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
IrinaK [193]
3 years ago
15

g Estimate the cost of common equity for a firm, given the following information. For the next year, the firm plans to pay a div

idend of $8.76 per share. The firm's stock is trading at $100.81 per share. The expected growth rate of the dividend is 3.8% per year. The firm's tax rate is 27%. (Enter your answer as an annual % rate (APR), rounding to 2 places, e.g., 12.34)
Business
1 answer:
wel3 years ago
6 0

Answer:

The cost of equity is 12.49 percent

Explanation:

The price per share of a company whose dividends are expected to grow at a constant rate can be calculated using the constant growth model of the DMM. The DDM bases the price of a stock on the present value of the expected future dividends from the stock. The formula for price today under this model is,

P0 = D1 / r - g

Where,

  • D1 is the dividend expected for the next period
  • r is the cost of equity
  • g is the growth rate in dividends

As we already know the P0 which is price today, the D1 and the growth rate in dividends (g), we can plug in the values of these variables in the formula to calculate the cost of equity (r)

100.81 = 8.76 / (r - 0.038)

100.81 * (r - 0.038) = 8.76

100.81r  -  3.83078 = 8.76

100.81r  =  8.76 + 3.83078

r = 12.59078 / 100.81

r = 0.12489 or 12.489% rounded off to 12.49%

You might be interested in
The second step in the marketing research project involves developing the research plan. This includes specifying the ________ f
Rus_ich [418]

Answer:

constraints; data

Explanation:

In the second step of marketing research, the research plan is developed. This includes making clear the limitations that will be met during the research activities and identifying the information/data needed for marketing decision making. The research plan is aimed at answering or atleast leading to the solution of the research problem identified in the first step. Instrument used to collect information, the type of research to be carried out are all determined at this stage.

7 0
3 years ago
United States exports soybean oil to China. However, to protect the Chinese soybean oil market, Chinese government has high tari
solniwko [45]

Answer:

United States can set up plants in China to avoid high tariffs

8 0
3 years ago
BRAINLIEST !!what are your thoughts on Sam and Bud Walton?
Ronch [10]
That will simpler in
3 0
2 years ago
Operating activities include long-term borrowing and repaying cash from lenders, and cash investments by or dividends paid to st
Phantasy [73]

Answer:

False (B)

Explanation:

Long-term borrowing & repaying cash from lenders

Long-term borrowing will be classified under financing activities as it represents capital sourced from loan investors (e.g Bondholders,Banks e.t.c). As for repaying cash from lenders, capital repayment will be classified under financing activities while interest is recognized either under operating or financing activity.

Cash investments by or dividends paid to stockholders.

Cash investment by stockholders will be categorized under financing activities while dividend paid can either be categorized as operating or financing activity.

4 0
3 years ago
On September 1, 2021, Gold Gaming sold 400 one-year subscriptions to its online gaming website for $90 each. The total amount re
musickatia [10]

Answer:

Explanation:

The adjusting entry is shown below:

Deferred Subscription Revenue A/c Dr $12,000

            To Subscription revenue A/c $12,000

(Being the deferred subscription amount is adjusted)

The computation is shown below:

= Number of subscriptions sold × sale price each × (number of months ÷ total number of months in a year)

= 400 subscriptions × $90 × (4 months ÷ 12 months)

= $36,000  × (4 months ÷ 12 months)

= $12,000

The four months are reported from the September 1 to December 31

7 0
3 years ago
Other questions:
  • Last year, Nicole had to invest. She invested some of it in an account that paid simple interest per year, and she invested the
    6·1 answer
  • Helen, age 17. wanted to buy a Harley-Davidson "Sportster" motorcycle. She did not have the funds to pay cash butpersuaded the d
    9·1 answer
  • Stewart, a construction worker, fell from a beam and suffered serious injuries. He sued his employer, Sunrise Construction, for
    8·1 answer
  • Addison, Inc. uses a perpetual inventory system. The following is information about one inventory item for the month of Septembe
    10·1 answer
  • Brainliest ASAP helppppp please
    13·2 answers
  • Your finance textbook sold 49,000 copies in its first year. The publishing company expects the sales to grow at a rate of 25 per
    5·1 answer
  • Two securities have a covariance of 0.022. If their correlation coefficient is 0.52 and one has a standard deviation of 15%, wha
    15·1 answer
  • Compute the modified duration of a 9% coupon, 3-year corporate bond with a yield to maturity of 12%.
    13·1 answer
  • What happens if a monopolist increases the price of a good?
    15·1 answer
  • If people have a high degree of _______ one is more likely to want to stay with their current company.
    6·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!