If a Stock Is Expected to Pay a Dividend of $40

question 4

Short Answer

If a stock is expected to pay a dividend of $40 for the current year,what is the approximate present value of this stock,given at discount rate of 5% and a dividend growth rate of 3%?

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Definitions:

Allowance for Doubtful Accounts

A contra asset account that represents estimated uncollectible amounts from customers, reducing the gross receivables to their net realizable value.

Bad Debts Expense

The cost recognized when a company determines that a customer's loan or receivable account is uncollectible.

Allowance Method

An accounting technique used to estimate and adjust accounts receivable for amounts that are unlikely to be collected.

Carrying Value

The value of an asset as shown on the balance sheet, representing its original cost minus any accumulated depreciation, impairment, or amortization.