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svlad2 [7]
2 years ago
15

A stock has an annual dividend of $10.00 and it is expected not to grow. It is believed the stock will sell for $100 one year fr

om now, and an investor has a discount (interest) rate of 6% (0.06). The dividend discount model predicts the stock's current price should be:
A. $94.67
B. $116.00
C. $103.77
D. $106.60
Business
1 answer:
Shkiper50 [21]2 years ago
8 0

Answer: C

Explanation: The present value of a stock is the sum of all future cash flows discounted using a rate.

The future cash flows, in this case, is the proceeds from selling the stock ($100) and the dividend ($10).

We can calculate the current price of the stock using the formula:

($100 + $10) / (1 + 6%) = 103.77

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A firm’s liquidity level decreases when:_______.
katovenus [111]

Answer:

b) inventory is sold on credit.

Explanation:

Liquidity is defined as the a business to use its current assets to settle it's current liabilities.

This is calculated by using the working capital ratio.

Working capital ratio = Current assets ÷ Current liabilities.

Cash and inventory contribute to a business' liquidity.

When inventory is sold on credit, it does not result in immediate increase in cash as payment is in the future. So there is a reduction in the current asset of the company.

A reduction in the numerator of the working capital ratio results in lower value of the ratio (lower liquidity)

5 0
3 years ago
To estimate the value of a nonconstant growth stock, we can estimate the value of each dividend during the period of nonconstant
garri49 [273]

Answer:

The correct answer is True.

Explanation:

The Gordon growth model is a method of valuing a company's share price, using constant growth and discounting the value of future dividends today. Gordon Growth is often known by its English name.

It is a dividend discount model that assumes that the growths that the company will experience are constant. It is based on the theory that the price of a share should be equal to the price of the dividends that the company is going to pay, discounted to its net present value.

If the share price in the market is less than the result obtained by the discounted dividend model, the share is undervalued and therefore, it is recommended to buy. If, on the other hand, the market price is higher than that of the model, it is understood that the share price is too high.

3 0
4 years ago
Your uncle repays a $450 loan from Tenth National Bank (TNB) by writing a $450 check from his TNB checking account. Assume these
katrin [286]

Answer:

Uncle accounting:

         Cash              Note Payable        

DEBIT   CREDIT      DEBIT      CREDIT

             450             450

Bank Accounting

         Cash              Note Receivables

DEBIT   CREDIT      DEBIT      CREDIT

450                                              450

B.- False

Explanation:

The uncle will see a decrease in their assets (cash) and a decrease i ntheir liabilties(Note payable)

Therefore their net equity (wealth) will remain the same

The bank will record the collection from their client and decrease their receivables.

6 0
3 years ago
Consider a competitive market with a large number of identical firms. The firms in this market do not use any resources that are
lozanna [386]

Answer:

a. increase price in the short run but not in the long run.

Explanation:

The firms don't use resources that are available in limited quantities. So, as firm output increases, they can use resources in higher quantity but at the same price.

Therefore, as quantity demanded increases, the firms can supply higher quantity without any increase in resource cost. So, price  increase in short run but not in the long term.

4 0
4 years ago
Assuming the Coase theorem applies, an efficient allocation of a resource will result ... A. only if the government acts to inte
Mamont248 [21]

Answer:

B. through negotiations between the parties involved.

Explanation:

  • correct answer is through negotiations between the parties involved because According to Coase theory, priority rights are best defined by negotiation between the parties involved and there is no transaction cost in negotiations.                            
  • The Coase theory states that when transaction costs are low, both parties can negotiate and reach an effective outcome in the presence of an outsider.

6 0
3 years ago
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