Question

King Waterbeds has an annual cash dividend policy that raises the dividend each year by 5​%. The most recent​ dividend, Div 0 was $ 0.40 per share. What is the​ stock's price if a.  an investor wants a return of 6​%? b.  an investor wants a return of 9​%? c.  an investor wants a return of 11​%? d.  an investor wants a return of 14​%? e.  an investor wants a return of 17​%?

Find the operating cash flow for the year for Robinson and Sons if it had sales revenue of $79,300,000​ cost of goods sold of $35,500,000​ sales and administrative costs of $6,000,000​ depreciation expense of $ 7,000,000 and a tax rate of 30 %

Answer 1

rate positively ..

Ans 1		as per dividend discount model price today = Expected dividend next year /(required rate - growth rate)
	Ans a)	Price today =		0.4*105%/(6%-5%)
				$                 42.00
		ans =		$                 42.00
	Ans b)	Price today =		0.4*105%/(9%-5%)
				$                 10.50
		ans =		$                 10.50
	Ans c)	Price today =		0.4*105%/(11%-5%)
				$                   7.00
		ans =		$                   7.00
	Ans d)	Price today =		0.4*105%/(14%-5%)
				$                   4.67
		ans =		$                   4.67
	Ans e)	Price today =		0.4*105%/(17%-5%)
				$                   3.50
		ans =		$                   3.50
Ans 2
		Computation of operating cash flow
	i	Revenue		79,300,000
	ii	COGS		35,500,000
	iii	administration cost	6,000,000
	iv	Depreciation		7,000,000
	v=i-ii-iii-iv	Profit before tax		30,800,000
	vi=v*30%	Tax @ 30%		9240000
	vii=v-vi	Net income		21,560,000
	viii=vii+iv	Operating cash flow	28,560,000
		ans =		$        28,560,000