Valuing this dividend as a perpetuity: P = $2.00 / 0.15 = $13.33 9-6 Value of Operations of Constant Growth Summit Systems will pay a dividend of $1.50 this year. If you expect Summit’s dividend to grow by 6% per year, what is its price per share if its equity cost of capital is 11%? Answer: Price per share = 1.50 / (11% – 6%) = $30
80*7.1607+1000*.3555 = $928 • 5-2 Yield to Maturity for Annual payments Wilson Wonders’s bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%. The bonds sell at a price of $850. What is their yield to maturity? 100+1000-850/12/1000+850/2 = 112.5/925 = .1216 or 12.16% • 5-6 Maturity Risk Premium The real risk-free rate is 3%, and inflation is expected to be 3% for the next 2 years.
(7–2) Constant GrowthValuation 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? Answer Price = $1.50 / (0.15 - 0.07) = $18.75 I'm doing this chapter right now, and this problem was in this week's homework.
The constant dividend growth formula P0 = D1/(r-g) assumes: A) The dividends are growing at a constant rate g forever. B) r > g C) g is never negative. D) Both A and B E) None of the above Answer: D 4. Casino Co. is expected to pay a dividend of $6 per share at the end of year one and these dividends are expected to grow at a constant rate of 8% per year forever. If the required rate of return on the stock is 20%, what is the current value of the stock today?
What should the employee’s wages be on the 9/30/12 payroll? The PT-salaried employee would be paid for $999.96 on the 9/30/12 pay date. (40,000/1560=$25.64*(65*60%=39) =$999.96 6*260=1,560 4. A FT-salaried employee has a termination date of 9/26/12. The employee is paid semi-monthly with an annual salary of $52,000.
The holiday season is when the company earns the most gains compared to months outside of the holiday season. Grace Jones, the treasurer of Toy World, describes the purpose of the report as performing cash budgeting analysis of the company to offer recommendations in the company’s financial situation. Section II contains the monthly cash budget as prepared. Grace expects that a $500,000 line of credit will be sufficient to cover any cash shortfalls. After reviewing the monthly cash budget, it appears that this line of credit will suffice to adequately cover the cash shortfalls predicted to occur in May and June of $48,035 and $480,035, respectively.
• debit to Allowance for Doubtful Accounts for $3,300. Multiple Choice Question 182 The financial statements of the Melton Manufacturing Company reports net sales of $300,000 and accounts receivable of $50,000 and $30,000 at the beginning of the year and end of year, respectively. What is the average collection period for accounts receivable in days? • 60.8 • 96.1 • 36.5 • 48.7 Find the final exam answers here ACC 291 Final Exam Answers Multiple Choice Question 119 Stine Company purchased machinery with a list price of $64,000. They were given a 10% discount by the manufacturer.
If Casper decided to take out a loan that charges 20% APR over one year for the amount of £2000 over 12 months he would expect to pay £183 per month for 12 months with interest of £205. (candid money calculator accessed 28/7/11) If Casper makes the decision to use his credit card and he borrowed £2000 over 2 years at 15% APR his total monthly payments would be £96.08 per month, the interest would calculate to £306 this would be a total repayment of £2306 over 2 years. (candid money calculator accessed 28/7/11) Comparing the ‘loan’ to the credit card loan, Casper would pay his debt back quicker but at nearly double the price of the credit card loan, the advantage the credit card loan has, his monthly installments will be half of what the ‘loan’ but at 2 years rather than 1 year. Question 2 In question 2 of this essay I shall attempt to answer questions on expenditure and budgeting, giving a brief example from the study of the personal finance course book DB123 and the transcript of the dvd accessed on the Open University website.
DONNA URCHAK The annual sales for Salco Inc. were $4.5 million last year. The firm’s end-of-year balance sheet was as follows: Current assets $500,000 Liabilities $1,000,000 Net fixed assets $1,500,000 Owners’ equity $1,000,000 $2,000,000 $2,000,000 The firm’s income statement for the year was as follows: Sales $ 4,500,000 Less cost of goods sold (3,500,000) Gross profit $ 1,000,000 Less operating expenses (500,000) Operating income $ 500,000 Less interest expense (100,000) Earnings before taxes $ 400,000 Less taxes (50%) (200,000) Net income $ 200,000 a. Calculate Salco’s total asset turnover, operating profit margin, and operating return on assets. b. Salco plans to renovate one of its plants, which will require an added investment in plant and equipment of $1 million. The firm will maintain its present debt ratio of .5 when financing the new investment and expects sales to remain constant.
Which of the following statements is not correct? a. The corporate valuation model can be used even for a company that does not pay dividends. b. The corporate valuation model discounts free cash flows by the required return on equity.