The Satellite Building Company has fallen on hard times. Its management expects to pay no dividends for the next 2 years. However, the dividend for Year 3, , will be $1.00 per share, and the dividend is expected to grow at a rate of 3 percent in Year 4, 6 percent in Year 5, and 10 percent in Year 6 and thereafter. If the required return for Satellite is 20 percent, what is the current equilibrium
price of the stock?
a. $0
b. $5.26
c. $6.34
d. $12.00
e. $13.09
c
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Answer the following statement true (T) or false (F)
Which of the following cost flow assumptions will report ending inventory closest to current cost?
a. LIFO method b. FIFO method c. weighted-average method d. acquisition cost e. specific identification method
All of the following statements regarding U.S. GAAP and IFRS are true except:
A. Both U.S. GAAP and IFRS allow reversals of write downs up to the original acquisition cost. B. For both U.S. GAAP and IFRS, merchandise inventory includes all items that a company owns and holds for sale. C. With limited exceptions, neither U.S. GAAP nor IFRS allow inventory to be adjusted upward beyond the original cost. D. Both U.S. GAAP and IFRS require companies to write down inventory when its value falls below the cost presently recorded. E. Both U.S. GAAP and IFRS include broad and similar guidance for the items and costs making up merchandise inventory.
Which of the following statements about debt is true?
A) Increasing debt increases the firm's flexibility. B) As debt increases, distress costs decrease. C) Using debt causes a loss of ownership by the firm. D) Using debt allows the firm to earn money using someone else's money. E) As the level of debt increases, the firm's credit rating begins to matter less.