Author Question: A firm has experienced a constant annual rate of dividend growth of 9 percent on its common stock ... (Read 115 times)

hubes95 · **on:** Jul 10, 2018

A firm has experienced a constant annual rate of dividend growth of 9 percent on its common stock and expects the dividend per share in the coming year to be 2.70. The firm can earn 12 percent on similar risk involvements.

The value of the firm's common stock is ________.
A) 22.50/share
B) 9/share
C) 90/share
D) 30/share

Question 2

From the finance perspective, there are five principal line accounts of particular interest on the balance sheet: the cash account, the working capital accounts, long-term capital assets accounts, long-term debt accounts, and ownership accounts.

Briefly explain each.
What will be an ideal response?

brittrenee · **Reply #1 on:** Jul 10, 2018

Answer to Question 1

C

Answer to Question 2

Answer: The cash account indicates how much money the company currently has on hand for paying bills and spending on new items. The working capital accounts are the current assets and current liabilities of the company; current assets are those accounts that will be turned into cash over the course of the operating cycle, and current liabilities are accounts that will come due for payment over the course of the operating cycle. Current assets minus current liabilities give us the net working capital of the company. Long-term capital assets accounts indicate the capital investment of the company in items like land, buildings, and machinery. Long-term debt accounts are those debts to be paid in more than one year. Ownership accounts show the amount of capital contributed by owners (common stock) and retained earnings (earnings of the company that are reinvested in the core business or used to pay off debt).