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
photoshop1234 [79]
3 years ago
10

Sanders, Inc., paid a $4 dividend per share last year and is expected to continue to pay out 60% of its earnings as dividends fo

r the foreseeable future. The growth rate of dividends is expected to be 5.2%. If the firm is expected to generate a 13% return on equity in the future, and if you require a 15% return on the stock, what is the value of the stock?
Business
1 answer:
maks197457 [2]3 years ago
6 0

Answer:

The price of the stock today is $42.94

Explanation:

The price of a stock whose dividends are expected to grow at a constant rate is calculated using the constant growth model of Dividend Discount model approach. It bases the price of the stock on the present value of the expected future dividends. The price today under this model is calculated as follows,

P0 = D0 * (1+g)  /  r - g

Where,

  • D0 * (1+g) is the D1 or the dividend for the next year
  • r is the required rate of return
  • g is the growth rate in dividends

P0 = 4 * (1+0.052)  /  (0.15 - 0.052)

P0 = $42.938 rounded off to $42.94

You might be interested in
The four major expenditure categories of GDP are: Group of answer choices consumption, government purchases, taxes, and investme
Nimfa-mama [501]

Answer:

consumption, investment, government purchases, and net exports.

Explanation:

The Gross Domestic Products (GDP) is the measure of the total market value of all finished goods and services made within a country during a specific period.

Simply stated, GDP is a measure of the total income of all individuals in an economy and the total expenses incurred on the economy's output of goods and services in a particular country. The Gross Domestic Products (GDP) of a country's economy gives an insight to it's social well-being.

Basically, the four major expenditure categories of GDP are consumption, investment, government purchases, and net exports.

4 0
2 years ago
Which of the following represents procurement as part of the support value activities in a value chain​ analysis?
ArbitrLikvidat [17]

Answer:

E. Purchasing inputs such as raw materials, resources, equipment and supplies

Explanation:

In business, <u>Procurement</u><u> </u>is the process of acquiring goods/services in order to support operational activities.

It includes all the aspects related to a purchase: price ( estimates, biddings ) , payment terms, good specifications, quality, delivery, volumes, etc.

8 0
3 years ago
Harvey is an auto dealer at Vonga Automobiles. As part of his team, he is required to directly call potential customers and conv
Naily [24]

Answer: Sales orientation

Explanation:

A firm that makes use sales orientation is focused on making its products and services very good and affordable. When a sales orientation strategy is adopted, the goal is to sell many goods and services without the firm worrying about marketing to its target audience.

The idea is that by making a product or service that is superior and being sold at the right price, which is combined with aggressive sales tactics, firms can convince people to purchase whatever they are selling. With the explanation, we can infer that the company Harvey works for uses a sales orientation.

4 0
3 years ago
Assume that the risk-free rate of interest is 6% and the expected rate of return on the market is 16%. A share of stock sells fo
Tju [1.3M]

Answer: Price of stock at year end =$53

Explanation:

we first compute the Expected rate of return using the CAPM FORMULAE that

Expected return =risk-free rate + Beta ( Market return - risk free rate)

Expected return=6% + 1.2 ( 16%-6%)

Expected return= 0.06 + 1.2 (10%)

Expected return=0.06+ 0.12

Expected return=0.18

Using the formulae Po= D1 / R-g  to find the growth rate

Where Po= current price of stock at $50

D1= Dividend at $6 at end of year

R = Expected return = 0.18

50= 6/ 0.18-g

50(0.18-g) =6

9-50g=6

50g=9-6

g= 3/50

g=0.06 = 6%

Now that we have gotten the growth rate and expected return, we can now determine the price the investors are expected to sell the stock at the end of year.

Price of stock = D( 1-g) / R-g

= 6( 1+0.06)/ 0.18 -0.06

=6+0.36/0.12

=6.36/0.12=  $53

3 0
3 years ago
Assume that you would like to purchase 100 shares of preferred stock that pays an annual dividend of $6.00 per share. However, y
butalik [34]

Answer:

$267.1211

Explanation:

return on preference share per unit is $6  , thus at 12% annual rate of return. Initial value of preference shares will be $50 per unit ( $6 divided by 12%).

Total value of preference shares = $50 multiplied by 100 preference shares = $5000

Future value of preference shares = 5000 (1.12)^5  = $8,811.7084

to find the value of money to be deposited to be able to buy the preference shares at the end of 5 yrs.

we work back to get the present value using the mutual fund annual rate

$8811.7084 = pv (1.06)^60  the rate is compounded monthly. Hence we shall compound the return 60 times in 5 years

Bank account money = 8811.7084  divided by 32.9877 = $267.1211

5 0
3 years ago
Other questions:
  • What should Susan's three main talking points be to convince her Mom that she should file her own tax
    10·1 answer
  • Branson paid $566,700 cash for all of the outstanding common stock of Wolfpack, Inc., on January 1, 2017. On that date, the subs
    8·1 answer
  • Tom maintains a popular blog that highlights restaurants in the Chicago area. Tom provides recommendations on the restaurants, p
    12·1 answer
  • Many people have argued that the skills needed to be successful in today's workforce have changed. What skills do you feel an in
    10·1 answer
  • Under the allowance method, writing off an uncollectible account Group of answer choices affects both balance sheet and income s
    9·1 answer
  • Define the terms anatomy and physiology. List and define the following subdivisions of these two areas of study:
    5·1 answer
  • 81. The forward rate of the Swiss franc is $.50. The spot rate of the Swiss franc is $.48. The following interest rates exist: U
    8·1 answer
  • g This year, Nilo Inc. granted nonqualified stock options to 230 employees. For financial statement purposes, Nilo recorded a $1
    10·1 answer
  • You have been offered an investment that will pay you a lump sum of $30,000 25 years from today, along with a payment of $1,000
    15·1 answer
  • James used $250,000 from his savings account that paid an annual interest of 15% to purchase a hardware store. After one year, J
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!