1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Molodets [167]
3 years ago
12

Chelsea Fashions is expected to pay an annual dividend of $1.26 a share next year. The market price of the stock is $24.09 and t

he growth rate is 2.6 percent. What is the cost of equity
Business
1 answer:
tekilochka [14]3 years ago
6 0

Answer:

7.83%

Explanation:

This is calculated by using the Gordon growth model (GGM) formula as follows: P = d / (r - g) ……………………………………… (1)

Where;

P =  market price of the stock = $24.09

d = next year annual dividend = $1.26 r = cost of equity = ?

g = dividend growth rate = 2.6%, or 0.026

Substituting the values into equation and solve for r, we have:

24.09 = 1.26 / (r - 0.026)

24.09 (r - 0.026) = 1.26

24.09r - 0.62634 = 1.26

24.09r = 1.26 + 0.62634

24.09r = 1.88634

r = 1.88634 / 24.09

r = 0.0783038605230386, or 7.83038605230386%

Rounding to 2 decimal places. we have:

r = 7.83%

Therefore, the correct option is 7.83 percent.

You might be interested in
An analyst seeks to determine the value of Bulldog Industries. After careful research, the analyst believes that free cash flows
Reil [10]

Answer:

$2,033

Explanation:

The computation of the terminal value at the end of the year 2 is shown below:

= {Free cash flow of the firm × (1 + growth rate) × (1 + growth rate) + (1+ growth rate)} ÷ (WACC - growth rate)

= {($80 million × (1 + 0.10) × (1 + 0.10) × (1 + 0.05)} ÷ (10% - 5)

= $101.64 ÷ 0.05

= $2,033

We simply applied the above formula so that the Terminal value could arrive

3 0
3 years ago
Keisler's has cost of goods sold of $11,518, interest expense of $315, dividends of $420, depreciation of $811, and a change in
True [87]
Solving: 420+296 = 716
716/(1-.21) = 906.33

Answer: $906.33
6 0
2 years ago
How long does it take to become a​ millionaire? A ​$500,000 investment will hit​ $1 million in 39 years at an annual interest ra
Solnce55 [7]

Answer:

It will take 30.10 year

Explanation:

We have given initial investment $500000

Future value = $ 1 million = $1000000

Rate of interest r = 1.79 %

We have to find the time taken to reach the amount $1000000

We know that future value is equal to A=P(!+\frac{r}{100})^n

1000000=500000(!+\frac{1.79}{100})^n

2=(1.0179)^n

Taking log both side

log2=nlog1.0179

n×0.0077 = 0.3010

n = 39.09 year

Now in second case rate of interest

r = 2.34 %

So 1000000=500000(1+\frac{2.34}{100})^n

2=(1+\frac{2.34}{100})^n

2=1.0234^n

taking log both side

log 2 = n log 1.0234

n×0.01 = 0.3010

n = 30.10 year

8 0
3 years ago
Which PESTEL factors are the most salient for the electric vehicle segment of the car industry? Do you see a future for electric
irinina [24]

Answer:

Economical, technological, and ecological.

Explanation:

PESTEL factors that are most salient for the electric vehicle segment of the car industry are economical, technological, and ecological. Electric cars would be economic as compared to gas and other forms of energy used to run a car or any other vehicle.

7 0
3 years ago
For all the women out there(only women) how do I make a girl feel comfortable while talking?
Scilla [17]

Answer:

Don't make her feel like you're hiding anything from her. If she seems upset, comfort her tell her everything will be alright. Let her know she can trust you. Make her feel like she's wanted for more than what she looks like. Show her how much you care and that you'd never do anything to intentionally hurt her. Make her feel safe. Once you can do all that she should begin to feel comfortable talking to you.

Explanation:

Hope this helps. Good luck.

8 0
3 years ago
Read 2 more answers
Other questions:
  • Which analytical tool determines the relative attractiveness of various strategies based on the extent to which key external and
    9·1 answer
  • Last year, Reggie, a Los Angeles, California resident, began selling autographed footballs through Trojan Victory (TV), Incorpor
    6·1 answer
  • If the price of Pepsi decreases, all else held constant, then we’d expect to see a consequent shift of the demand curve for: Mul
    14·1 answer
  • Empire Industries is considering adding a new product to its lineup. This product is expected to generate sales for four years a
    9·2 answers
  • A contractor who agrees to undertake work without being under the direct control or direction of another and is personally respo
    10·1 answer
  • Political risk is defined as an organization's risk of _____ due to politically based events or actions by host governments.
    11·1 answer
  • Ayayai Corp. redeemed $158,000 face value, 12% bonds on April 30, 2022, at 102. The carrying value of the bonds at the redemptio
    7·1 answer
  • You're the manager at company x and have been tasked with creating a plan that has the purpose of establishing specific objectiv
    8·1 answer
  • Which extended ERP component collects information used throughout an organization, organizes it, and applies analytical tools to
    5·1 answer
  • ASAP Please help and thank you!
    15·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!