Answer:
2.58%
Explanation:
holding period return (HPR) = [(ending value - initial value) + dividends received] / initial value
initial value of Petter's portfolio = (100 x $62.85) + (100 x $121.15) = $18,400ending value = (100 x $59.80) + (100 x $127.35) = $18,715dividends received = 100 x $1.60 = $160HPR = [($18,715 - $18,400) + $160] / $18,400 = $475 / $18,400 = 0.0258 = 2.58%
Q1: A researcher wants to understand the role of ethnocentrism, animosity, and self-esteem on purchase intention towards Chinese products in Pakistan with the moderating role of social status.
Based on the given information, answer the following questions:
I. Identify the independent variable(s), moderator, and dependent variable(s) of the study.
II. Develop the conceptual framework
III. Suggest the null and alternative hypothesis/hypotheses of the study.
Question No.2:
Rectify the Error if any in the following in-text citation as per APA guidelines
Perceived risk, which is defined as an individual’s degree of expected uncertainty associated with the result of using a certain technology (Tan and Lau, 2016). It includes five main groupings: service performance, monetary, time, societal, and security risks (Jacoby and Kaplan, 1972; Mha, 2015). Perceived risks in turn increase consumer hesitation and generate negative attitudes toward a service (Kalaiarasi and Srividya, 2012). This breeds a sense of anxiety and unease that in turn decreases the perceived value and usefulness of technology, thereby diminishing adoption intentions (Kumar, Arcand, Tai, 2012). Indeed, as stated by (Kazi and Mannan, 2013), electronic banking applications are associated with high perceived risks because consumers fear the exchange of personal financial information and services through online applications Moreover, studies have indicated that a high degree of perceived risk and insecurity is generally associated with mobile devices as people dread the loss or theft of these appliances and the information they hold (Hanafizadeh, 2013). Studies have also found that consumers fear the uncertainty associated with mobile applications, including system errors, software problems, connection troubles, and third party hacking (Tai and Ku, 2013). Therefore, high risks will significantly reduce an individual’s likelihood to adopt m-banking technologies (Kumar, Arcand, Tai, 2012).
Answer:
A researcher wants to understand the role of ethnocentrism, animosity, and self-esteem on purchase intention towards Chinese products in Pakistan is explained below in complete details.
Explanation:
1. Independent variable are those variables which are shaped by the experimenter, also described the incentive variable. There are 3 Autonomous Variables
IV. - • Ethnocentrism • Animosity • Self Esteem
Dependent Variable- The variable that is covered, also termed acknowledgment variable.
DV -the purpose of acquiring Chinese commodities.
Moderator - moderator is the variable that improves the intensity of the association between IV and DV (as discussed in the description above)
Social Status is the moderator.
3. Alternative hypothesis - Social Status moderates the variation in the purchasing purpose of Chinese commodities between people of differing Ethnocentrism, self-esteem, and Animosity towards Chinese commodities in Pakistani people.
Null hypothesis - there is no distinction between the purchasing intention of people of differing Ethnocentrism, Self Esteem, and Animosity towards Chinese commodities in pakistani population.
Shawn goes to the library to pick up a copy of a common tax form used file taxes. Which of the following is MOST likely the form that Shawn got?
1099
W-2
1776
1040
Answer:
Shawn would choose form 1040 filing tax form.
Explanation:
The answer is D.) 1040
I got a picture of the answer.
Hope this helps!
Stock Y has a beta of 1.10 and an expected return of 13.15 percent. Stock Z has a beta of .80 and an expected return of 6 percent. If the risk-free rate is 5.0 percent and the market risk premium is 7.6 percent, what are the reward-to-risk ratios of Y and Z?
Answer:
For Y = 7.31%
For Z = 1.25%
Explanation:
The computation of reward-to-risk ratios of Y and Z is shown below:-
Reward to Risk Ratio = (Expected Return of Security - Risk free Return) ÷ Beta of Security
Reward to Risk Ratio Y = (13.05% - 5%) ÷ 1.10
= 7.31%
Reward to Risk Ratio Z = (6% - 5%) ÷ 0.80
= 1.25%
hence, the same is to be considered
Equipment costing $17,500 with an estimated salvage value of $1,180 and an estimated life of 4 years was purchased on October 31, 2019. Using the straight-line depreciation method, what is the amount of depreciation expense to be recorded at December 31, 2019?
Answer:
the depreciation expense recorded is $680
Explanation:
The computation of the depreciation expense under the straight-line method is shown below:
= (Purchase cost - residual value) ÷ (estimated life)
= ($17,500 - $1,180) ÷ ( 4 years)
= $4,080
Now the 2 months depreciation is i.e. from November to December
= $4,080 × 2 months ÷ 12 months
= $680
Hence, the depreciation expense recorded is $680
The December 31, 2018, balance sheet of Whelan, Inc., showed long-term debt of $1,415,000, $143,000 in the common stock account, and $2,680,000 in the additional paid-in surplus account. The December 31, 2019, balance sheet showed long-term debt of $1,610,000, $153,000 in the common stock account and $2,980,000 in the additional paid-in surplus account. The 2019 income statement showed an interest expense of $95,500 and the company paid out $148,000 in cash dividends during 2019. The firm’s net capital spending for 2019 was $990,000, and the firm reduced its net working capital investment by $128,000.
1. What was the firm's cash flow to creditors during 2019? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 1,234,567.)2. What was the firm’s cash flow to stockholders during 2019? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations an
Answer:
a. -$99,500
b. -$162,000
Explanation:
a. Cash Flow to Creditors = Interest paid - (Ending long-term debt - Beginning long-term debt)
Cash Flow to Creditors = $95,500 - ($1,610,000 - $1,415,000)
Cash Flow to Creditors = $95,500 - $195,000
Cash Flow to Creditors = -$99,500
b. Cash Flow to Stockholders = Dividends paid - [(Ending common stock + Ending additional paid-in surplus) - (Beginning common stock + Beginning additional paid-in surplus)]
Cash Flow to Stockholders = $148,000 - [($153,000 + $2,980,000) - ($143,000 + $2,680,000)]
Cash Flow to Stockholders = $148,000 - [$3,133,000 - $2,823,000] = $148,000 - $310,000
Cash Flow to Stockholders = -$162,000
Consider the recorded transactions below.
Credit Debit
Accounts Receivable 7,900
Service Revenue 7,900
Supplies 2,050
Accounts Payable 2,050
Cash 9,700
Accounts Receivable 9,700 .
Advertising Expense 1,100
Cash 1,100
Accounts Payable 3,200
Cash 3,200
Cash 1,200
Deferred Revenue 1,200
Required:
Post each transaction to T-accounts and compute the ending balance of each account. The beginning balance of each acc the transactions is: Cash, $2,900; Accounts Receivable, $3,700; Supplies, $350; Accounts Payable, $3,000; Deferred Reve Service Revenue and Advertising Expense each have a beginning balance of zero.
Answer:
gogle know the answer that is the secret
Expando, Inc., is considering the possibility of building an additional factory that would produce a new addition to their product line. The company is currently considering two options. The first is a small facility that it could build at a cost of $9 million. If demand for new products is low, the company expects to receive $9 million in discounted revenues (present value of future revenues) with the small facility. On the other hand, if demand is high, it expects $12 million in discounted revenues using the small facility. The second option is to build a large factory at a cost of $10 million. Were demand to be low, the company would expect $12 million in discounted revenues with the large plant. If demand is high, the company estimates that the discounted revenues would be $15 million. In either case, the probability of demand being high is 0.40, and the probability of it being low is 0.60. Not constructing a new factory would result in no additional revenue being generated because the current factories cannot produce these new products.
a. Calculate the NPV for the following: (Leave no cells blank - be certain to enter "0" wherever required. Enter your answers in millions rounded to 1 decimal place.)
Plans NPV
Small facility $ million
Do nothing million
Large facility million
b. The best decision to help Expando is:_______.
a. to build the large facility.
b. to build the small facility.
c. to do nothing.
Answer:
a)
small facility:
initial outlay = -$9,000,000
present value of expected cash flows = (0.6 x $9,000,000) + (0.4 x $12,000,000) = $10,200,000
NPV = $10,200,000 - $9,000,000 = $1,200,000
large facility:
initial outlay = -$10,000,000
present value of expected cash flows = (0.6 x $12,000,000) + (0.4 x $15,000,000) = $13,200,000
NPV = $13,200,000 - $10,000,000 = $3,200,000
b) the best option is:
a. to build the large facility.the NPV of the large facility is significantly higher than the NPV of the smaller facility, while the required investment is not that different.
Even as it begins to produce the Mirai for the U.S. market, Toyota continues to manufacture its traditionally fueled cars, trucks, and SUVs. Doing this helps Toyota manage the ______ of industrial demand.
a. volatility
b. division
c. durability
d. development
Answer:
a. volatility
Explanation:
From the question, we are informed that "Even as it begins to produce the Mirai for the U.S. market, Toyota continues to manufacture its traditionally fueled cars, trucks, and SUVs. In case of Doing this it helps Toyota manage the volatility of industrial demand.
volatility of industrial demand do occur where there is uncertainty as far as demand is concerned in the consumer products , as a result of this most firms to catch up with compitition, growing their sales an lot more , so in this case Toyota still continues to manufacture its traditionally fueled cars, trucks, and SUVs even though there is Mirai for the U.S. market.
Which statement best compares these two loans?
Loan A
Loan B
O The annual percentage rate for loan A is higher
than the rate for loan B
Loan
amount
$15,000
$10,000
O The interest for loans A and B will cost the borrower
the same amount over time.
APR
17%
19%
O The interest is about half the principal for A and
almost equal to the principal for B.
The total payment for A is higher than for B, even
though the principal is actually lower
Loan
repayment
term
5 years
5 years
Total
interest
paid
$7,367.32
$9,857.02
) Intro
Done
Based on the given information, it seems that Loan A has a lower principal amount ($15,000) compared to Loan B ($10,000). However, Loan A has a higher annual percentage rate (APR) of 17% compared to Loan B's 19% APR.
What are the basis of Loan comparison ?This means that over the course of the loan term, the borrower will end up paying more interest for Loan B, making the total payment for Loan B higher than Loan A.
In terms of the interest, it appears that for Loan A, the interest is about half the principal amount, whereas for Loan B, the interest is almost equal to the principal amount. This indicates that Loan B may be more expensive in terms of interest costs.
Despite Loan A having a lower principal amount, the total interest paid for Loan A is $7,367.32, which is lower than the total interest of $9,857.02 for Loan B. This suggests that Loan A may be a better option for the borrower, as it would result in lower overall costs over the loan term.
Overall, the comparison between Loan A and Loan B highlights the importance of considering both the interest rate and the principal amount when evaluating loan options.
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True/ False In Alex Tabarrok’s TED talk, he mentions, "innovative ideas are driving growth within the global economy more than ever before."
Answer:
True
Explanation:
The man Alexander Taborrak is a Canadian/American economist. He is a university professor and also a director of research.
The correct answer to this question is true. As he mentioned the importance of innovation and also the importance of creativity and still on the topic, he went on to make the statement that that the best is yet to come as 'innovation ideas are the driving growth of the economy as a whole'.
The basic principle involved with expense recognition is: Multiple Choice All costs that are used to generate revenue are recorded in the period the revenue is recognized. All transactions are recorded at the exchange price. The business is separate from its owners. The business will continue to operate indefinitely unless there is evidence to the contrary.A company orders office supplies in June. Those supplies are received and paid for in July. The supplies are used in August. In which month should the company record supplies expense
Answer:
All costs that are used to generate revenue are recorded in the period the revenue is recognized
Supplies expense is recorded in August
Explanation:
Expenses are the cost that a company incurs in the process of generating revenue from an asset. As such when a business is paying cost like wages, rent, and office materials it is generating revenue from sales and services provided.
The expense recognition principle requires that a business records expenses when revenue associated with them are recognised.
An office that orders office supply and uses them in August will only recognise supply expense when there is use of the office supply.
So supply expense will be recognised in August
Assume that England and Spain can switch between producing cheese and producing bread at a constant Labor Hours Needed to Make 1 Unit of Number of Units Produced in 24 Hours Cheese Bread Cheese BreadEngland 2 3 12 8Spain 3 6 8 4Assume that England and Spain each has 24 labor hours available. If each country divides its time equally between the production of cheese and bread, then total production is:_________. a. 10 units of cheese and 6 units of bread. b. 25 units of cheese and 7.5 units of bread. c. 20 units of cheese and 12 units of bread. d. 12 units of cheese and 8 units of bread.
Answer:
a. 10 units of cheese and 6 units of bread.
Explanation:
Total there are 24 labor hours
So, for each there is 12 hours
Now the distribution is as follows
For england
= 12 ÷ 2 + 12 ÷ 3
= 6 units + 4 units
= 10 units
For Spain
= 12 ÷ 3 + 12 ÷ 6
= 4 units + 2 units
= 6 units
Hence, the correct option is a
And, the same is to be considered
All other options are wrong
Sue now has $490. How much would she have after 8 years if she leaves it invested at 8.5% with annual compounding?
Answer
a.
$1,148.14
b.
$837.58
c.
$941.10
d.
$1,157.55
e.
$724.64
Answer:
c.$941.10
Explanation:
Calculation for How much would she have after 8 years
Using this formula
FV = PV(1+i)^n
FV represent future value
PV represent present value
i represent interest rate
n represent number of periods
Let plug in the formula
FV = 490(1 + .085)^8
FV= $941.10
Therefore How much would she have after 8 years will be $941.10
Escalation bias refers to the situation in which:_______. a. investors put more money into a failure rather than into a success. b. investors tend to follow the herd. c. investors have a propensity to sell winners too soon and hang on to losers too long. d. investors ignore bad news and overemphasize good news. e. investors are all noise traders.
Answer:
a. investors put more money into a failure rather than into a success.
Explanation:
The escalation bias is a part of behavioral finance. In this the investor is not accepting their mistake if they had done any kind of mistake. Rather accepting it they put more money in the asset that performed poorly also at the same time the bad news is ignored by them, they only focused to invest more and more in the stocks
hence, the correct option is a
should I cover for my coworker who sneaks out
no then you would get in trouble, but then again it would be nice for you to do it fir him. tell the boss that he needed to go do something if he gets cureas.(can't spell)
Suppose the beta of Microsoft is 1.13, the risk-free rate is 3 percent, and the market risk premium is 8 percent. Calculate the expected return for Microsoft. A. 12.04 percent B. 15.66 percent C. 13.94 percent D. 8.65 percent
Answer:
i think its C
Explanation:
Some club members want to increase membership dues by $7.00.Other club members want to increase them by $3.00.They have reached an impasse on the issue,so they decide to split the difference and raise the dues by $5.00.What type of conflict style did the group use?
A) Accommodating
B) Collaborating
C) Competing
D) Avoiding
E) Compromising
Answer:
Option E (Compromising) would be the correct choice.
Explanation:
A conflict mediation method of consensus attempts to discover a reason to reasonably pleasing parties and from both sides of the debate. When it becomes more necessary to optimize a compromise than for the conclusion to always be perfect, a deadline is fast approaching, even at such an ongoing crisis, because you need a workable measure only for the moment, such style might be suitable to be using.The other choices aren't relevant to the situation presented. Because otherwise, that is the right answer.
You expect KT Industries (KTI) will have earnings per share of $3 this year and expect that they will pay out $1.50 of these earnings to shareholders in the form of a dividend. KTI's return on new investments is 15% and their equity cost of capital is 12% The expected growth rate for KTI's dividends is:_________
a. $12.50
b. $39.25
c. $33.35
d. $20.00
Answer:
Growth rate = 7.50%
Explanation:
Given:
Return on investment = 15%
Retention ratio = [1.5 / 3] 100 = 50%
Find:
Growth rate
Computation:
Growth rate = Return on investment*Retention ratio
Growth rate = 15% x 50%
Growth rate = 7.50%
Four people each have a different willingness to pay for one unit of a good: George will pay $15, Glen will pay $12, Tom will pay $10, and Peter will pay $8. If price decreases from $9 to $8 then the consumer surplus from this unit will increase by___. The consumer surplus is calculated as the marginal benefit or the value of the good minus its price, then summed over the quantity bought. If the price is $9, there are only 3 people (George, Glen, and Tom) who would buy the goods. Since Peter wants to pay $8, he will not buy this good since its price ($9) is higher than his willingness to pay. The consumer surpluses for George, Glen, and Tom are $6 (=15 - 9), $3 (=12 - 9), and $1 (=10 - 9), respectively. The total consumer surplus would be $10 (= 6 + 3 + 1). If the price is $8, all of them would be willing to buy the goods. The consumer surpluses for George, Glen, Tom, and Peter are $7 (=15 - 8) $4 (=12 - 8), $2 (=10 - 8), and $0 (=8 - 8), respectively. The total consumer surplus would be $13 (= 7 + 4 + 2). Thus, if price decreases from $9 to $8 then the consumer surplus from this unit will increase by $3. If the price increases from $9 to $11, what would be the decrease in consumer surplus?
Answer:
If price decreases from $9 to $8 then the consumer surplus from this unit will increase by $3.
Explanation:
total consumer surplus = ($15 + $12 + $10 + $8) - (4 x $8) = $45 - $32 = $13. Consumer surplus is the difference between the maximum amount that consumers are willing to pay for a good or service, and its actual price.
when the price was $9 per unit, total consumer surplus = ($15 + $12 + $10) - (3 x $9) = $37 - $27 = $10.
that means that consumer surplus increased by $13 - $10 = $3
Diversification is good for shareholders. So why shouldn't managers acquire firms in different industries to diversify a company?
Answer:
The definition would be defined in the clarification portion below, according to the particular context.
Explanation:
Even before managers accomplish diversification besides trying to create a conglomerate whilst also buying other corporations, it is almost always accomplished at a premium surrounded by white market rates because once shareholders could effectively achieve consolidation according to their own besides investing money throughout multiple organizations. Although it may be more difficult to accurately determine productivity in a conglomerate, authority costs will be lower as well as assets might well be apportioned around through segments incompetently.What should you do during the development phase regardless of the type of event you are implementing?
a) identify your goals and objectives
b) identify the charity for the event profits
c) identify the location of the event
d) identify who will be the master of ceremonies
Answer:
d) identify who will be the master of ceremonies
Explanation:
a) identify your goals and objectives ⇒ Initiation phase b) identify the charity for the event profits ⇒ Initiation phase c) identify the location of the event ⇒ Planning or design phaseOne of the first activities carried out during the operations or development phase should be to establish his/her work team (including master of ceremonies).
The term learning organization is used to describe organizations in the educational
and nonprofit industries.
True or false
Answer: False
Explanation: The term "Learning organizations" can be defined as a place where people continue learning and expand their capacity to see the results they desire. According to Peter Sange, the one who coined the concept with his colleagues, Learning organization responds as a company that helps its employees to learn more.
Steve Colburn's portable sawmill used 100% for business, was completely destroyed by fire. The sawmill had an adjusted basis of $35,000 and a fair market value of $50,000 before the fire. The sawmill was uninsured. Steve's casualty loss is:________.1) $49,900.
2) $50,000.
3) $35,000.
4) $34,900.
Answer: $35,000
Explanation:
A casualty loss is simply a loss that an individual or business incurs when a property is damaged, or destroyed due to an unexpected or sudden event like fire, volcanic eruption, flood etc.
Here, Steve's casualty loss will be gotten when we compare both his adjusted basis and the fair market value and then we choose the lesser one. Since $35000 is lesser than $50000, therefore the answer will be $35000.
You decide that structural changes must be made immediately at Holden Evan to deal with the problems caused by the three SBU marketing teams. What should you do?
Hello. This question is incomplete. The full question is:
An additional challenge facing Holden Evan is the rise in costs of raw materials. Each of the SBUs currently maintains its own relationships with suppliers and is paying different prices for the same goods. The CEO of Holden Evan tells you that this is a serious issue for the company. "We must find a way to rein in these costs. I expect you to improve the company's efficiency and find other ways to reduce costs right away.
You decide that structural changes must be made immediately at Holden Evan to deal with the problems caused by the three SBU marketing teams. What should you do?
Answer:
The ideal would be to merge all marketing teams into one.
Explanation:
I would unite the three marketing teams that make up each SBU and form a single marketing team that should work in unity and serve all product lines in a unique and no longer individual way as was done previously. In this way, the cost of production and raw materials will be unique and more comprehensive, allowing greater control over expenses and team work.
The thing that should be done will be to merge all the marketing teams into one.
From the information given, the challenge that the company is facing is the rise in costs of raw materials since each of the SBUs currently maintains its own relationships with suppliers and is paying different prices for the same goods.
Therefore, in order to rein in these costs, it's important to merge all the marketing teams into one. Thus will be important in enhancing the company's efficiency and reducing cost.
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First City Bank pays 7 percent simple interest on its savings account balances, whereas Second City Bank pays 7 percent interest compounded annually.If you made a $64,000 deposit in each bank, how much more money would you earn from your Second City Bank account at the end of 9 years? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Answer:
$13,341.39
Explanation:
The computation is shown below:
For First city bank,
The Future value is
= $64,000 + $64,000 × 7%× 9
= $64,000 + $40,320
= $104,320
And for Second city bank,
Given that
NPER = 9,
RATE = 7%,
PV = $64,000
PMT = $0
The formula is shown below:
=-FV(RATE;NPER;PMT;PV;TYPE)
After applying the above formula, the future value is $117,661.39
Now finally
More money would be
= $117,661.39- $104,320
= $13,341.39
A change in which of the following will cause the aggregate demand curve to shift?
A)
energy costs
B)
productivity of workers
C)
regulations
D)
consumer spending
Answer:
D) consumer spending
Explanation:
The aggregate demand is the total of all goods and services that consumers are willing and able to buy in the economy in a given period. It is the demand for all goods and services in the entire country per period. Price variation usually causes movements along the demand curve.
Other factors that influence governments, firms, and household expenditures cause the aggregate demand curve to shift. A change in consumer spending will reduce the number of goods demanded. The aggregate demand will shift inwards.
Please answer ASAP:
Eve runs a small Business. She runs her business operations from a rented office. Eve has paid the office rent worth $10,000 for the next four months in advance. Under which component of her businesses balance sheet with this amount fall?
A. Current assets
B.fixed assets
C. Current liabilities
D. Long term liabilities
E. Owners equity
Answer:
A. Current assets
Explanation:
Eve has prepaid her rent for the next four months. It means Eve has made payments for a service that she is yet to consume. Prepayments are currents assets. In this case, Eve's landlord owes her four months' worth of rent, only that she does not expect monetary payment.
Because Eve will use the room for four months without payments, the rent prepayment is an asset to the business.
Current assets are the assets convertible to cash in a period of one year or less. Liabilities would be the money Eve owes to third parties.
Answer:
A
Explanation:
it is current assets because she has paid for it in advance and it is a short period of time.
A shirt manufacturer buys cloth by the 100 yard roll from a supplier. For setting up a control chart to manage the irregularities (e.g., loose threads and tears) the following data was collected from a sample provided by the supplier.
a. Determine the c¯ , Sp, UCL and LCL for a c -chart with z = 2. (Leave no cells blank - be certain to enter "0" wherever required. Round your answers to 2 decimal places.)
Answer: see attachments
Explanation:
For a c -chart with z = 2 (irregularities in 10 samples) ; c¯ = 4.3, SP = 2.07, UCL = 8.45, LCL = 0.15.
What do you mean by Sample?A sample is a condensed, controllable representation of a larger group. It is a subgroup of people with traits from a wider population.
Calculate the average irregularities per sample
Total irregularities in 10 samples = 43
No of samples = 10
Average irregularities / sample c¯ =43/10 = 4.3
This is the center line of the control chart denoted by
Sp = sqrt(4.3) = 2.07
Assuming Z value for control chart = 2; Since this is not mentioned here
UCL = 4.3 + z
UCL = 4.3 + 2*
UCL = 8.45
LCL = - z
LCL = 4.3 - 2*
LCL = 0.15
Therefore, c¯ = 4.3, SP = 2.07, UCL = 8.45, LCL = 0.15.
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Consider a bank policy to maintain 12% of deposits as reserves. The bank currently has $10 million in deposits and holds $400,000 in excess reserves. What is the required reserve on a new deposit of $50,000?
Answer: $4,000
Explanation:
The required reserve and the excess reserve held by the bank are different because the required reserve is imposed by the central bank and the excess reserve is done by the bank.
The 12% reserves the bank is holding are both the excess and required reserves.
This means that the excess reserve is;
= 400,000/10,000,000
= 4%
The required reserve ratio will therefore be;
= 12% - 4 %
= 8%
Required reserve on $50,000 will be;
= 8% * 50,000
= $4,000
Red Sun Rising just paid a dividend of $2.52 per share. The company said that it will increase the dividend by 30% and 25 over the next two years, respectively. After that, the company is expected to increase its annual dividend at 3.8%. If the required return is 11.8%, what is the stock price today?a. $45.44.b. $42.51.c. $47.08.d. $25.00.e. $48.72.
Answer: e. $48.72.
Explanation:
Dividend next year is = 2.52 * (1 + 30%) = $3.276
Dividend in two years = 3.276 * ( 1 + 25%) = $4.095
Then calculate the terminal value at year 2;
= (Dividend * (1 + growth rate))/ (Required return - growth rate)
= (4.095 * (1 + 3.8%)) / (11.8% - 3.8%)
= $53.132625
Add their present values up;
= (3.276/( 1 + 11.8%)) + (4.095 / (1 + 11.8%)) + (53.132625 / ( 1 + 11.8%))
= $48.72