Answer:
A lower real interest rate makes saving less appealing.
Explanation:
The lower the interest rate, the lower the amount saved and the higher the interest rate, the higher the amount of money saved. There is a positive relationship between interest rate and the supply of loanable funds. This is why the supply curve for loanable funds is upward sloping
Katie had a high monthly food bill before she decided to cook at home every day in order to reduce her expenses. She starts to save $1,410 every year and plans to renovate her kitchen. She deposits the money in her savings account at the end of each year and earns 5% annual interest. Katie’s savings are an example of an annuity. If Katie decides to renovate her kitchen, how much would she have in her savings account at the end of eight years?
Answer: $13,464.23
Explanation:
Kate is saving a constant amount of $1,410 per year so indeed it is an annuity.
The amount she will have in the account after 8 years is the future value of the annuity after 8 years.
The formula is;
Future Value of Annuity = Annuity * (future value factor of annuity, 8 years, 5%)
= 1,410 * 9.5491
= 13,464.231
= $13,464.23
Your grandfather put some money in an account for you on the day you were born. You are now 18 years old and are allowed to withdraw the money for the first time. The account currently has $3,996 in it and pays an 8% interest rate. a. How much money would be in the account if you left the money there until your 25th birthday? b. What if you left the money until your 65th birthday? c. How much money did your grandfather originally put in the account?
Answer:
a. $6,848.48
b. $148,779.85
c. $1000
Explanation:
First we have to determine the present value of the money
The formula for calculating present value:
P = FV (1 + r)^-n
FV = Future value
P = Present value
R = interest rate
N = number of years
$3,996(1.08)^-18 = $1000
a. The formula for calculating future value:
FV = P x (1 + r) n
FV = Future value
P = Present value
R = interest rate
N = number of years
a. $1000 x (1.08)^25 = $6,848.48
b. $1000 x (1.08)^65 = $148,779.85
Based on the amount in the account and the interest rate, the following is true:
a. $6,848.44b. $148,779.12c. $1,000The amount at your 25th birthday can be found as:
= Amount x ( 1 + rate) ^ number of years
Number of years:
= 25 - 18
= 7 years
Amount at 25th birthday:
= 3,996 x ( 1 + 8%)⁷
= $6,848.44
Amount at 65th birthday:
Number of years = 65 - 25
= 40 years
= 6,848.44 x ( 1 x 8%)⁴⁰
= $148,779.12
The amount that was originally deposited can be found from:
Amount at 18th birthday = Original amount x ( 1 x 8%)¹⁸
3,996 = Amount x 3.996019499
Amount = 3,996 / 3.996019499
= $1,000
In conclusion, $1,000 was initially deposited.
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Why are intercompany sale of assets eliminated?
Answer:
To avoid a company's documentation of revenue from sales to itself
Explanation:
Intercompany sale of assets is a financial related term that can only arise as a result of transaction activities occurring between companies in a group.
Since it is believed that, the various companies in a group of companies are together and the same.
Hence, the intercompany sale of assets is eliminated because of the need to avoid company's documentation of revenue from sales to itself
When Ryan joined a technology firm, he made a good impression quickly by beating his sales goals repeatedly. His success allowed him to move up in the company quickly. After moving several times to start his own sales teams within the firm, Ryan took on the coveted role of enterprise account representative four years after graduating from college. Which benefit of sales experience and understanding the sales process does this example best represent
Answer:
Make a meaningful contribution quickly.
Explanation:
Sales process refers to the template followed by marketers which originates from finding prospects to the last stage where the customers purchase a product. It is very important that marketers have a proper understanding of the sales process and good experience in sales as it would help them to make meaningful contributions to the organization they serve.
When they join an organization armed with these helpful skills, they would not struggle to make sales. This would help them rise quickly in the firm and exceed their goals. Ryan had a proper understanding of the sales process and this helped him to succeed in the technology firm.
Bristol corporation reported a beginning balance of $6200 in accounts receivable on January at the beginning of the year and 5,334 million at the end of the year. Its statement of cash flows using the direct method reported cash collections from customers of 33.551 million for the year. Assuming that microchem corporation makes all sales on account, compute teh amount of sales during the year.
Answer: $32,685
Explanation:
The closing balance of the accounts receivable account is;
Closing Balance = Opening Balance + Sales - Cash collections
Sales = Closing Balance - Opening Balance + Cash Collections
Sales = 5,334 - 6,200 + 33,551
Sales = $32,685
ASAP/WILL MARK BRAINLIEST
Economic decision making is the process of choosing _____.
a. how to spend your time.
b. which needs and wants will be satisfied.
c. how to use your income.
d. whether to buy products now or later.
Answer:
c. how to use your income.
Explanation:
While b and d are both types of economic decisions, using income coverse all of them and is the correct answer here
A partial listing of costs incurred during December at Rooks Corporation appears below: Factory supplies $ 15,000 Administrative wages and salaries $ 112,000 Direct materials $ 160,000 Sales staff salaries $ 75,000 Factory depreciation $ 56,000 Corporate headquarters building rent $ 41,000 Indirect labor $ 39,000 Marketing $ 110,000 Direct labor $ 90,000 The total of the product costs listed above for December is:
Answer: $360,000
Explanation:
Product costs will be the addition of the Direct materials, Direct labor and the Manufacturing overhead.
Manufacturing overhead costs will be:
Factory supplies = $15,000
Add: Factory depreciation = $56,000
Add: Indirect labor = $39,000
Total = $110,000
Product cost will be:
Direct materials = $160,000
Add: Direct labor = $90,000
Add: Manufacturing overhead = $110,000
Product cost = $360,000
what do inflation rates measure
Answer:
The speed with which general prices are rising
Explanation:
Inflation measures the rate at which the general prices of goods and services are increasing in an economy. During inflation, the purchasing power of a country's currency is eroded. Inflation means a selected basket of goods will cost more this period than it did in the previous season.
The consumer price index or CPI is the most acceptable index used in determining the rate of inflation. Inflation may result from high economic growth where firms and individuals have increased incomes resulting in too much money in circulation. A moderate level of inflation is required to promote spending and sustain favorable economic growth
Assume that Sonic Foundry Corporation has a contractual debt outstanding. Sonic has available two means of settlement. It can either make immediate payment of $2,458,000, or it can make annual payments of $336,800 for 15 years. Click here to view factor tables Payments must begin now and be made on the first day of each of the 15 years, what payment method would you recommend assuming an expected effective-interest rate of 11% during the future period
Answer: Make immediate payment of $2,458,000
Explanation:
The recommended payment option will be the one with a lower present value.
It can make a payment of $2,458,000 now which would be the PV of the first option.
Second option is a constant amount for 15 years to be paid on the first day of every year making it an annuity due.
Present Value of annuity due;
= Annuity * Present value factor of Annuity due, 15 periods, 11%
= 336,800 * 7.9819
= $2,688,303.92
Lower and recommended option is to make immediate payment of $2,458,000.
Development that considers both current and future needs is referred to as______ development
Answer:
Sustainable
Explanation:
Sustainable development is involves utilization of resources to achieve our goals both in present and the future goals, Sustainable development can be categorized as
✓environmental
✓human
✓ social
✓economic
It should be noted that Development that considers both current and future needs is referred to as sustainable development
The city of Jacksonville, Florida is issuing $100,000,000 of general obligation bonds paying interest on January 1st and July 1st of each year until maturity. The dated date of the issue is June 1, 2020. The first payment will be made on January 1st, 2021. A bondholder purchases the issue at the offering. The first interest payment is a(n):
Answer: Odd first interest payment
Explanation: The Interest paid on the first installment is a odd first Interest payment. Such scenario comes into play when a loan with a fixed installment payment date, which is 6 months in this case (January 1st and July 1st), begins on a date which does not allow the immediate use to f this regular payment schedule. Hence, the odd first Interst payment is adopted in other to enable the lender cove r the initial period before beung able to use the usual regular payment schedule. In this case the odd first Interest schedule is between June 1st to January 1st. After which regular payment schedule commences on July 1st.
Fragmental Co. leased a portion of its store to another company for eight months beginning on October 1, at a monthly rate of $975. Fragmental collected the entire $7,800 cash on October 1 and recorded it as unearned revenue. Assuming adjusting entries are only made at year-end, the adjusting entry made by Fragmental Co. on December 31 would be:
Answer:
Debit to Unearned Rent
Credit to Rent Earned for $2,925
Explanation:
Given:
Amount of total rent = $7,800
Computation:
Amount unearned = Amount of total rent (3months / 8 months)
Amount unearned = 7,800 [3/8]
Amount unearned = $2,925
Journal entry:
Unearned rent A/c Dr $2,925
Rent A/c Cr $2,925
[Debit to Unearned Rent
Credit to Rent Earned for $2,925]
What makes BOSE speakers and products do good? In your discussion, explain why high quality products and services are the most profitable What compels people to pay the huge cost for these products compared to other least costly goods and services? Analyze one other student's post concerning quality goods and services.
Answer & Explanation :
Reasons of Bose speakers' & products' goodness
Excellent Design - Best suitable for major premium 'willing to pay' customers Supply - Exceptionally capable suppliers Manufacturing - Updated & superior quality technologies, based on intense research & developmentHigh quality products & services outshine in market for following reasons:
The proportionate higher quality is sold at much higher relative price. These goods become 'ostentation' (status symbol) goods, are bought not only for their increased value, but also for prestige. Rejection based repair & rework is minimum. This synergises internal processes & increases cost efficiency.So, high prices & cost efficiency imply - high profitability for such high quality products.
What is the anticipated level of profits for the expected sales volumes? b. Assuming that the product mix would be 43 percent chicken and 57 percent fish at the break-even point, compute the break-even volume using weighted-average contribution margin. c. If the product sales mix were to change to four chicken tacos for each fish taco, what would be the new break-even volume?
Answer:
a. Anticipated level of profit.
Profit = Contribution margin of Chicken + Contribution Margin of Fish - Fixed costs
Contribution margin of Chicken
= (Selling - Variable costs) * Units sold
= ( 3.9 - 1.95) * 209,000
= $407,550
Contribution Margin of Fish
= (Selling - Variable costs) * Units sold
= ( 5 - 2.5 ) * 305,000
= $762,500
Profit = 407,550 + 762,500 - 111,000
Profit = $1,059,050
b. Break-even using weighted-average contribution margin.
Breakeven point = Fixed Cost/ Weighted Contribution margin
Weighted contribution margin
= (Proportion of chicken * Contribution margin of chicken) + (Proportion of fish * Contribution margin of fish)
= ( 43% * (3.9-1.95)) + ( 57% * ( 5 - 2.5 ))
= $2.2635
Breakeven point = 111,000 / 2.2635
= 49,039 units
c. Sales mix changes to four chicken tacos for each fish taco.
That means 0.8 chickens and 0.2 fish.
= (Proportion of chicken * Contribution margin of chicken) + (Proportion of fish * Contribution margin of fish)
= ( 80% * (3.9-1.95)) + ( 20% * ( 5 - 2.5 ))
= $2.06
Breakeven point = 111,000 / 2.06
= 53,883 units
Chicken = 80% * 53,883
= 43,106 units
Fish = 53,883 - 43,106
= 10,777 units
Attached photo is similar question as yours is missing details.
The following data are given for a period (all amounts are in dollars): Raw (direct) materials: 1,000 at beginning, 1,500 at end Work-in-process: 3,000 at beginning, 2,400 at end Finished goods 6,000 at beginning, 9,300 at end Purchase of raw (direct) material: 4,000 during period Direct labor: 5,000 Manufacturing overhead: 7,000 The amount of total manufacturing cost for the period is:
Answer:
$17,500
Explanation:
Give that
Direct raw materials at the beginning = $1,000
End work in process =$3,000
Beginning work in process = $3,000
End finished goods = $2,400
Beginning finished goods = $6,000
Total manufacturing cost = (Direct materials + Direct labor + Overhead applied) + Beginning work in process inventory - Ending work in process inventory
= ($4,000 + $5,000 + $7,000) + $3,000 - $1,500
= $17,500
A lender generally charges discount points on an FHA loan to:__________
Answer: provide the investors with greater interest yield
Explanation:
Federal Housing Administration (FHA) loan is simply a mortgage insured by the Federal Housing Administration and the main aim of the loan is to help meet the needs of low income earners.
A lender generally charges discount points on an FHA loan on order to provide the investors with greater interest yield.
Who reports the official United States unemployment rate?
1. Unemployment collection offices.
2. The U.S. Bureau of Labor Statistics.
3. U.S. Federal Reserve.
4. Craig from Craigslist.
Answer:
definitely 4. Craig from Craigslist
Explanation:
n December , General Electric (GE) had a book value of equity of billion, billion shares outstanding, and a market price of per share. GE also had cash of billion, and total debt of billion. a. What was GE's market capitalization? What was GE's market-to-book ratio? b. What was GE's book debt-equity ratio? What was GE's market debt-equity ratio? c. What was GE's enterprise value?
Answer:
a. GE's market capitalization = 276.60 billion; and GE's market-to-book ratio = 2.85.
b. GE's book debt-equity ratio = 2.08; and GE's market debt-equity ratio = 0.73
c. GE's enterprise value = $374.26 billion
Explanation:
Note: This question is not complete as all its data are omitted. The complete question is therefore provided before answering the question as follows:
In December 2015, General Electric (GE) had a book value of equity of $97.1 billion, 9.2 billion shares outstanding, and a market price of $30.06 per share. GE also had cash of $103.9 billion, and total debt of $201.7 billion. a. What was GE's market capitalization? What was GE's market-to-book ratio? b. What was GE's book debt-equity ratio? What was GE's market debt-equity ratio? c. What was GE's enterprise value?
The explanation to the answer is now provided as follows:
a. What was GE's market capitalization? What was GE's market-to-book ratio?
Calculation of GE's market capitalization
Market capitalization = Number of shares outstanding * market price per share = 9.2 billion * $30.06 = 276.60 billion
Calculation of GE's market-to-book ratio
Market-to-book ratio = Market capitalization / Book value of equity = $276.552 billion / $97.1 billion = 2.85
b. What was GE's book debt-equity ratio? What was GE's market debt-equity ratio?
Calculation of GE's book debt-equity ratio?
Book debt-equity ratio = Total debt / Book value of equity = $201.7 billion / $97.1 billion = 2.08
Calculation of GE's market debt-equity ratio
Market debt equity ratio = Total debt / Market capitalization = $201.7 billion / $276.46 billion = 0.73
c. What was GE's enterprise value?
Enterprise value = Market capitalization + Total debt - cash = $276.46 billion + $201.7 billion - $103.9 billion = $374.26 billion
As of 2013, which of these countries had the highest GDP per capita? Uganda the United States Switzerland Brazil
Answer:
Switzerland the answer
In the year 2013, the nation that had the highest GDP per capita out of the options was Switzerland.
What was the GDP per capita of Switzerland in 2013?In 2013, Switzerland had the very high GDP per capita of $88,109.49 which put it higher than the United States and Brazil.
This high GDP per capita meant that the Swiss economy was strong and that the people were mostly well off.
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A self-employed middle-aged woman contributes annually to a Traditional IRA. She is unmarried, has two grown children, and has established a trust naming her two children as sole beneficiaries. The woman puts her assets in the trust and names the trust as beneficiary of the Traditional IRA. If she should die, what would happen to her IRA? (A) IRA assets would be divided evenly between her two children. (B) IRA assets would be included in the trust and established distributions from the trust to her children would be taxable as ordinary income. (C) IRA assets would be included in the trust, and her children would be allowed to rollover the distributions into their own IRAs on a tax-free basis. (D) The IRA would become the property of the Estate and would not be distributed to her children.
Answer:
(B) IRA assets would be included in the trust and established distributions from the trust to her children would be taxable as ordinary income.
Explanation:
In this case, the trust is the direct beneficiary of the woman's IRA account. In case she dies, her IRA account's assets will pass to the trust. Then, the trust must make any distributions to the beneficiaries of the trust. in this case, the two children are the sole beneficiaries of the trust, and therefore, they will receive the distributions form the trust. This distributions should be made according to specific terms contained in the trust and will be taxed as ordinary income.
The advantage of designating a trust as a beneficiary of an IRA account is that the woman will decide how the trust will make the distributions.
Convex Mechanical Supplies produces a product with the following costs as of July 1, 20X1: Material $6 Labor 4 Overhead 3 $13 Beginning inventory at these costs on July 1 was 12,100 units. From July 1 to December 1, Convex produced 27,000 units. These units had a material cost of $10 per unit. The costs for labor and overhead were the same. Convex uses FIFO inventory accounting. a. Assuming that Convex sold 29,000 units during the last six months of the year at $20 each, what would gross profit be?
Answer:
Gross profit= $135,400
Explanation:
Giving the following information:
12,100 units:
Material $6
Labor $4
Overhead $3
Total $13
27,00 units:
Material $10
Labor $4
Overhead $3
Total $17
Convex sold 29,000 units during the last six months of the year at $20 each.
First, we need to calculate the cost of goods sold. Under the FIFO (first-in, first-out) method, the COGS is calculated using the cost of the first units sold.
COGS= 12,100*13 + 16,900*17= $444,600
Now, the gross profit:
Gross profit= 29,000*20 - 444,600
Gross profit= $135,400
XYZ can buy a Monet for $8,200,000 today. She believes that the masterpiece can be sold in 9 years for $19,600,000. What is the annual rate of return that XYZ expects to earn on this art investment? a. 139.02% (plus or minus .02 percentage points) b. 15.45% (plus or minus .02 percentage points) c. 10.17% (plus or minus .02 percentage points) d. 26.56% (plus or minus .02 percentage points) e. None of the above is within .02 percentage points of the correct answer
Answer:
c. 10.17%
Explanation:
we can use the future value formula:
future value = present value x (1 + r)ⁿ
future value = $19,600,000present value = $8,200,000n = 9$19,600,000 = $8,200,000 x (1 + r)⁹
$19,600,000 / $8,200,000 = (1 + r)⁹
(1 + r)⁹ = 2.390243902
⁹√(1 + r)⁹ = ⁹√2.390243902⁹√
1 + r = 1.101663943
r = 1.101663943 - 1 = 0.101663943 = 10.17%
Which of the following accounts will NOT normally have a zero balance after the closing entries have been posted?
A. Income Summary
B. Fees Income
C. The owner's capital account
D. Rent Expense
Lloyd is a divorce attorney who practices law in Florida. He wants to join the American Divorce Lawyers Association (ADLA), a professional organization for divorce attorneys. The membership dues for the ADLA are $650 per year and must be paid at the beginning of each year. For instance, membership dues for the first year are paid today, and dues for the second year are payable one year from today. However, the ADLA also has an option for members to buy a lifetime membership today for $7,000 and never have to pay annual membership dues.Obviously, the lifetime membership isn’t a good deal if you only remain a member for a couple of years, but if you remain a member for 40 years, it’s a great deal. Suppose that the appropriate annual interest rate is 5.9%. What is the minimum number of years that Lloyd must remain a member of the ADLA so that the lifetime membership is cheaper (on a present value basis) than paying $650 in annual membership dues? (Note: Round your answer up to the nearest year.)
Answer:
16 years
Explanation:
we can use the present value of an annuity due formula:
PV of annuity due = payment + {payment x [1 - (1 + r)ⁿ⁻¹]/r}
present value = 7,000payment = 650 r = 0.0597,000 = 650 + {650 x [1 - (1 + 0.059)ⁿ⁻¹]/0.059}
6,350 = 650 x [1 - (1 + 0.059)ⁿ⁻¹]/0.059
6,350 / 650 = 9.769230769 = [1 - (1 + 0.059)ⁿ⁻¹]/0.059
9.769230769 x 0.059 = [1 - (1 + 0.059)ⁿ⁻¹]
0.576384615 = 1 - (1 + 0.059)ⁿ⁻¹
(1 + 0.059)ⁿ⁻¹ = 0.423615384
n - 1 = log 0.423615384 / log 1.059 = 0.373028275 / 0.02489596 = 14.98336571
n = 14.98336571 + 1 = 15.98336571
if an attorney remains am ember for at least 16 years (16 ≥ 15.98336571), then the lifetime membership fee is better
Property rights protect businesses by:
A. setting a minimum price on all goods in an industry.
B. ensuring that the government cannot regulate their actions.
C. providing them with emergency loans from the government.
D. preventing competitors from copying their products.
Property rights protect businesses by preventing competitors from copying their products. Thus, option D is correct.
What is a Property right?Property rights are frequently defined as the ability to keep something, like land or a car, and get rid of it whenever one pleases. This, therefore, is but one component of private property than emphasizes the sole right to possession.
There are only three ways to safeguard intellectual property: through patents, registrations, or rights. A patent protects a given product design, a service mark a word, phrase, or pattern, and even a copyright protects a piece of writing.
This will give them an added benefit when it comes to the product. Also, this will help in earning more profit or revenue as they will be the only person who will be responsible for selling that kind of product.
Therefore, option D is the correct option.
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Holiday Corp. has two divisions, Quail and Marlin Quail produces a widget that Marlin could use in its production Quail's variable costs are $5.90 per widget while the full cost Is $8.90. Widgets sell on the open market for $15.80 each. If Quail is operating at capacity, what would be the cost savings if the transfer were made and Marlin currently is purchasing 195,000 units on the open market?
Answer:
Cost savings when transfer are made = $0
Explanation:
In the question it was given that Quail is operating at capacity, then the Minimum and Maximum transfer price would be market price = $15.80
Cost savings when transfer are made = No of unit Marlin purchase*(Maximum transfer price - Minimum transfer price)
Cost savings when transfer are made = 195,000 unit * ($15.80 - $15.80)
Cost savings when transfer are made = $3,081,000 - $3,081,000
Cost savings when transfer are made = $0
Trader A enters into futures contracts to buy 1 million euros for 1.1 million dollars in three months. Trader B enters in a forward contract to do the same thing. The exchange rate (dollars per euro) declines sharply during the first two months and then increases for the third month to close at 1.1300. Ignoring daily settlement, what is the total profit of each trader
Answer:
$30,000
Explanation:
The total profit for each trader (ignoring daily settlement) = $1,000,000 * (1.1300-1.1000)
Total profit for each trader = $1,000,000 * 0.03
Total profit for each trader = $30,000
The ___ is the unique blend of product, distribution, promotion, and pricing strategies designed to produce mutually satisfying exchanges with a target market.
Answer:
GDP is the unique blend of product .according to social studies
Recently, the owner of Martha's Wares encountered severe legal problems and is trying to sell her business. The company built a building at a cost of $1,170,000 that is currently appraised at $1,370,000. The equipment originally cost $650,000 and is currently valued at $397,000. The inventory is valued on the balance sheet at $340,000 but has a market value of only one-half of that amount. The owner expects to collect 98 percent of the $190,200 in accounts receivable. The firm has $11,400 in cash and owes a total of $1,370,000. The legal problems are personal and unrelated to the actual business. What is the market value of this firm? Multiple Choice $1,464,996 $1,124,996 $764,796 $934,796 $567,000
Answer: $764,796
Explanation:
The market value will use the current appriased values as well as recoverable accounts.
Building = $1,370,000
Equipment = $397,000
Inventory = Half of $340,000 = $170,000
Accounts receivable = 98%* 190,200 = $186,396
Cash = $11,400
Debt = $1,370,000
Market Value = Assets - Liabilities
= 1,370,000+ 397,000 + 170,000 + 186,396 + 11,400 - 1,370,000
= $764,796
West-Coast Business Software (WBS) just reported $24 million total net income. The firm has 10 million shares outstanding. Analysts expect that WBS can sustain a long-run return on reinvestment (RIR) of 15%. The firm’s cost of capital is 12%. a. What are the firm’s earnings per share (EPS)? Suppose WBS pays a dividend of $1.60 per share. What is the pay-out ratio? b. Given the pay-out ratio calculated in part a), what is the expected rate of dividend growth? What is the value of the firm’s stock? c. How would the answer to part b) change if WBS instead followed a policy of paying only 1/3 of earnings as dividends?
Answer:
EPS = $2.40 per share
Pay-out ratio = 2 / 3
Growth rate = 5%
Price of a stock (P0) = $24
Explanation:
Earning per share can be calculated by dividing the total net income a company in the total number of shares the company has issued. After finding EPS we can calculatate payout ratio easily by dividing dividends per share in Earning per share.
DATA
Net income = 24m
No of shares = 10m
RIR = 15%
Ke = 12%
a)
EPS = Net Income / No. of share outstanding
EPS = $24,000,000 / 10,000,000 shares
EPS = $2.40 per share
Pay-out ratio = Dividend per share / Earning per share
Pay-out ratio = $1.60 / $2.40
Pay-out ratio = 2 / 3
b)
Growth rate = (1 - payout ratio) x RIR
Growth rate= (1 - 2/3) x 15%
Growth rate = 5%
Price of a stock (P0) = D0 x (1 + g) / (Ke - g)
Where do KE = cost of capital , g = growth
Price of a stock (P0) = $1.60 x (1 + 0.05) / (0.12 - 0.05)
Price of a stock (P0) = $1.68 / 0.07
Price of a stock (P0) = $24
c) If the payout ratio was 1/3,
Growth rate = (1 - 1/3) x 15%
Growth rate = 2/3 x 15%
Growth rate = 10%
Dividend per share (D0) = $2.4 x 1/3
Dividend per share (D0) = $0.80 per share
P0 = $0.80 x (1 + 0.10) / (0.12 - 0.10)
P0= $0.88 / 0.02
P0= $44
