Explain Problem 2: Sale-Leaseback Sangamon signs a sale-leaseback with a buyer, Bismark. Under the terms of the contract, Bismark will pay $146,874 in cash to Sangamon for equipment and then immediately lease it back to Sangamon. The equipment originally cost $100,000 and had a carrying value of $80,000 on Sangamon’s books immediately prior to the transaction. In 5 years, the residual value of the leased equipment is estimated to be $20,000 when the lease terminates. The lease contract obligates Sangamon to make five equal annual payments of $30,000 to Bismark that begin immediately after the sale.
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
Sample quiz 2: Fin 819 1. Super Computer Company's stock is selling for $100 per share today. It is expected that this stock will pay a dividend of 5 dollars per share, and then be sold for $120 per share at the end of one year. Calculate the expected rate of return for Super Computer Company ‘s stock. A) 20% B) 25% C) 10% D) 15% E) None of the above Answer: B Response: r = (120+5-100)/100 = 25% 2.
Both monies pooled together after taxes add together the sum of £1626.56. With outgoings at £1140 and £1625 pooled together there is a difference of £405 which split between the two girls would be a total of £202.50. Using the online household equivalence calculator this compensates Praveena’s loss of income by 37%. Case study 2 Casper is in the process of paying for his holiday which will cost him £2000, he is considering what to do? 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.
2,145.48 c. 8,879.71 5. Your brother has offered to give you either $5,000 today or $10,000 in 10 years. If the interest rate is 7% per year, which option is preferable? The best option would be the 10,000 in 10 years since it would be worth more. 6.
4. What is the present value of $10,000 received a. twelve years from today when the interest rate is 4% per year; PV=10,000/1^12=6,245.97 b. twenty years from today when the interest rate is 8% per year; and PV=10,000/1.08^20=2,145.48 c. six years from today when the interest rate is 2% per year? PV=10,000/1.02^6=8,879.71 5. Your brother has offered to give you either $5,000 today or $10,000 in 10 years. If the interest rate is 7% per year, which option is preferable?
If I took 25 years to pay off my loan the monthly Payment would be $761.22 per month. If it took 20 years to pay off my loan the monthly Payments would be $849.52 per month. So if I wanted to pay off the loan in 20 years I Would need to raise my total monthly payment by $88.30 per month. I also need to explain whether or not it would be reasonable to do this if I currently meet my monthly expenses with less than $100.00 left over. Yes I would be able to meet my monthly Expenses.
During 10 years, the investors will reinvest all the cash flows into the company, so maintaining the growth of 7.45% each year. The return on equity used for the valuation is the rate of 7.45% which is the return on PacifiCorp equity on 2005. For the cost of equity, the capital would be invested in MidAmerican if the company did not take the acquisition. Therefore, I consider the rate of return on MidAmerican on 2004 (5.72%) as the cost of equity of PacifiCorp. Dividing the present value of future cash flows by the cost of the investment indicates that every dollar invested buys securities worth $1.18.
The rental price of capital? The real wage? c. Suppose that a gift of capital from abroad raises the capital stock by 10 percent. What happens to total output (in percent)? The rental price of capital?
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.