Violate the cost concept and reduce value of inventory

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Reference no: EM131900783

1. Ecolap Inc. (ECL) recently paid a $0.46 dividend. The dividend is expected to grow at a 12.50 percent rate. The current stock price is $49.72. What is the return shareholders are expecting.

2. Based on ower of Cost or Market" rule and Cost Principle, why the accounting profession has decided to violate the cost concept and reduce the value of inventory (an asset valuation) in these circumstances?

3. A stock sells for $30. The next dividend will be $3 per share. If the return on equity ROE is a constant 12% and the company reinvests 50% of earnings in the firm, what must be the opportunity cost of capital? (Do not round intermediate calculations.)

Reference no: EM131900783

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