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mestny [16]
2 years ago
11

ABC Inc. just paid a dividend of $1.00 this year. The stock price is $15.43 currently. The market risk premium is 15% and the ri

sk-free rate is 6%. What will the price of ABC's stock be if the dividend growth increases by 25%?
Business
1 answer:
mariarad [96]2 years ago
4 0

Answer:

Price lowers and becomes negative or -5.37 dollars

Explanation:

Market risk premium's formula could be written as dividends/price + dividend's growth rate. Therefore, we dividend growth rate according to the current price and dividend level equal to market risk premium - dividends/price or 0.15 - 1/15.43 = 0.086 or 8.6%. If the dividend growth rate rises by 25% than new one is 33.6%. Price is equal to dividends/market risk premium - dividend growth rate or in this case 1/0.15-0.336 or 1/-0.186 or -5.37 dollars. If the price is negative that would mean that any future selling of the stock would mean that ABC would have to pay in order to sell it.

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A bank with a two-year horizon has issued a one-year certificate of deposit for $50 million at an interest rate of 2 percent. Wi
IRINA_888 [86]

Explanation:

The bank runs the danger that just before the second year, the short-term interest rate will increase, increasing its Lending value, but leaving untouched the interest income the bank gets from either the Treasury bill.  

Annual interest revenue of 0.04* $50 million= 2 million and annual interest costs for the bank (0.02)* $50 million= 1 million, between 2 per cent to 4 per cent for the Treasury note.

The bank makes a profit of $2 million – $1 million = $1 million. If the interest rate rises 1 percent, the bank’s profit falls to

((0.04)* $50 million) – ((0.03) * $50 million) = $500,000.  

7 0
2 years ago
Calculate the product of savings and growth_multiplier. Store the result in year1. What do you think the resulting type will be?
alexandr1967 [171]

<u>Explanation:</u>

<u></u>

growth_multiplier  is 1.1

savings = 100

desc = "compound interest "

# Place product of growth_multiplier and savings  to year 1

Year 1 =  growth_multiplier* savings  

# Print  

print(type(year1))

Now,

# Place addition of desc & desc  

doubledesc  will be  desc + desc

# Print doubledesc

print(doubledesc)

<u></u>

8 0
2 years ago
KFC in Japan altered the sweetness of its coleslaw to appeal to Japanese tastes. This is an example of which type of global mark
polet [3.4K]

Answer:

c.Product customization

Explanation:

What is Product customization?

Its a type  of strategy  that companies implement to attarct more customers. It usually implies the modification of designs, uses and/or characteristics of their items to satisfy the customer’s needs or desires.  

This policy has the benefit of giving the company the opportunity to stand out from the competitors by fine-tuning items and services. Therefore the company gains a bigger portion of market share

In this case, KFC, altered their global formula in order to gain more acceptance in the Japanese market

7 0
2 years ago
Someone who wants credentials in skilled training, but in less time than a four- year degree should consider...
Pavlova-9 [17]

Answer:

Career or technical education.

Explanation:

Someone who wants credentials in skilled training, but in less time than a four- year degree should consider Career or technical education.

A technical education course is solely based on providing skilled training which will help the student to learn the practicalities in a shorter period of time.

They are focused on a specific kind of skilled training which you can use in your career. Technical education is also known by the name of a diploma which can be completed in a period of 2 years or even in a period of months.

4 0
2 years ago
To help them estimate the company's cost of capital, Smithco has hired you as a consultant. You have been provided with the foll
Zarrin [17]

Answer:

Option (D) is correct.

Explanation:

Cost of common stock:

= (Expected dividend at the end of Year 1 ÷ Price of stock) + Growth rate.

= (1.45 ÷ 22.50) + 0.065

= 0.0644 + 0.065

= 0.1294 i.e., 12.94%

Conclusion:-

Cost of common stock = 12.94%

Note:-

D1 = Expected dividend at the end of Year 1,

P0 = Current price of common stock, and

gL = Growth level i.e., growth rate in dividend.

3 0
2 years ago
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