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
Offering regular customers discounts on products is know as a
Alexxx [7]

Answer:

External customer incentives

Explanation:

External customer incentives are similar to customer incentives. The phrase external distinguishes between internal customers or company employees and other customers who chose to buy the company's products.

Customer incentives are offers given to customers by a company to attract and retain them. Businesses use incentives to convert potential customers into paying clients. Discounts are an example of external customer incentives.  They are used when a business faces competition from similar products by other companies. Business also offer end of the year, anniversary, and other seasonal discounts.

7 0
3 years ago
In what order must the three key financial statements be prepared?
ra1l [238]

Answer:

D. income statement, statement of owner's equity, balance sheet is the correct answer.

Explanation:

6 0
3 years ago
g Kaye's Kitchenware has a market/book ratio equal to 1. Its stock price is $12 per share and it has 5.2 million shares outstand
Ede4ka [16]

Answer:

48.00%

Explanation:

For computing the debt to capital ratio, first we have to determine the equity value and debt value which is shown below:

Equity value = Number of outstanding shares × stock price per share

                    = 5.2 million shares × $12

                    = $62.4 million

We know,

Total capital = Debt + equity

$120 million = Debt + $62.4 million

So, the debt would be

= $120 million - $62.4 million

= $57.6 million

Now the debt to capital ratio would be

= $57.6 million ÷ $120 million

= 48.00%

7 0
3 years ago
Silver Spoon Service repairs commercial food preparation equipment. The following budgeted cost data is available for 2019: Time
stepladder [879]

Answer:

The rate charged per hour of labor is 120.

Explanation:

Rate charged per hour of labor is given by:

= Budgeted cost per labor hour + Profit margin

= 660000/10000 + 54  

= 120

Therefore, The rate charged per hour of labor is 120.

5 0
3 years ago
Maurice and Stanley's train store has grown to the point that they need more capital to expand the current location and to open
harina [27]

Answer:

b. sole proprietorship.

Explanation:

  • A sole proprietorship is a single business entity that is responsible for all profits and losses and may use a sole name or a business name as a private company is known for its flexibility and thus does not need to take large loans from the government.
  • Have an advantage of less administrative paperwork and record-keeping than a corporation, have less risk of being stolen by investors.
6 0
3 years ago
Other questions:
  • Gallant Company reported net income of $2,500,000. The income statement included one extraordinary item: a $500,000 gain from co
    12·1 answer
  • Nakato, a South Asian country, exported goods worth $500 million and imported goods worth $400 million in the last fiscal year.
    8·2 answers
  • The constraint at Rauchwerger Corporation is time on a particular machine. The company makes three products that use this machin
    15·1 answer
  • Wine and Roses, Inc. offers a 6.0 percent coupon bond with semiannual payments and a yield to maturity of 6.91 percent. The bond
    8·1 answer
  • Albert, a nursing assistant, did not violate any laws when treating a patient. However, he was suspended without pay,
    11·1 answer
  • A new per unit subsidy for almond production in the United States increases the world supply of almonds. If almonds are inelasti
    12·1 answer
  • How many schools in plano
    15·1 answer
  • Why is a w-2 form so important
    7·1 answer
  • 1.- Registre el siguiente asiento de situación inicial en su libro Diario
    15·1 answer
  • How to calculate a trial balance​
    13·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!