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.
$600,000 Chapter 18 In-Class Problems (with solutions) ACG3151 How much of the dividend will be paid to the common shareholders, and how much will be paid to the preferred shareholders? Common Shareholders=$10,000 Preferred Shareholders=$80,000($60,000 cumulative, $20,000 participating) 3. Tom, Inc. issued 1,000,000 shares of $2 par common stock in 2005 for $9 per share. In 2008 Tom, Inc. repurchased 100,000 shares at a price of $8 per share. On March 30, 2009 they decide to resell 50,000 shares at a price of $13 per share.
When the amount goes over the fair value of the lease the amount should be documented as an asset. c. What expenses related to this lease will Lani incur during the first year of the lease, and how will they be determined? Lani will obtain interest which will equal the amount used benefits the lease which is multiplied by the liability. She will receive fees associated with the depreciation of the cost of capital towards the cost of assets. d. How should Lani report the lease transaction on its December 31, 2006, balance sheet?
DSO = Receivables / Ave. sales per day Receivables= DSO * Ave. sales per day = 20 * 20,000 Receivables= $400,000 (3-2) Debt Ratio: Vigo Vacations has an equity multiplier of 2.5. The company’s assets are financed with some combination of long-term debt and common equity. What is the company’s debt ratio? Debt ratio = 1 – (1 / Equity multiplier) Debt ratio = 1 – (1/2.5) = 1 - .40 = .60 Debt ratio = 60% (3-3) Market/Book Ratio: Winston Washers’s stock price is $75 per share. Winston has $10 billion in total assets.
She conducted market research and found that after-tax cash flows on the investment should be about $15,000 per year for the next 7 years. The franchiser stated that Kay would generate a 20 percent return. Her cost of capital is 10 percent. Find the following: a) The PVB. Payment is 15000, 7 is N, FV is 0, 10 is the I/Y and compute for the PV b) The PVC.
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.
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.
Penn Medical Center, a for-profit hospital, is considering the purchase of a new 64-slice CT scanner. The cost of the new scanner is $5 million and will be depreciated over 10 years on a straight line basis to $0 savage value. The tax rate is 40%. The financing options include either borrowing the full cost of the scanner or leasing a scanner. The lease option is a 5-year lease with equal before-tax lease payments of $950,000 per year.
2.Suppose your company needs to raise $30 million and you want to issue 30-year bonds for this purpose. Assume the required return on your bond issue will be 8 percent, and you’re evaluating two issue alternatives: an 8 percent semiannual coupon bond and a zero coupon bond. When find PV do 30m/PV to get the amount of coupon bonds.Part B: In 30 years, what will your company’s repayment be if you issue the coupon bonds? What if you issue the zeros? The repayment of the coupon bond will be the par value plus the last coupon payment times the number of bonds issued.
The tax rate is 40 percent. a. what is the initial investment outlay? b. The company spent and expensed $50,000 on research related to the project last year. Would this change your answer?