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Problem 1Assume a dividend of $1.25 was paid. The stock has a required rate of return of 11.2 percent and investors expect the dividend to increase at a constant rate of 10 percent. Complete parts (a) through (e) below.a) Compute D0, D1, D2, D3 and D7.b) Compute the present value of the dividends for t = 3 years.c) Compute the current market price.d) Assume that the constant growth rate is actually 0%. What is the current market price?e) Describe the behavior of the present value of each future dividend (i.e. the behavior as t increases).
Problem 2Suppose a dividend that pays at $1.07 has a growth rate of 20% for the first 3 years. After the 3 years, there is a long-run growth rate of 8%. The stock has a required rate of return of 12.4%. Find the current market price of a share of common stock.
Problem 3Assume the beta coefficient for a company's stock is B = 0.2, the risk-free rate of return, rRF, is 8% and the required rate of return on the market, rM, is 14%. Assume the dividend expected during the coming year is D1 = $2.50 and the growth rate is a constant 7%. Complete parts (a) through (c) below.a) Compute the price at which the company's stock should sell.b) Find the new price of the stock assuming the risk-free rate of return is 5% and the required rate of return on the market is 11%.c) What would be needed for a stock to be in equilibrium?
American Linen is a company that has multiple salespersons. In 2008, it changed the compensation method for its sales force, moving from a system of fixed wages to one of base wage plus charge.
Discuss and explain two factors that would increase demand for labor. Suppose if the market price of the good or service that a firm produces increases, what happen to the demand of labor
Using the data in the following table, Complete the last two columns by replacing the * with the correct values and create the following curves in one chart.
After a 10 percent price discount, a company found that its weekly sales increased by 30 percent. If the marginal cost (MC) of this product is $40 each, determine the optimal price for this product?
The law of diminishing marginal productivity states that as more and more of a variable input is added to an existing fixed input,
Assume that a stock price has an expected return of 16% per year and a volatility of 30% per year. When the stock price at the end of a certain day is $50,
Administrators at a university are considering to offer a summer seminar. It costs $3000 to reserve a room, hire an instructor, and bring in the machine.
As a kid, you recorded the costs of your Kool-Aid stand and create your long-run average-cost curve. Now you work in a video chip company.
Enpar manufactures a one type of engine part for an automotive manufacturer. It operates 2-plants, Plant A and Plant B, which have the following production functions:
College A is planning outsourcing their groundskeeping. They have been given a bid from Groundskeeper Willie for $250,000 a year, with the claim that he will keep school grounds in the same condition they are in now.
The following table shows information for a simple production function. From the data in the table, calculate marginal and average products.
"A characteristic of oligopolistic market is that, once the general price level is established it tends to remain fixed for an extended period of time." Discuss the economic rationale underlying this phenomenon.
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