Answer:
5.7 1
Explanation:
Given:
- Earning expect: $100,000
- Grow rate: 3% = 0.03 (g)
- Discount rate: 10% = 0.1 (r)
- Number of shares: 250,000
We need to find the EPS because all of the earnings are paid out as dividends
= $100,000/250,000 shares
= $0.4
=> Current price:
P = D1 / (r-g)
<=> P = 0.4 (0.1 - 0.03) = 5.7 1
So the price per share of stock is 5.7 1
Hope it will find you well
Answer:
$224,000
Explanation:
The computation of the borrowed cash amount is shown below:
= Cash balance + expected cash receipts - expected cash disbursements - minimum monthly balance
= $3,461,000 + $712,000 - $1,397,000 - $3,000,000
= $224,000
Simply we add the expected cash receipts and less the expected cash disbursements and minimum monthly balance to the cash balance so that accurate value can come.
Answer:
The WACC before bond issuance is 3.9% and the WACC after bond issuance is 3.71%
Explanation:
In order to calculate the WACC before bond issuance
, we would have to calculate first the cost of equity using capital asset pricing model
.
So Using CAPM we have Rf + Beta x Market risk premium
=
0.5% + 0.85 * 4%
= 3.9%
. cost of equity
Therefore WACC before bond issuance = (Cost of equity x weight of equity + cost of debt (1-tax) x weight of debt)
= 3.9%
. WACC before bond issuance will be equal to cost of equity in this case as there is no debt issue.
In order to calculate the WACC after bond issuance we make the following calculation:
WACC after bond issuance = (Cost of equity x weight of equity + cost of debt (1-tax) x weight of debt)
= (3.9% x 0.9) + (2% x 0.1)
= 3.51% + 0.2%
= 3.71%
