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shtirl [24]
1 year ago
6

The CFO of a publicly traded company is expecting to pay a dividend next year of $1.25 and projecting that the price of the comp

any’s stock will be $45 in 1 year. The CFO has determined that the required rate of return for the company is 10%. Based on the data available, what is the value of one share of stock today?
Business
1 answer:
Levart [38]1 year ago
8 0

Answer:

$42.604

Explanation:

Using dividend growth model we have D1 = $1.25, dividend at end of year 1

P1 = $45 price at the end of year 1

Ke = 10% Cost of capital or expected return

g = ? the growth rate expected

Thus

D2 = D1 + g

$45 = \frac{1.25+g}{0.10-g}

$4.5 - 45g = 1.25 + g

$3.25 = 46g

7.06% = g

Now, using value of g we have

P0 = \frac{1.25}{0.10-0.0706}

Current price P0 = $42.604

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How does newton's law apply to a company's brand? explain, citing at least one example. the bigger the brand the more force it t
LUCKY_DIMON [66]

Answer:

Explanation:

The person who spoke says that, if the the brand is very huge, (so also it will have a huge baggage ), by this , the force that will be needed to change its positioning will be high. An example is companies like

Unilever, P&G like to keep all the brands they have differently like Pringles and cornflakes and another example is companies like Hoover found it very hard to convince the world that they were more than vaccum cleaners as a brand.

6 0
2 years ago
For each item below, indicate to which category of elements of financial statements it belongs. (a) Dividends select a category
notka56 [123]

Answer:

(a)  Dividends : Equity

(b) Interest receivable :Assets

(c) Issuance of preferred stock : Equity

(d) Prepaid insurance: Assets

(e) Amortization: Expenses

(f) Cost of goods sold: Expenses

(g) Accounts payable: Liabilities

(h) Cash: Assets

(i) Equipment: Assets

(j) Gain on sale of equipment: Revenues

Explanation:

The main elements of financial statements are: Assets, Liabilities, Equity , Revenues and Expenses.  

Assets are all the resources that the company has.

Liabilities are all the obligations that the company has.

Equity is the difference of subtracting the liabilities of the assets.

Revenue is the economic benefit that the company receives.

Expenses are the disbursements that the company makes.

5 0
2 years ago
The defect rate for data entry of insurance claims at Sadegh Kazemi Insurance Co. has historically been about 1.50​%. This exerc
AURORKA [14]

Answer and Explanation:

Data provided in the question

defect rate i.e. \bar p = 1.50%

the sample size = n = 200

Now

S_p = \sqrt{\frac{\bar p (1 - \bar p)}{n} } \\\\= \sqrt{\frac{1.50\% (1 - 1.50\%)}{200} }

= 0.008595057

Now the 3 sigma control limits is

UCL_p = \bar p + 35p

= 0.015 + 3 (0.008595057 )

= 0.04078517

LCL_p = \bar p - 35p

= 0.015 - 3 (0.008595057 )

= 0

hence, the 3 sigma control limits are UCL 0.04078517 and LCL 0 respectively

7 0
2 years ago
Jim debt was reviewing the total accounts receivable. this month he received $80,000 from credit customers. this represented 40%
Eduardwww [97]
200,000 have to find what 10 percent is and multiply that by 10
4 0
1 year ago
Read 2 more answers
Turnbull Co. has a target capital structure of 58% debt, 6% preferred stock, and 36% common equity. It has a before-tax cost of
Elis [28]

Answer:

Turnbull's weighted average cost of capital will be higher by 0.65% if it has to raise additional common equity capital.

Explanation:

By combining the WACC formula and retained earnings cost of capital,we will arrive at;

WACC = Debt W × after tax cost of debt + Preferred stock weight × cost of capital + Equity W × Cost of capital

= 58% × 4.92% + 6% × 9.3% + 36% × 12.4%

= 2.85% + 0.56% + 4.46%

= 7.87%

Also, using the same WACC formula and using common equity cost of capital, , we will arrive at the below;

WACC = Debt W × after tax cost of debt + preferred stock weight × cost of capital + Equity W × cost of capital

= 58% × 4.92% + 6% × 9.3% + 36% × 14.2%

= 2.85% + 0.56% + 5.11%

= 8.52%

Therefore, increase cost using common equity over retained earnings is [ 8.52% - 7.87%]

= 0.65%

N.B we arrived at 4.92% for after tax by;

Pre tax 8.2%

Current tax rate 40%

= Pre tax × ( 1 - cost of debt)

= 8.2% × ( 1 - 40%)

= 8.2% × 0.6%

= 4.92%

7 0
2 years ago
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