sadielebaron
19.01.2021 •
Business
A stock is currently selling at 80 per share to yield an annual nominal interest rate of 10%, compounded semi-annually. The stock is expected to pay dividends at the end of each year forever. The next dividend (payable one year from now) is 2 and is expected to increase at a rate of X% per year. Calculate X.
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Ответ:
X is 7.75%
Explanation:
The yield on a stock is determined by dividend and stock appreciation in the market.
First, we need to calculate the effective annual yield
Effective annual yield = ( 1 + Nominal interest rate/periods per year )^numbers of compounding periods annually - 1
Effective annual yield = ( 1 + 10%/2 )^2 - 1
Effective annual yield = 1.1025 - 1
Effective annual yield = 0.1025
Effective annual yield = 10.25%
Now use the following formula to calculate the X
Price of the share = Expected dividend / ( Effective annual yield - Growth rate )
Where
Price of share = 80
Expected Dividend = 2
Effective annual yield = 10.25%
Growth rate = X
Placing values in the formula
80 = 2 / ( 10.25% - X )
0.1025 - X = 2 / 80
0.1025 - X = 0.025
-X = 0.025 - 0.1025
-X = -0.0775
X = 0.0775
X = 7.75%
Ответ:
Explanation:
The correct value of inventory:
Year end balance $267,670
Add:
Goods purchased on term FOB shipping point $25,600
Goods sold on terms FOB destination $52,170
Less: Goods purchased on terms FOB destination ($43,630)
Correct inventory as on December 31 $301,810