allocate all the resource to it</em>

Step 2

<em>Calculate the Total contribution from the production of Muffin</em>

Total contribution margin = 20 per her × 3000

                                        = $ 60,000.00

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The market demand function for corn is Qd = 5 15 - 2P and the market supply function is Qs= 5P- 6, both quantities measured in b
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