Question 3
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Finance
Date
Nov 24, 2024
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Uploaded by 19shyamalkaushik
Your inquiry:
12. Uptown Attire just delivered $1.50 as its yearly profit and builds its profit by 2.5 percent every
year. What will Uptown's stock cost be in decade at a rebate pace of 12.25 percent? Assuming that
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Reply
To compute the stock cost of Uptown Apparel in decade, you can utilize the Gordon Development
Model (otherwise called the Gordon-Shapiro Model or the Profit Markdown Model). The recipe for
this model is as per the following:
P=D/(r-g)
Where:
P = Stock Cost
D = Profit anticipated one year from this point (the following year's profit)
r = Required Pace of Return (markdown rate)
g = Profit Development Rate
For this situation, you are given:
D = $1.50 (the ongoing profit)
r = 12.25% (markdown rate)
g = 2.5% (profit development rate)
Presently, plug these qualities into the equation to work out the stock cost in decade:
P= 1.50/(0.1225−0.025)
P=1.50/0.0975
Presently, play out the division:
P=15.38
In this way, the assessed stock cost of Uptown Dress in decade, expecting a 2.5 percent yearly profit
development rate and a rebate pace of 12.25 percent, would be roughly $15.38.
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