Chris Anderson is interested in purchasing the common stock of Wildhorse, Inc., which is currently priced at $37.30. The company is expected to pay a dividend of $2.58 next year and to increase its dividend at a constant rate of 6.95 percent
(a) What should the market value of the stock be if the required rate of return is 14 percent? (Round answer to 2 decimal places e-g. 15.20.) $ Market value of stock
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Ответ:
The market value of the stock is $36.60
Explanation:
The formula relevant to computing the market value of the stock is given as
Price=Dividend/(return rate-growth rate)
Dividend=$2.58
return rate =14%
growth rate =6.95%
Price=$2.58/(14%-6.95%)=36.59574468
Approximately $36.60
The market price forecast is based on the dividend yield and gains yield attributable to the stock in the future.
Besides, a stock that promises higher dividend yield and gains yield would priced higher by investors owing to its high returns capacity while the reverse is the case for a stock with lower returns.
No wonder the stocks of companies like Apple is highly priced,even from their first day of listing on the stock exchange.
Ответ:
The best definition for continuum from the options above would be (C) a range with no clear divisions.
This is because continuum generally describes transitions from one variable to another without a clear defining point as to when the change happens.
The other options are incorrect because (A) a historical timeline, (B) a process to track progress of production, and (D) a schedule, generally have clear tracking points between variables, which a continuum doesn’t have.