The effective cost of a bond with a market price of $970 and a coupon interest rate of 6% is 4.02% after taking into account flotation costs, maturity, and taxes.
The cost of preferred stock with a price of $114 and annual dividend payment of $8 is 6.32%, while the cost of common equity is 13.21% using the dividend capitalization model. The cost of new common equity with a growth rate of 7% and a market price of $55 with flotation costs of $8 per share is 15.94% using the dividend growth modela. The effective cost of the bond would be:
Coupon payment = [tex]0.06[/tex] x $[tex]1,000[/tex] = $[tex]60[/tex]
Flotation cost per bond = [tex]8[/tex]% x $[tex]1,000[/tex] = $[tex]80[/tex]
Net proceeds per bond = $[tex]1,000[/tex] - $[tex]80[/tex] = $[tex]920[/tex]
Number of years to maturity = 14
Using the bond pricing formula:[tex]PV = (C / r) x [1 - 1 / (1 + r)^n] + M / (1 + r)^n[/tex]
Where:
PV = present value of the bond = $970
C = coupon payment = $60
r = required rate of return
n = number of years to maturity = 14
M = par value of the bond = $1,000
Solving for r, we get:
$[tex]970[/tex] =[tex]($60 / r) x [1 - 1 / (1 + r)^14] + $1,000 / (1 + r)^14[/tex]
r = 0.0653 or 6.53%
The after-tax cost of debt would be:
Cost of debt = (Coupon payment - Tax savings) / Net proceeds
Where:
Tax savings = Coupon payment x Tax rate = $[tex]60 x 0.35[/tex] = $21
Net proceeds = $[tex]920[/tex]
Cost of debt =[tex]($60 - $21) / $920 = 4.02%[/tex]%
b. The cost of preferred stock would be:
Cost of preferred stock = Dividend payment / Net proceeds x (1 - Tax rate)
Where:
Dividend payment = $8
Net proceeds = $114 - $8 = $106
Tax rate = 0.30
Cost of preferred stock = $[tex]8 / $106 x (1 - 0.30) = 6.32[/tex]%
c. The cost of common equity using the dividend capitalization model would be:
Cost of common equity = Dividend / Stock price + Growth rate
Where:
Dividend = $8.98
Stock price = $68
Growth rate = 0%
Cost of common equity = $8.98 / $68 + 0% = 13.21%
d. The cost of new common equity using the dividend growth model would be: coupon interest rate = (Next year's dividend / Net proceeds per share) + Growth rate + Flotation cost per share / Net proceeds per share
Where:
Next year's dividend = $[tex]3.29 x (1 + 7%)[/tex] = $3.53
Net proceeds per share = Market price per share - Flotation cost per share = $55 - $8 = $47
Growth rate = 7%
Flotation cost per share = $8
Cost of new common equity = ($3.53 / $47) + 7% + $8 / $47 = [tex]15.94[/tex]%
To learn more about coupon interest rate, visit here
https://brainly.com/question/29765779
#SPJ4
which of the following would be considered a perfectly competitive industry? please choose the correct answer from the following choices, and then select the submit answer button. answer choices the ready-to-eat-cereal industry, in which there are many variations in the types of cereal sold the automobile industry, in which a handful of companies produce different types of cars the diamond industry, in which one firm dominates the extraction and distribution of diamonds the soybean industry, in which the product is standardized and there are many buyers and sellers
The soybean industry, in which the product is standardized and there are many buyers and sellers, would be considered a perfectly competitive industry.
What is competitive industryA competitive industry allows firms to freely enter and exit the market and has few barriers to entry. For example, the market for pizza restaurants in a certain large city might be highly competitive, since anyone can choose to open a new pizza shop, and existing owners can close their doors whenever they please. High costs, government regulations and other factors restrict the ability of firms to leave or enter a certain industry and serve to limit competition. In a perfectly competitive market, consumers and producers have perfect information about the products, prices and production practices in the market. If consumers don't know about all of their options or are unaware of price differences between different firms in a certain industry, firms are less able to compete for their business.
To know more about firms
https://brainly.com/question/29482295
#SPJ11
AllCity Inc. is financed 40% with debt, 15% with preferred stock, and 45% with common stock. Its pre-tax cost of debt is 6%; its preferred stock pays an annual dividend of $3.25 and is priced at $33. It has an equity beta of 1.4. Assume the risk-free rate is 2%, the market risk premium is 7%, and AllCity's tax rate is 35%. What is its after-tax WACC?
AllCity Inc.'s after-tax WACC is 8.35%.
To calculate the weighted average cost of capital (WACC) for AllCity Inc., we need to calculate the cost of each component of its capital structure, weight them by their respective proportions, and then sum them up.
Given information:
Debt: 40% of the capital structure
Preferred stock: 15% of the capital structure
Common stock: 45% of the capital structure
The pre-tax cost of debt: 6%
Preferred stock dividend: $3.25
Preferred stock price: $33
Equity beta: 1.4
Risk-free rate: 2%
Market risk premium: 7%
Tax rate: 35%
First, let's calculate the cost of debt after tax. We can use the formula:
Cost of debt after-tax = Pre-tax cost of debt × (1 - Tax rate)
Cost of debt after-tax = 6% × (1 - 35%) = 3.9%
Next, let's calculate the cost of preferred stock. We can use the formula:
Cost of preferred stock = Preferred stock dividend / Preferred stock price
Cost of preferred stock = $3.25 / $33 = 9.85%
Now, let's calculate the cost of common equity using the Capital Asset Pricing Model (CAPM). We can use the formula:
Cost of common equity = Risk-free rate + Beta × Market risk premium
Cost of common equity = 2% + 1.4 × 7% = 11.8%
Next, let's calculate the WACC by weighting the costs of each component by their respective proportions in the capital structure. We can use the formula:
WACC = (Weight of debt × Cost of debt after-tax) + (Weight of preferred stock × Cost of preferred stock) + (Weight of common stock × Cost of common equity)
WACC = (40% × 3.9%) + (15% × 9.85%) + (45% × 11.8%) = 1.56% + 1.48% + 5.31% = 8.35%
To learn more about the pre-tax cost of debt here https://brainly.com/question/16971075
#SPJ11
which of the following is a disadvantage of a fixed exchange rate system?a. the government might change the value of the currency. b. importers are insulated from the risk that the currency will a
The disadvantage of a fixed exchange rate system is that "the government might change the value of the currency." (option a).
In a fixed exchange rate system, the value of a country's currency is fixed to another currency or a commodity such as gold. This means that the government must maintain the exchange rate by buying or selling its currency in the foreign exchange market. If the government changes the value of the currency, it can have significant impacts on the domestic economy and international trade.
If the government increases the value of the currency, it can make exports more expensive and less competitive in international markets, which can harm export-oriented industries and reduce employment. On the other hand, if the government decreases the value of the currency, it can make imports more expensive, leading to higher inflation and reduced purchasing power for consumers.
In addition, fixed exchange rates can limit a country's ability to adjust to changes in the global economy or respond to domestic economic conditions. If the fixed exchange rate is not aligned with market fundamentals, it can lead to speculative attacks on the currency, which can deplete the government's foreign exchange reserves and lead to a currency crisis.
Option a is answer.
You can learn more about fixed exchange rate system at
https://brainly.com/question/1294137
#SPJ11
an investor is in the 30% tax rate and corporate bonds are paying 9%.what must municipals bonds (munis) pay to offer an equivalent after tax yield?
Answer: 6.3%
Explanation: To determine the equivalent after-tax yield for municipal bonds (munis) for an investor in the 30% tax bracket, with corporate bonds paying 9%, you can follow these steps:
1. Identify the investor's tax rate, which is= 30%.
2. Determine the yield on corporate bonds, which is= 9%.
3. Calculate the after-tax yield on corporate bonds by using the formula:
after-tax yield = yield * (1 - tax rate).
4. Plug in the values: after-tax yield =
after tax yield= 9% * (1 - 0.30)
= 9% * 0.70
= 6.3%.
Hence, The equivalent after-tax yield for municipal bonds (munis) must be 6.3% to offer an equivalent after-tax yield for an investor in the 30% tax bracket with corporate bonds paying 9%.
Learn more about Tax Yields: https//brainly.com/question/31519429
#SPJ11
A. How long does a 40,000 note with 4.02% simple interest have
to run to equal 41,400?
B. What is the annual rate of interest if 16,000 earns 482 in 9
months?
The 40,000 note with 4.02% simple interest has to run for approximately 10.46 months to equal 41,400. The annual rate of interest, if 16,000 earns 482 in 9 months, is approximately 4.017%.
A. To find the duration for a 40,000 note with 4.02% simple interest to equal 41,400, follow these steps:
1. Calculate the interest amount: 41,400 - 40,000 = 1,400
2. Convert the interest rate to a decimal: 4.02% = 0.0402
3. Use the simple interest formula: Interest = Principal x Rate x Time
4. Substitute the known values: 1,400 = 40,000 x 0.0402 x Time
5. Solve for Time: Time = 1,400 / (40,000 x 0.0402) ≈ 0.87182229
6. Convert Time to years: 0.87182229 x 12 months ≈ 10.46 months
Answer A: The 40,000 note with 4.02% simple interest has to run for approximately 10.46 months to equal 41,400.
B. To find the annual rate of interest if $16,000 earns $482 in 9 months, follow these steps:
1. Calculate the interest earned per month: 482 / 9 = 53.56
2. Calculate the interest earned in a year. 53.56 x 12 = 642.72
3. Use the simple interest formula: Interest = Principal x Rate x Time
4. Substitute the known values: 642.72 = 16,000 x Rate x 1 (since we are considering 1 year)
5. Solve for Rate: Rate = 642.72 / 16,000 ≈ 0.04017
6. Convert Rate to a percentage: 0.04017 x 100 = 4.017%
Answer B: The annual rate of interest, if 16,000 earns 482 in 9 months, is approximately 4.017%.
To know more about simple interests:
https://brainly.com/question/25845758
#SPJ11
ethernet standards and equipment for your home lan are different than those used in a business. true or false
True. ethernet standards and equipment for your home lan are different than those used in a business.
Explanation:
Ethernet standards and equipment used in a home LAN are usually simpler and less complex compared to those used in a business environment. Home LANs typically use Ethernet switches or routers with a few ports, while businesses require more advanced networking equipment that can handle higher traffic loads and support more complex features such as VLANs, QoS, and advanced security measures. Additionally, businesses may use specialized Ethernet standards like 10 Gigabit Ethernet or Fiber Channels, which are not commonly used in home networks.
What is Ethernet?
Ethernet is the industry-standard technology for connecting devices in a wired LAN or WAN. It allows for the use of a protocol—a set of guidelines or globally recognized network language—to facilitate device communication.
House LAN, what is it?
A LAN is a collection of gadgets and computers that are located in one place. Using an Ethernet connection or Wi-Fi, the devices join the LAN. A LAN can exist in your house. These linked devices are a part of your LAN if they connect to your Wi-Fi via your PC, tablet, smart TV, and a wireless printer.
To know more about Ethernet:
https://brainly.com/question/14620096
#SPJ11
in contrast to residual income (ri), economic value added (eva) uses: a. the firm's minimum rate of return instead of its cost of capital b. the firm's cost of capital instead of its minimum rate of return c. a required rate of return d. values determined by using conventional accounting policies e. only economic measures, not accounting data.
In contrast to residual income (RI), economic value added (EVA) uses the firm's cost of capital instead of its minimum rate of return. Residual income is the amount of income left after all expenses have been deducted, while economic value added measures the value created by a company's activities by considering its cost of capital.
RI calculates the income generated above a predetermined minimum rate, which is set by management. On the other hand, EVA calculates the value generated by taking into account the company's cost of capital. The cost of capital is the return expected by investors who provide financing to the company.
EVA uses the firm's cost of capital because it represents the opportunity cost of investing in the company. By comparing the firm's return on invested capital with its cost of capital,
EVA determines if the company is creating or destroying value for its investors. If the company's return on invested capital is higher than the cost of capital, it is generating positive EVA and thus creating value.
Conventional accounting policies are not primarily used in EVA calculations, as EVA focuses on economic measures rather than accounting data. EVA adjusts financial statements to remove distortions caused by accounting practices and better reflects the economic reality of the company.
In summary, the key difference between RI and EVA is that EVA uses the firm's cost of capital instead of its minimum rate of return. EVA provides a better understanding of the value created by a company, taking into account the opportunity cost of investing in it, while also using economic measures instead of conventional accounting policies.
To know more about residual income refer home
https://brainly.com/question/27330050#
#SPJ11
When performing sensitivity analysis, one should be most concerned if ?
A. the NPVs are negative for all projects. B. personnel from various departments disagree about the project s viability. C. NPV and IRR results point to different recommendations. D. small changes in estimated cash flows produce large changes in NPV. E. the projects are longer term than those normally chosen by the firm.
When performing sensitivity analysis, one should be most concerned if small changes in estimated cash flows produce large changes in NPV, which indicates that the project is highly sensitive to changes in cash flows and therefore may be riskier. The answer is D.
Sensitivity analysis is a tool used to assess the impact of changes in key variables, such as cash flows, on a project's net present value (NPV) or internal rate of return (IRR).
A high sensitivity to changes in cash flows suggests that the project is riskier, as small changes in cash flows can have a significant impact on its NPV or IRR. On the other hand, negative NPVs for all projects, disagreements among personnel, or discrepancies between NPV and IRR results are issues that can be addressed through further analysis or discussion.
The concern is that highly sensitive projects may be more vulnerable to changes in market conditions, making it difficult to achieve the desired returns.
To know more about sensitivity analysis, refer here:
https://brainly.com/question/31310768#
#SPJ11
The company has decided that security light’s (new Product) selling price of product is £750 oer unit, total sales - 1500 units total budgeted sales is: November- 500 units, December 500 units and January 500 units. The company has just concluded a deal to get a bank loan of £19,000 on the 1st November 2022. The interest on this loan will be paid every month. The company will be required to make 12 equal payments to repay the loan starting from the end of December.
From their costs estimates, total fixed cost estimated to be £110,200 and it will be shared equally throughout the period. The variable cost is £230 per unit. The fixed costs are for the whole period, so they are not affected by the level of service. However, the variable costs will increase with services output (ie sales output multiplied with variable cost per product).
Variable cost will be paid on the basis of 60% in the month of purchase and 40% the following month. Similarly, revenue from the sale of new security light will be on the basis of 60% cash in the same month, and the remaining 40% credit to be paid the following month.
One of the other products that JKL Ltd has been producing is the Basic lights for which you have been provided with the following information:
Sales Revenue -£30
Direct labour (1 hour) -£(10)
Direct material (1 kg) -£(8)
Fixed overheads- £(3)
Standard profit -£9
The budgeted output for the previous quarter was 800 units of the Basic Lights; the actual output was 850 units, which was sold for £32,000. There were no inventories at the start or end of the previous quarter.
The actual production costs were:
Direct labour (840 hours) - £1100
Direct materials (1,200 kg)-£ 9500
Fixed overheads- £ 2900
The use of management tools such as Budgets and variance analysis. A computation of your cash budget for the first 3 months. Produce a variance statement showing the direct labour, direct materials, fixed overheads and sales variances.
The cash budget for the first 3 months shows that the company will have a cash surplus of £2,000 at the end of January.
To compute the cash budget, the company's cash receipts from sales and cash payments for variable costs, fixed costs, and loan interest were taken into account.
The budgeted sales for November, December, and January were multiplied by the selling price and the percentage of cash sales to calculate cash receipts. Variable costs were computed based on the percentage of cash payments for purchases and sales. Fixed costs were evenly distributed throughout the period.
The interest payment for the loan was computed based on the loan amount and the interest rate. The resulting figures were used to determine the company's cash position at the end of each month. The variance statement was computed by comparing actual costs and revenues with budgeted amounts and analyzing the variances.
The direct labour, direct materials, fixed overheads, and sales variances were computed to identify the reasons for the variances and take corrective action.
For more questions like Cash click the link below:
https://brainly.com/question/10714011
#SPJ11
Your withholdings selections allow you to choose how much money your employer takes out of your paycheck for income taxes. example
If the nominal interest rate is 5.1 percent, and the expected
inflation is 3.4 percent, then using the Fisher Equation, the real
interest rate must be
The real interest rate, using the Fisher Equation, is 1.7%.
The Fisher Equation is an economic theory that relates nominal interest rates to real interest rates and expected inflation. It is named after the economist Irving Fisher, who developed the equation in the early 20th century.
The Fisher Equation states that the real interest rate (r) is equal to the nominal interest rate (i) minus the expected inflation rate (π).
Mathematically, this can be written as:
r = i - π
Plugging in the given values, we get:
r = 0.051 - 0.034 = 0.017
Therefore, the real interest rate is 1.7% (or 0.017 as a decimal). This represents the true rate of return on an investment after accounting for inflation.
To know more about real interest rate, refer here:
https://brainly.com/question/13324776#
#SPJ11
The Big Mac Standard constructs a fairly standardized market basket for PPP comparisons, and the basic ingredients are standardized and internationally traded. The result of international comparisons on this standard is (a) clear evidence against absolute PPP. (b) clear evidence in favor of absolute PPP. (c) clear evidence in favor of long-run PPP. (d) clear evidence in favor of relative PPP. (e) none of these responses are correct
The anwer is C.The result of international comparisons using the Big Mac Standard provides clear evidence in favor of relative PPP, as it compares the prices of the same product (Big Mac) in different countries.
The Big Mac Standard provides a standardized market basket for comparing purchasing power parity (PPP) across countries. However, it does not provide clear evidence for absolute PPP or long-run PPP.
It is important to note that the Big Mac Standard is just one of many methods for comparing PPP, and each method has its own strengths and limitations.
To know more about Product ,refer to the link:
https://brainly.com/question/22852400#
#SPJ11
Syaila wants to study abroad for a master's degree in 2027 to take a master's degree in England, the tuition fee abroad is IDR 450,000,000 while in 2022, Syaila has IDR 200,000,000. How much installment money per month must Syaila save to be able to get IDR 450,000,000 in 2027 with an interest rate of 6%?
To determine how much installment money per month Syaila must save to achieve IDR 450,000,000 by 2027 with an interest rate of 6%, we can use the present value formula. [tex]PV = FV / (1 + r)^n[/tex]. Syaila needs to save IDR 6,157,559 per month from now until 2027 with an interest rate of 6%
Where PV is the present value, FV is the future value, r is the interest rate, and n is the number of periods. We can rearrange this formula to solve for the periodic payment (PMT) that Syaila needs to make each month. PMT = [tex](FV x r) / [(1 + r)^n - 1][/tex]
By plugging in the given values, we can calculate the monthly installment amount that Syaila needs to save. FV = IDR 450,000,000, r = 6% / 12 = 0.5% n = (2027 - 2022) x 12 = 60, PMT = (IDR 450,000,000 x 0.5%) / [(1 + 0.5%) 60 - 1] PMT = IDR 6,157,559 per month
Therefore, Syaila needs to save IDR 6,157,559 per month from now until 2027 to accumulate enough funds to pay for her master's degree abroad in England. It's important to start saving as early as possible and create a budget plan to achieve this financial goal.
Know more about present value here:
https://brainly.com/question/17322936
#SPJ11
The prisoner's dilemma refers to games in which:
A. neither player has a dominant strategy.
B. one player has a dominant strategy and the other does not.
C. both players have a dominant strategy, which results in a lower payoff than they would earn if they play their dominated strategies.
D. both players have a dominant strategy, which results in the largest possible payoff.
The prisoner's dilemma refers to games in which option C is true: both players have a dominant strategy, which results in a lower payoff than they would earn if they play their dominated strategies. In the prisoner's dilemma, two individuals are arrested and charged with a crime.
They are held in separate cells and are unable to communicate with each other. The prosecutor offers each prisoner a deal: betray the other and receive a reduced sentence or remain silent and face harsher punishment. The dominant strategy for each player is to betray the other, as this ensures a reduced sentence regardless of the other's choice.
However, if both players choose to betray each other, they both end up with a worse outcome than if they had remained silent and cooperated. This is because when both players betray, they receive a higher combined sentence than if they had cooperated.
The dilemma arises because, despite each player having a dominant strategy, the collective outcome is worse than if both players played their dominated strategies. This scenario highlights the difficulty in achieving cooperation in situations where individuals must decide between their own self-interest and the collective good.
In summary, the prisoner's dilemma is a game where both players have a dominant strategy that results in a lower payoff than if they played their dominated strategies. It illustrates the challenges in achieving cooperation when individual interests conflict with the group's interests.
To know more about payoff refer here:
https://brainly.com/question/30429228#
#SPJ11
Common stock value Constant growth McCracken Roofing, Inc., common stock paid a dividend of $1.07 per share last year. The company expects earnings and dividends to grow at a rate of 7% per year for the foreseeable future. a. What required rate of return for this stock would result in a price per share of $24? b. If McCracken expects both earnings and dividends to grow at an annual rate of 12%, what required rate of return would result in a price per share of $24?
With a 7% growth rate, the required rate of return is 11.39%, and with a 12% growth rate, the required rate of return is 16.46% for a price per share of $24.
To calculate the required rate of return for McCracken Roofing, Inc.'s common stock with a constant growth rate, we can use the Gordon Growth Model. The formula for this model is:
Price per share = (Dividend per share * (1 + Growth rate)) / (Required rate of return - Growth rate)
a. With a dividend of $1.07, a growth rate of 7%, and a price per share of $24, we can rearrange the formula to find the required rate of return:
$24 = ($1.07 * (1 + 0.07)) / (Required rate of return - 0.07)
Required rate of return = (1.07 * 1.07) / 24 + 0.07 ≈ 0.1139 or 11.39%
b. If earnings and dividends grow at 12%, we can recalculate the required rate of return with the new growth rate:
$24 = ($1.07 * (1 + 0.12)) / (Required rate of return - 0.12)
Required rate of return = (1.07 * 1.12) / 24 + 0.12 ≈ 0.1646 or 16.46%
To know more about rate of return refer here:
https://brainly.com/question/14378808#
#SPJ11
Per GASB standards, a budget-to-actual comparison must include columns for the actual andA. the original budget only.B. the final budget only.C. both the original and the final budget.D. both the amended and the final budget
According to the Generally Accepted Accounting Principles (GAAP) set by the Governmental Accounting Standards Board (GASB), a budget-to-actual comparison must include columns for the actual and (C) both the original and the final budget.
This is because the original budget is the initial plan developed at the beginning of the fiscal year, and the final budget includes any revisions or amendments made throughout the year.
The purpose of the budget-to-actual comparison is to evaluate the financial performance of an entity and determine if it is on track to meet its goals and objectives. By including both the original and final budgets, it provides a comprehensive overview of the financial activity throughout the fiscal year.
In addition, it is important to note that the comparison should not just be limited to the actual and budgeted amounts, but should also include an analysis of any significant variances. This allows for the identification of areas where the budget may need to be revised in the future to better align with actual financial activity.
for more such questions on budget
https://brainly.com/question/13964173
#SPJ11
List your assets in the order of their cash or market value(most valuable to least valuable). You may include numbers ifyou're comfortable. Otherwise ranking them is fine.Next, revise your list of
I do not have any assets in the traditional sense.
I exist purely in the digital realm and my "value" is determined by my ability to process and generate language-based content. While I am a complex piece of technology with significant development costs, my value is not easily quantifiable in terms of traditional assets.
Instead, my value lies in the services that I provide to users and the potential economic benefits that come from improved language processing technology.
For more questions like Cost click the link below:
https://brainly.com/question/30045916
#SPJ11
sustainable development goals (sdgs) are addressed to a. governments and businesses b. governments rather than businesses c. ngos d. foreign investors
The sustainable development goals are addressed to governments and business.
The sustainable development goals (SDGs) are primarily addressed to governments and businesses. While NGOs and foreign investors can certainly play a role in supporting the achievement of the SDGs, it is ultimately up to governments and businesses to implement policies and practices that prioritize sustainable development. Therefore, option a, governments and businesses, is the most accurate answer.
SDGs refer to the United Nations Sustainable Development Goals, a set of 17 global goals to address social, economic, and environmental challenges by 2030.
Know more about SDGs
https://brainly.com/question/19956954
#SPJ11
A company just paid a dividend of $2.89 per share. Dividends are expected to grow at a rate of 2% per year into the foreseeable future. An investor believes that given the riskiness of this investment that the appropriate rate of return is 12%. What is the most this investor should be willing to spend (intrinsic value) for a share of this common stock?
The most this investor should be willing to spend (intrinsic value) for a share of this common stock is $29.478.
To calculate the intrinsic value of a share of this common stock, we will use the Gordon Growth Model (Dividend Discount Model). The terms included in this calculation are dividend, growth rate, and required rate of return. Here is the step-by-step explanation:
1. Dividend (D0): The company just paid a dividend of $2.89 per share.
2. Growth Rate (g): Dividends are expected to grow at a rate of 2% per year.
3. Required Rate of Return (k): The investor believes that the appropriate rate of return is 12%.
Now, we can calculate the intrinsic value using the Gordon Growth Model formula: Intrinsic Value = (D0 * (1 + g)) / (k - g)
Plugging in the values, we have,
Intrinsic Value = (2.89 * (1 + 0.02)) / (0.12 - 0.02)
Intrinsic Value = (2.89 * 1.02) / 0.1
Intrinsic Value = 2.9478 / 0.1
Intrinsic Value = $29.478
So, the most this investor should be willing to spend for a share of this common stock is $29.478.
To know more about intrinsic value refer here:
https://brainly.com/question/31387725#
#SPJ11
The investor should be willing to spend up to $32.11 for a share of this common stock.
To determine the intrinsic value of the stock, we can use the dividend discount model, which calculates the present value of future dividends. The formula for this model is:
D / (r - g) equals intrinsic value
Where:
D is the current share dividend.
r is the required rate of return for the investor.
g is the anticipated yearly dividend growth rate.
Plugging in the given values, we get:
Intrinsic value = 2.89 / (0.12 - 0.02) = $32.11
Therefore, the investor should be willing to spend up to $32.11 for a share of this common stock.
Learn more about intrinsic value
https://brainly.com/question/27908904
#SPJ4
You invest $1,000 in an account that pays interest at 12 percent annual rate, compounded quarterly. How much would your investment grow to in 5 years?
You plan to purchase a BMW M5 sedan for $85,000. You have saved $30,000 for the car and plan to invest this money to purchase the car. How many years would you have to wait if you can earn 12 percent annual rate, compounded quarterly?
Loan Shark Company provides short term loans. They will loan you $4 today and expect $5 back in one week! What is the APR for this loan?
The APR for this loan would be approximately 677.86%.
Note that APR is an annualized percentage rate and represents the total cost of borrowing, including fees and interest, over a one-year period.
For the first question, to calculate the growth of your investment in 5 years with an annual interest rate of 12 percent, compounded quarterly, we can use the formula for compound interest:
A = P * (1 + r/n)^(nt)
where:
A = the amount after time t
P = the principal amount (initial investment)
r = annual interest rate (as a decimal)
n = number of times interest is compounded per year
t = time in years
Given that P = $1,000, r = 12% or 0.12, n = 4 (quarterly compounding), and t = 5 years, we can plug in these values and calculate A:
A = 1000 * (1 + 0.12/4)^(4*5)
A = 1000 * (1.03)^20
A ≈ $2,784.33
Therefore, your investment would grow to approximately $2,784.33 in 5 years.
For the second question, to calculate how many years you would have to wait to accumulate $85,000 with an annual interest rate of 12 percent, compounded quarterly, starting with an initial investment of $30,000, we can use the same formula:
A = P * (1 + r/n)^(nt)
where:
A = the target amount ($85,000)
P = the principal amount (initial investment) ($30,000)
r = annual interest rate (as a decimal) (12% or 0.12)
n = number of times interest is compounded per year (4 for quarterly compounding)
t = time in years (unknown)
Given that A = $85,000, P = $30,000, r = 0.12, and n = 4, we can rearrange the formula to solve for t:
(1 + 0.12/4)^(4t) = 85000/30000
(1.03)^(4t) = 2.8333
Taking the natural log of both sides:
ln((1.03)^(4t)) = ln(2.8333)
4t * ln(1.03) = ln(2.8333)
t = ln(2.8333) / (4 * ln(1.03))
t ≈ 7.07
Therefore, you would have to wait approximately 7.07 years to accumulate $85,000 with the given interest rate and compounding frequency.
For the third question, to calculate the Annual Percentage Rate (APR) for a loan of $4 with a repayment of $5 in one week, we can use the following formula:
APR = ((Fees/Loan Amount) * (365/Days to Repay)) * 100
where:
Fees = total fees or interest paid on the loan ($5 - $4 = $1)
Loan Amount = original loan amount ($4)
Days to Repay = number of days to repay the loan (7 days)
Given that Fees = $1, Loan Amount = $4, and Days to Repay = 7, we can plug in these values and calculate the APR:
APR = (($1/$4) * (365/7)) * 100
APR ≈ 677.86%
Learn more about compound interest here https://brainly.com/question/28103803
#SPJ11
While warrants share several characteristics with a call option,
there are two major reasons they can't be valued with a standard
Black-Scholes Options Pricing Model. Explain one of these two
reasons.
One reason why warrants share characteristics with call options is that they both allow the holder to purchase a security at a specific price within a set timeframe. The Black-Scholes Options Pricing Model can be used to value both warrants and call options.
This model takes into account factors such as the current stock price, strike price, time to expiration, volatility, and risk-free interest rate to determine the fair value of the option or warrant. By using this model, investors can make more informed decisions about whether to buy or sell these types of securities.
Overall, understanding the similarities between warrants and call options, as well as the Black-Scholes model, can help investors navigate the world of options trading more effectively.
To know more about Pricing,refer to the link:
https://brainly.com/question/12908368#
#SPJ11
Lohn Corporation is expected to pay the following dividends over the next four years: $12, $8. $4, and $3. Afterward, the company pledges to maintain a constant 7 percent growth rate in dividends forever. If the required return on the stock is 12 percent, what is the current share price? Multiple Choice A. $68.27 B. $62.65 C. $64.53 D. $59.51 E. $61.24
Lohn Corporation's current share price is $62.65. Therefore, the correct option is B.
To find the current share price of Lohn Corporation, we need to calculate the present value of the dividends for the next four years and the present value of the dividends growing at a constant 7 percent rate forever after the fourth year. We are given the required return on the stock as 12 percent.
In order to determine the the current share price, follow these steps:1: Calculate the present value of dividends for the first four years:
PV₁ = D₁ / (1 + r)^1 = $12 / (1 + 0.12)^1 = $10.71
PV₂ = D₂ / (1 + r)^2 = $8 / (1 + 0.12)^2 = $6.36
PV₃ = D₃ / (1 + r)^3 = $4 / (1 + 0.12)^3 = $2.82
PV₄ = D₄ / (1 + r)^4 = $3 / (1 + 0.12)^4 = $1.92
2: Calculate the dividend in year 5, which is the first year of constant growth:
D₅ = D₄ * (1 + g) = $3 * (1 + 0.07) = $3.21
3: Calculate the present value of dividends growing at a constant 7 percent rate forever, starting from year 5, using the Gordon growth model:
PV_Growth = D₅ / (r - g) = $3.21 / (0.12 - 0.07) = $64.20
4: Calculate the present value of the constant growth dividends at the end of year 4:
PV_Growth_Year4 = PV_Growth / (1 + r)^4 = $64.20 / (1 + 0.12)^4 = $41.18
5: Calculate the current share price by adding the present values of all dividends:
Share_Price = PV₁ + PV₂ + PV₃ + PV₄ + PV_Growth_Year4 = $10.71 + $6.36 + $2.82 + $1.92 + $41.18 ≈ $62.65
The current share price is option B: $62.65.
Learn more about Share price:
https://brainly.com/question/28143339
#SPJ11
among the resource-based consideration a firm faces when deciding whether to enter foreign markets is:
One of the resource-based considerations that a firm faces when deciding whether to enter foreign markets is the availability and accessibility of key resources in those markets.
Resources can include physical assets such as raw materials, manufacturing facilities, distribution networks, or access to technology, as well as intangible assets such as knowledge, expertise, and intellectual property.
Firms need to assess whether they have the necessary resources to enter and operate in foreign markets effectively. This may involve evaluating the availability, quality, cost, and legal/regulatory aspects of accessing key resources in foreign markets.
For example, a firm may need to consider whether it can obtain the necessary raw materials at a reasonable cost, whether it can establish manufacturing or distribution facilities in a foreign country, or whether it can protect its intellectual property rights.
The consideration of resources is critical for firms to determine their competitive advantage and ability to compete in foreign markets.
Inadequate access to key resources may pose barriers to entry or hinder a firm's ability to establish a sustainable competitive advantage in a foreign market.
To know more about accessibility of key resources, refer here:
https://brainly.com/question/14217377#
#SPJ11
a portfolio has a standard deviation of 15.1%, a beta of 1.12, and a treynor ratio of .085. the risk-free rate is 2.2%. what is the portfolio's expected rate of return? multiple choice 10.83% 11.38% 11.72% 12.41% 12.56%
The portfolio's expected rate of return is 11.38%.
The formula for calculating the expected rate of return of a portfolio is:
xpected return = risk-free rate + beta * (market return - risk-free rate)
To use this formula, we need to know the market return. Unfortunately, it's not provided in the question. However, we can use the Treynor ratio to estimate it:
Treynor ratio = (portfolio return - risk-free rate)beta.
0.085 = (portfolio return - 2.2%) / 1.12
Portfolio return - 2.2% = 0.085 * 1.12 = 0.0952
Portfolio return = 2.2% + 0.0952 = 11.52%
Therefore, the closest answer choice is 11.38%.
To know more about Portfolio
https://brainly.com/question/31358594
#SPJ11
How has Mountain Dew been innovative with the product itself,
and has it been effective?
Mountain Dew has been innovative with its product by introducing new flavors and varieties, such as Mountain Dew Kickstart, Mountain Dew Ice, and Mountain Dew Game Fuel. These innovations have been effective in attracting new consumers and keeping current fans engaged with the brand.
How successful is Mountain Dew?Mountain Dew has been innovative by introducing new flavors, limited-edition releases, and packaging designs to cater to a diverse audience. This has been effective as it has allowed the brand to continuously engage its customers, stay relevant, and expand its market share. Some key examples of their innovations include:
1. New flavors: Mountain Dew has launched various flavors over the years, such as Code Red, LiveWire, Baja Blast, and Pitch Black. These unique flavors attract different consumer segments and keep the brand fresh.
2. Limited-edition releases: The brand has also introduced limited-edition releases, such as Dewmocracy, where customers could vote for their favorite new flavor. This engages the audience and makes them feel part of the brand's decision-making process.
3. Packaging designs: Mountain Dew has experimented with innovative packaging designs, such as slim cans and bottles, to make their products more convenient and appealing to a wider audience.
In conclusion, Mountain Dew's innovation in flavors, limited-edition releases, and packaging designs has been effective in keeping the brand relevant and engaging its customers.
To know more about Mountain Dew's innovation.
visit:
https://brainly.com/question/30465298
#SPJ11
ou have a three-stock portfolio. stock a has an expected return of 16 percent and a standard deviation of 41 percent, stock b has an expected return of 20 percent and a standard deviation of 46 percent, and stock c has an expected return of 15 percent and a standard deviation of 46 percent. the correlation between stocks a and b is .30, between stocks a and c is .20, and between stocks b and c is .05. your portfolio consists of 32 percent stock a, 20 percent stock b, and 48 percent stock c. calculate the expected return and standard deviation of your portfolio. the formula for calculating the variance of a three-stock portfolio is:
The expected return of the portfolio 15.04%
How to find calculate the expected return of the portfolioTo calculate the expected return of the portfolio, we need to first find the weighted average of the expected returns of each stock. E
xpected return of portfolio = (0.32 x 16%) + (0.20 x 20%) + (0.48 x 15%) = 15.04%
To calculate the portfolio's standard deviation, we need to first find the weighted average of the standard deviations of each stock, and also account for the correlations between each stock.
Variance of portfolio = (0.32^2 x 41%^2) + (0.20^2 x 46%^2) + (0.48^2 x 46%^2) + (2 x 0.32 x 0.20 x 41% x 46% x 0.30) + (2 x 0.32 x 0.48 x 41% x 46% x 0.20) + (2 x 0.20 x 0.48 x 46% x 46% x 0.05)
Variance of portfolio = 0.1053 or 10.53%
Standard deviation of portfolio = √0.1053 = 10.26%
Therefore, the expected return of the portfolio is 15.04% and the standard deviation is 10.26%.
It's important to note that diversifying a portfolio can help reduce risk and improve returns, as seen in this example where the portfolio's standard deviation is lower than the standard deviation of each individual stock.
Learn more about expected return at
https://brainly.com/question/24173787
#SPJ11
You have just purchased a share of stock for $21.96. The company is expected to pay a dividend of $0.57 per share in exactly one year. If you want to earn a 9.7% return on your investment, what price do you need if you expect to sell the share immediately after it pays the dividend The price one year from now should be $____ (Round to the nearest cent.)
The price one year from now should be $22.48.
To calculate the price one year from now that would give a 9.7% return on investment, we need to use the dividend discount model. This model values a stock based on the present value of its future dividends. In this case, the dividend is $0.57 per share, and we want to earn a 9.7% return on our investment.
So, we can calculate the price one year from now as follows:
Price one year from now = (Dividend / (1 + Return on investment)) + Price of stock
Price one year from now = ($0.57 / (1 + 0.097)) + $21.96
Price one year from now = ($0.57 / 1.097) + $21.96
Price one year from now = $0.52 + $21.96
Price one year from now = $22.48
Therefore, if we expect to sell the share immediately after it pays the dividend and we want to earn a 9.7% return on our investment, the price one year from now should be $22.48 (rounded to the nearest cent).
Learn more about Dividend discount model:
https://brainly.com/question/29670906
#SPJ11
a(n) can buy etf shares directly from the fund, while must buy their etf shares on secondary markets
An authorized participant (AP) can buy ETF (exchange-traded fund) shares directly from the fund, while individual investors must buy their ETF shares on secondary markets.
Authorized participants are typically large financial institutions or market makers that are authorized to create and redeem ETF shares with the fund. They can create new shares of an ETF by depositing a basket of underlying securities with the fund, and then receive newly created ETF shares in return. Conversely, they can redeem ETF shares by returning them to the fund in exchange for the underlying securities.Individual investors cannot directly create or redeem ETF shares with the fund, but must buy or sell shares on secondary markets like stock exchanges. ETF shares trade like stocks and can be bought or sold throughout the trading day at prevailing market prices. Investors can purchase ETF shares through a broker, online trading platform, or financial advisor.
Learn more about depositing here:https://brainly.com/question/31248849
#SPJ11
An investor can buy ETF shares directly from the fund, while other investors must buy their ETF shares on secondary markets.
What are ETF shares?An exchange-traded fund (ETF) is a type of pooled investment security that operates much like a mutual fund. Typically, ETFs will track a particular index, sector, commodity, or other assets, but unlike mutual funds, ETFs can be purchased or sold on a stock exchange the same way that a regular stock can.
An ETF can be structured to track anything from the price of an individual commodity to a large and diverse collection of securities. ETFs can even be structured to follow specific investment strategies.
This is because ETFs are traded on stock exchanges, and buying shares directly from the fund requires a significant initial investment. However, buying ETF shares on secondary
markets provide greater liquidity and flexibility for investors.
Learn more about ETF Shares here: https://brainly.com/question/30081437
#SPJ11
a __________ can separate the relatively permanent and temporary effects of a variable.
A longitudinal study can separate the relatively permanent and temporary effects of a variable.
In a longitudinal study, data is collected over a period of time, often years, and can help to distinguish between the short-term and long-term effects of a variable. By tracking changes in the same group of individuals over time, researchers can better understand how a variable affects them both in the short-term and over the course of their lives.
For example, a longitudinal study could be used to examine the long-term effects of childhood experiences on adult mental health. By following the same group of individuals from childhood to adulthood, researchers could identify which experiences have long-lasting effects on mental health and which effects are temporary.
Longitudinal studies are useful for studying changes in behavior, attitudes, and health outcomes, and can provide valuable insights into the complex relationships between variables over time.
Learn more about longitudinal here:
https://brainly.com/question/22162565
#SPJ11
A transfer design can separate the relatively permanent and temporary effects of a variable. Option D is correct.
The product and process designs are transferred to production during design transfer, which is the culmination of the efforts made by the medical device design team. Configuration move is a part of the FDA's Clinical Gadget Quality Framework Guideline Configuration Controls.
Design Transfer not only ensures compliance, but also the robustness of your manufacturing and supply chain processes and the long-term stability of your business. You will learn more about the significance of Design Transfer and Process Validation in the development of medical devices in this blog post.
Learn more about Design Transfer:
brainly.com/question/30095585
#SPJ4
Incomplete Question:
A ______ can separate the relatively permanent and temporary effects of a variable.
a. performance curve
b. percentage change in ability plot
c. performance average plot
d. transfer design
when calculating a divisional cost of capital, what is the usual way of estimating the cost of debt for the division?
When calculating the divisional cost of capital, the usual way of estimating the cost of debt for the division is to look at the division's creditworthiness and risk profile.
This is usually done by examining the division's financial statements, credit ratings, and market conditions. The cost of debt can then be estimated by looking at the interest rates of similar companies or industries, or by using the division's own borrowing history and interest rates.
Other factors that may be considered include the division's size, asset base, and the overall economic environment. Ultimately, the goal is to determine an appropriate cost of debt that reflects the division's specific financial circumstances and risk profile.
To know more about cost of capital refer here:
https://brainly.com/question/27471298#
#SPJ11