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2 years ago

Stocks that don't pay dividends yet

Business

1 answer:

mariarad [96]2 years ago

5 0

Answer:

horizon value at year 5 = $94.3444

current intrinsic intrinsic value P₀ = $47.73

Assuming that the markets are in equilibrium, Goodwin's current expected dividend yield is and Goodwin's capital gains yield is <u>0(it pays no dividends)</u>.

Goodwin has been very successful, but it hasn't paid a dividend yet. It circulates a report to its key investors containing the following statement:

Goodwin's investment opportunities are poor.

Is this statement a possible explanation for why the firm hasn't paid a dividend yet?

<u>B. False</u>

Generally companies that are experiencing a rapid growth do not pay dividends, because they need all the cash that they can use to finance their expansion. Sometimes mature companies that have a steady growth rate will also choose not to pay dividends because they consider themselves as solid investments and not paying dividends allows them to grow more and should increase stockholders' wealth more.

Explanation:

D₃ = $5.50

D₄ = $7.073

D₅ = $9.096

D₆ = $9.642 (and a constant growth rate of 4.38%

Re = 14.60%

horizon value at year 5 = $9.642 / (14.6% - 4.38%) = $94.3444

intrinsic value P₀ = $94.3444 / 1.146⁵ = $47.73

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You are 40 years old. Your investment portfolio currently consists of: (1) a savings account, with a $16,000 balance, (2) certif

murzikaleks [220]

Answer:

Option C is correct one.

<u>The investment strategy is conservative. </u>

Explanation:

This is so because most of the money is either in cash or certificates of deposits. Portfolio also consists 40% of bonds with 6% interest rate and 40% equities are also only of the employer's stock. The rate of appreciation and dividend is also very low on this stock. Hence due to all these factors we can say the strategy is conservative.

8 0

2 years ago

Laserscope Inc. is trying to determine the best combination of short-term and long-term debt to employ in financing its assets.

snow_lady [41]

Answer:

Laserscope Inc.

Return on Equity (ROE):

= $1,466,400/$18,000,000 * 100

= 8.15%

Explanation:

a) Laserscope's Return on Equity (ROE) is a financial performance measure, calculated by dividing the net income or Earnings After Tax (EAT) by its total shareholders' equity. It is usually expressed as a percentage. So the above calculation is further multiplied by 100.

b) Data and Calculations:

Current assets = $16

Fixed assets = $20

Total assets = $36

Debt ratio = 50% of $36 million = $18 million

Therefore, Stockholders' equity = 50% (1 - 50%) or $18 million

EBIT = $4.1 million

Short-term debt = $6 million

Long-term debt = $12 million

Interest on short-term debt = $420,000 (7% * $6 million)

Interest on long-term debt = $1,236,000 (10.3% * $12 million)

Total interest expense = $1,656,000

Earnings before interest and taxes = $4,100,000

Interest expense 1,656,000

Earnings before taxes 2,444,000

Company tax (40%) (977,600)

Earnings after taxes (EAT) $1,466,400

7 0

2 years ago

A clothing manufacturer makes both shirts and shorts. The sales price for shirts is $24 with variable costs of $10 and shorts ha

Gnoma [55]

Answer:

1)They would prefer to make shorts as contribution margin per unit is higher for shorts

Explanation:

Step 1. Given information.

Sales price shirts is $24

Variable costs shirts is $10

Sales price shorts $32

Variable costs shorts $17

Step 2. Formulas needed to solve the exercise

Contribution margin = sales price - variable cost

Step 3. Calculation.

Contribution margin shirts = 24 - 10 = 14

Contribution margin shorts = 32 - 17 = 15

Step 4. Solution.

<h2>Contribution margin shorts > Contribution margin shirts</h2>

6 0

2 years ago

Starling Company purchased machinery at the beginning of Year 1 at a cost of $86,100. The machinery has an estimated life of fiv

Alja [10]

Answer: $10,906

Explanation:

Given that,

Purchased machinery at the beginning of Year 1 = $86,100

machinery has an estimated life of five years,

Estimated residual value = $4,305

Accumulated depreciation = $49,077 at the end of Year 2

Year 3 Depreciation expense:

= $\frac{Cost\ of\ machinery - Estimated\ residual\ value - Accumulated\ depreciation}{3}$

= $\frac{86,100 - 4,305 - 49,077}{3}$

= $10,906

5 0

2 years ago

Diogo has a utility function,U(q1, q2) = q1 0.8 q2 0.2,where q1 is chocolate candy and q2 is slices of pie. If the price of slic

guapka [62]

Answer:

$(0.5 \times 8q_2)+q_2=100\\\\5q_2=100\\\\q_2=20$

since $q_2 = 20$

$q_1 = 8*20\\\\q_1=160$

Explanation:

U(q₁ q₂)

$q_1^{0.8}q_2^{0.2}\\\\P_1= \$0.5 \ P_2=\$1 \ Y=100$

Budget law can be given by

$P_1q_1+P_2q_2=Y\\\\0.5q_1+q_2=100$

Lagrangian function can be given by

$L=q_1^{0.8}q_2^{0.2}+ \lambda (100-0.5q_1-q_2)$

First order condition csn be given by

$\frac{dL}{dq} =0.8q_1^{-0.2}q_2^{0.2}-0.5 \lambda=0\\\\0.5 \lambda=0.8q_1^{-0.2}q_2^{0.2}---(i)$

$\frac{dL}{dq} =0.2q_1^{0.8}q_2^{-0.8}- \lambda=0\\\\ \lambda=0.2q_1^{0.8}q_2^{-0.8}---(ii)$

$\frac{dL}{d \lambda} =100-0.5q_1-q_2=0\\\\0.5q_1+q_2=100---(iii)$

From eqn (i) and eqn (ii) we have

$\frac{0.5 \lambda}{\lambda} =\frac{0.8q_1^{-0.2}q_2^{0.2}}{0.2q_1^{0.8}q_2^{-0.8}} \\\\0.5=\frac{4q_2}{q_1}\\\\q_1=8q_2}$

Putting $q_1=8q_2$ in euqtion (iii) we have

$(0.5 \times 8q_2)+q_2=100\\\\5q_2=100\\\\q_2=20$

since $q_2 = 20$

$q_1 = 8*20\\\\q_1=160$

3 0

2 years ago