Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. suppose mr. stewart just bought a share of powerwi

Suppose Mr. Stewart just bought a share of PowerWind Co., a renewable energy startup. PowerWind...

90.2K

Verified Solution

Question

Accounting

Suppose Mr. Stewart just bought a share of PowerWind Co., a renewable energy startup. PowerWind promises to pay Mr. Stewart $20 in dividends for one year and then the firm will shut down. Suppose that the liquidation value of the share is $4, and the rate of time preference is 5%. Then, according to the single-period dividend discount model, the present value of the cash payment received by Mr. Stewart in one year would be ($19.05, $23.05, $3.81, $22.86) , which means that the market price of the share of stock is ($19.05, $23.05, $3.81, $22.86)

Which of the following is the formula used in the Gordon growth model?

PVt=sum(DIVt+1(1+r)t)PVt=sumDIVt+11+rt, where rr is the rate of time preference

PVt=DIVt+1rgPVt=DIVt+1rg, where gg is the rate at which the dividend is expected to grow and rr is the rate of time preference

PVt=DIVt-1r+gPVt=DIVt-1r+g, where gg is the rate at which the dividend is expected to grow and rr is the rate of time preference

PVt=DIVt+1+(rg)PVt=DIVt+1+rg, where gg is the rate at which the dividend is expected to grow and rr is the rate of time preference

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Physics
1.2K views

How would gravitational mass and inertial mass change in an elevator (if at all)? Why is...

Advance Math
1.2K views

3) Prove that the cardinality of the open unit interval, (0,1), is equal to the cardinality...

Biology
1.2K views

Question 9 Check the 2 correct answers Which of the Opasteurization filtration

Biology
1.2K views

15 Liste In a relaxed skeletal muscle actin is not chemically bound to OZ lines...

Physics
1.2K views

Comprehension ill In the circuit shown an ideal battery of terminal voltage V 10 V...

Statistics
1.2K views

A county office gets an average of 10 calls in a 2 hour time period....

Algebra
1.2K views

2 8 8 8 1 4 Determine whether or not the vectors v linearly independent...

Algebra
1.2K views

8 Find an algebraic expression that is equivalent to the expression tan arccos

Accounting
1.2K views

Financial information for American Eagle is presented in Appendix A, and financial information...

Accounting
1.2K views

Part 1: On July 1, 2020, Wallace Company, a calendar-year company, sold special-order merchandise on...

Accounting
1.2K views

You are the systems analyst for the wee willie Williams widget works company. You have...

Finance
1.2K views

Doak Corp. is evaluating a project with the following cash flows: Year Cash Flow 0...