05 Jun Question Writing a business memo which ex
Question
Writing a business memo which explains the attached spreadsheet solution, in English terms. You do not need to create a spreadsheet for this question, only write a memo that will correspond with the spreadsheet I have already created. It is attached for your reference.
Basic Functions and Spreadsheet Review
To: You
From: Your boss
Date: September 1, 20xx
Subject: What do our stockholders expect from us?
We need to determine our “cost of capital” in order to put a value on our business. The “cost of capital” is the return that our stockholders expect to get from their investment in our company, from the combination of the dividends we pay and the increase in the value of our stock over the year. We are not a publicly-traded company, so we can’t figure out this value directly. Instead, we need to compare ourselves to a similar company.
After consulting with some major stockholders, they say that they consider us to be most like our competitor, Abercrombie, Inc., which is publicly-traded, so we should have a similar cost of capital. One common model for calculating stock prices (called the Gordon Model), says that the price of a share of stock is equal to the next expected dividend to be paid, divided by the difference between the cost of capital and the annual rate of growth in those dividend payments.
Abercrombie’s stock price is currently $65.00 per share and they are expected to pay $2.00 in dividends over the next year. This level of dividends has consistently grown by 10.00% over the past few years, and most investors expect this growth rate to continue.
I’d like to see a spreadsheet that determines Abercrombie’s cost of capital, and then computes what our stock price should be if we had the same cost of capital, assuming we paid a $1.00 dividend, and we grew anywhere from 8.00% to 11.00% over the next year. Explain to me in a memo how you arrived at that answer
Attachments
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Writedemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Order Now” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.