Part a: 16105.1; Part b: 12762.82, 20113.57 3. It is estimated that in 5 years the total cost for one year of college will be $20,000. a. How much must be invested today in a CD paying 10.0 percent annual interest in order to accumulate the needed $20,000? 12418.43 b.
Boehm Incorporated is expected to pay a $1.50 per share dividend at the end of this year (i.e., D1 = $1.50). The dividend is expected to grow at a constant rate of 7% a year. The required rate of return on the stock, rs, is 15%. What is the value per share of Boehm’s stock? Nick’s Enchiladas Incorporated has preferred stock outstanding that pays a dividend of $5 at the end of each year.
Dilemma of Ocean Carriers: Oceans Carriers (OC) has been approached by a charter with lucrative proposal to charter their ship. The problem is that OC has not ship that can accommodate the requirements of the client and Mary Linn, vice president of finance has to decide if investing in a new ship would be justified by the future cash flows. Options, conditions and scenarios: Ms. Linn would need to investigate the options of investing in a new ship given the following scenarios: 1- Purchase the capesize and to be scrapped after 15 years with a relevant corporate tax rate of 35% 2- The capesize should operate for 30 years and scrapped after. This will mean that the corporate policy of OC has to change. 3- Purchase the capesize and to be sold to the second hand market after 15 years.
b. The future value of $800 saved each year for 10 years at 8 percent. c. The amount that a person would have to deposit today (present value) at a 6 percent interest rate in order to have $1,000 five years from now. d. The amount that a person would have to deposit today in order to be able to take out $500 a year for 10 years from an account earning 8 percent. Solution: a.
If the required return on this preferred stock is 6.5%, at what price should the preferred stock sell? =Preference Dividend/ Required Return= $7.5/ 6.5%= $ 115.38 13. The Isberg Company just paid a dividend of $0.75 per share, and that dividend is expected to grow at a constant rate of 5.50% per year in the future. The company's beta is 1.15, the market risk premium is 5.00%, and the risk-free rate is 4.00%. What is the company's current stock price, P0?
Old press – Originally purchased 3 years ago at an installed cost of $400,000, it is being depreciated under MACRS using a 5-year recovery period. The old press has a remaining economic life of 5 years. It can be sold today to net $420,000 before taxes; if it is retained, it can be sold to net $150,000 before taxes at the end of 5 years. Press A – This highly automated press can be purchased for $830,000 and will require $40,000 in installation costs. It will be depreciated under MACRS using a 5-year recovery period.
Calexico Hospital plans to invest $1.6 million in a new MRI machine. The MRI will be depreciated its 5-year economic life to a $200,000 salvage value. Additional revenues attributed to the new MRI will be in the amount of $1.5 million per year for 5 years. Additional operating expenses, excluding depreciation expense, will amount to $1 million per year for 5 years. Over the life of the machine, net working capital will increase by $30,000 over the life of the project.
Corporation AB had a net long-term capital loss is 2005 and net operating loss in 2004. What are the earliest year(s) to which these losses can be carried? Answer: Capital loss to 2003 or 2010 and net operating loss to 2002 or 2024 3. Cloud corporation has a taxable income of $100,000 in 2005 along with a $30,000 general business credit. What is the amount of its credit carryover and the last year to which the carryover could be used?
2. Based on the following, calculate the costs of buying and of leasing a motor vehicle. Purchase Costs Leasing Costs Down payment $1,500 Security deposit $500 Loan payment $450 for 48 months Lease payment $450 for 36 months Estimated value at End of loan $4,000 End of lease charges $600 Opportunity cost interest rate: 4 percent 3. You can purchase a service contract for all of your major appliances for $180 a year. If the appliances are expected to last for 10 years, and you earn 5 percent on your savings, what would be the future value of the amount you would pay for the service contract?
c. Internal common equity where the current market price of the common stock is $43.50. The expected dividend this coming year should be $3.25, increasing thereafter at a 7% annual growth rate. The corporation’s tax rate is 34%. d. A preferred stock paying a 10% dividend on a $125 par value. If a new issue is offered, flotation costs will be 12% of the current price of $150.