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Yuliya22 [10]
3 years ago
13

A local bank pays 100% of its earnings out in dividends. If earnings continue to grow at 2% per year and the most recent annual

dividend is $0.88. How much would you be willing to pay for this stock if you expect the return on the market portfolio to be 10%, the risk-free rate to be 3%, and the company’s beta to be 0.7?
Business
1 answer:
Ivenika [448]3 years ago
7 0

Answer:

The maximum price per share that should be paid today is $15.21

Explanation:

We first need to calculate the required rate of return (r) on this stock. The required rate of return can be calculated using the CAPM approach.

r = rRF + Beta * (rM - rRF)

Where,

  • rRF is the risk free rate
  • rM is return on market

r = 0.03 + 0.7 * (0.1 - 0.03)   =  0.079 or 7.9%

The fair price per share of this stock can be calculated using the constant growth model of DDM as the earnings, which will all be paid out as dividend, are expected to grow at a constant rate of 2%. The formula for price per share today under this model is,

P0 = D0 * (1+g)  /  (r - g)

P0 = 0.88 * (1+0.02) / (0.079 - 0.02)

P0 = $15.21

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Holding other factors constant, if new technology becomes available that allows machines to produce manufactured goods more quic
Ber [7]

Answer: Increase; increase

Explanation:

Efficiency is so vital to business and manufacturing. The ability of a business to produce and curb minimal loss will give a boast on production and encourage manufacturers to do more, especially when they have the ability to produce in large quantity (by batches) and still get a good ratio for the number of goods manufactured. This is where machines has aided productivity, as they were introduced, productivity increased and they were minimal loss and time waste when producing. When technology allows for more of this effective machines, manufacturers will produce more and there would be a boast in investment.

4 0
3 years ago
Which statement about ethnocentrism is most accurate?
Alexus [3.1K]

Answer:

<em> Ethnocentrism causes us to judge others by our own values. </em>

<em> Ethnocentrism causes us to judge others by our own values. Ethnocentrism is the belief in the superiority of one's own culture. This belief is a natural attitude found in all cultures, and it causes us to judge others by our values</em>.

4 0
3 years ago
On January 1, 2009, Coronado Industries purchased for $690000, equipment having a useful life of ten years and an estimated salv
JulijaS [17]

Answer:

There is not gain in this operation so the answer is $0

Explanation:

There are some journal entries that needs to be done to have a full picture of the statement

* Purchase

Fixed Assets                        690.000

Cash                                                        690.000

* Monthly depreciation

Since, the FA was depreciated during 8 years. Firstly you have to calculate the amount that can be depreciate on a monthly basis

Amount to be depreciated = (Cost of the FA - Salvage value) = (690.000-48.600) = 641.400

Then calculate the yearly depreciation

Yearly depreciation = ((amount to be depreciated/useful life) * years used) =

(641.400/10*8) = 513.120

then the journal entry to record the monthly depreciation for 8 years is

Depreciation expense          513.120

Acc Depreciation                                   513.120

* Post the Journal Entry to record the sell of FA

You have to reverse the Acc Depreciation and credit the FA

Cash                                     152.500

Fixed assets                                         690.000

Acc depreciation                   513.120

Loss on sale of FA                   24.380

6 0
3 years ago
A ________ state is one with unstable leadership, whose policies are driven by ideology rather than by economic or human costs a
stepan [7]

A rogue state is one that has unstable leadership and the policies are driven by ideologies instead of economic costs or benefits.

<h3>What is a state?</h3>

A state is a territory that belongs to one country. It is having its own government which runs that particular state or province.

A rogue state is a kind of state which is responsible for shattering and disrupting global laws and is also considered a danger to other countries or nations in the whole world. North Korea, Libya, Iran, Iraq, and Cuba are labeled as rogue states. These states are not driven by an economy and are actually driven by the ideologies developed by their presidents.

Therefore, the state is driven by ideologies instead of an economy that is considered to be a rogue state.

Learn more about the rogue state in the mentioned link:

brainly.com/question/3500231

#SPJ1

7 0
2 years ago
Why should a persuasive letter like this focus on audience benefits?A) People are selfish and won't be interested in the message
olga2289 [7]

Answer:

b because I had this work sheet

7 0
4 years ago
Read 2 more answers
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