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Sonja [21]
2 years ago
6

DT Motors paid its first annual dividend yesterday in the amount of $.15 a share. The company plans to double the dividend in ea

ch of the next 3 years. Starting in Year 4, the firm plans to pay $1.50 a share indefinitely. What is one share of this stock worth today if the market rate of return on similar securities is 13.8 percent?
Business
1 answer:
devlian [24]2 years ago
5 0

Answer:

Price = $8.92

Explanation:

Dividend from yr1 to yr3 will be multiplied by 2 since it doubles per year;

D1 = $0.15*2 = $0.30

D2 = $0.30 *2 = $0.60

D3 = $0.60 *2 = $1.20

D4 (onwards) = $1.50

Next, find the present value (PV) of each dividend;

PV(D1) = 0.30/(1.138) = 0.2636

PV (D2) = 0.60/(1.138²)= 0.4633

PV(D3 ) = 1.20/ (1.138³) = 0.8142

PV(D4 onwards) = \frac{[\frac{1.50}{0.138} ]}{1.138^{3} } = 7.3754

To find the price of the stock today, sum up present values above;

= 0.2636 + 0.4633 + 0.8142 + 7.3754

Price = $8.92

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Answer:

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Explanation:

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2 years ago
Central Valley Construction (CVC) purchased $80,000 of sheet metal fabricating equipment from Buffalo Supply on January 1, 20X1.
lys-0071 [83]

Answer:

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Explanation:

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2 years ago
Gilbert Company made an ordinary repair to a delivery truck during 2016 at a cost of $500 and capitalized the repair cost. What
Leto [7]

Answer:

The answer is:

Asset will be overstated

Net income will be overstated

Explanation:

Because of the incorrect capitalization(the process of converting or adding to a firm's asset):

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7 0
2 years ago
Explain the impact of effective purchasing on an operation’s cash flow.
Paraphin [41]

Answer:

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8 0
1 year ago
Zenith Company, a calendar-year entity, amends its defined benefit pension plan on January 1, 2019 and must recognize the increa
valentina_108 [34]

Answer:

net pension expense (or revenue) under U.S.GAAP is $600

Explanation:

the past service cost included in the 2013 net pension expense ( or revenue) under U.S. GAAP is calculated below;

past service cost = { ( <u>increase PSC for vested employees</u>)

                             (remaining working life of vested employees)

                                                        +

                              {(<u> increase PSC for non-vested employee)</u>}

                               ( remaining working life of non- vested employees)

past service cost = { $5000/10years) + ( $ 2000/20years)

past service cost = $500 + $100

past service cost =$600

Therefore the past service cost  included in the 2013 net pension expense (or revenue) under U.S.GAAP is $600

4 0
2 years ago
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