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 The share of a Copper Tech is currently $180

Finance Nov 13, 2020

 The share of a Copper Tech is currently $180. You are aware that its current dividend is $5.00 (D0) per share with a growth rate of 2.5% (g). The required return is 5% (R). What is your recommendation on the share?

Select one:

a. The share is overpriced, so buy it.

b. The share is underpriced, so buy it.

c. The share is overpriced, so sell it.

d. The share is underpriced, so sell it.

10.

What is the present value of $10,000 received every year for 6 years? The interest rate is 4.50% p.a. and you receive the first payment in one year.

Select one:

a. $72,414.62

b. $51,578.83

c. $60,000

d. $38,203.51

11.

You are the manager of a supplement store which specialises in selling organic protein powder. You sell 8,000 tubs per year. The total cost of placing an order is $130 and it costs $20 to hold a tub of protein for a year.

What is the economic order quantity and the number of orders per year required?

Select one:

a. Approximately 50 tubs per order, 160 order per year

b. Approximately 8000 tubs per order, 1 order per year

c. Approximately 82 tubs per order, 548 orders per year

d. Approximately 100 tubs per order, 80 orders per year

e. Approximately 322 tubs per order, 25 orders per year

Expert Solution

Price = recent dividend* (1 + growth rate )/(cost of equity - growth rate)
Price = 5 * (1+0.025) / (0.05 - 0.025)
Price = 205

b. The share is underpriced, so buy it.

10

PVOrdinary Annuity = C*[(1-(1+i/100)^(-n))/(i/100)]
C = Cash flow per period
i = interest rate
n = number of payments
PV= 10000*((1-(1+ 4.5/100)^-6)/(4.5/100))
PV = 51578.72
Using Calculator: press buttons "2ND"+"FV" then assign
 
PMT =10000
I/Y =4.5
N =6
FV = 0
CPT PV
 
Using Excel
=PV(rate,nper,pmt,FV,type)
=PV(4.5/(100),6,,PV,)
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