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Firlakuza
29 days ago
12

Over the next three years, Distant Groves will pay annual dividends of $.65, $.70, and $.75 a share, respectively. After that, d

ividends are projected to increase by 2 percent per year. What is one share of this stock worth today at a required return of 14.5 percent
Business
1 answer:
soldi70 [3.1K]29 days ago
6 0

Answer:

The current value of the share is $5.68.

Explanation:

To determine the stock's present price, we utilize the dividend discount model (DDM), which assesses the stock based on the current worth of projected dividends.

The formula to calculate today's stock price is:

P0 = D1 / (1+r)  +  D2 / (1+r)^2  +... +  Dn / (1+r)^n  +  Terminal value / (1+r)^n

If dividends are expected to grow consistently, the terminal value is calculated when the growth rate becomes constant:

Terminal value = Dn * (1+g) / (r - g)

Where,

  • g represents the constant growth rate for dividends

<pthus for="" our="" stock="" price="" calculation="" we="" have:="">

P0 = 0.65 / (1+0.145)  +  0.70 / (1+0.145)^2  +  0.75 / (1+0.145)^3  +  

(((0.75 * (1+0.02) / (0.145 - 0.02)) / (1+0.145)^3

Final calculation yields P0 = $5.678, rounded to $5.68.

</pthus>
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arsen [2988]

Answer:

$154,050

Explanation:

The following shows how net income for the business is calculated:

Total Sales           $634,000

Subtract: costs      -$328,000

Subtract: depreciation -$73,000

EBIT                   -$233,000

Subtract: interest      -$38,000

EBT                      195,000

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The calculation involves deducting all costs, interest, and taxes from the total sales revenue to arrive at the net income.

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The Merchandise Inventory account includes costs associated with purchases, shipping fees, preparation costs and handling expenses.

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