Answer:
b) fall to 8 percent.
Explanation:
First, irrespective of the duration of the bond, if the price is equal to the bond's face value, it means that the coupon rate is equal to the yield to maturity (YTM).
Initial YTM = 10%
Since this is a perpetually coupon paying bond, you use PV of perpetuity to find the rate;
PV = Coupon PMT / rate
Given PV as $1,250, new annual rate would be;
1,250 = 100/rate
solve for rate by cross multiplying;
1,250rate = 100
divide both sides by 1,250
rate = 100/1,250
rate = 0.08 or 8%
Therefore, the
interest rate would fall to 8 percent.
Answer:
Option (a) is correct.
Explanation:
Given that,
Beginning balance of Retained Earnings = $75,000
Net income = $26,000
Ending retained earnings = $91,000
Total Balance during the year:
= Beginning balance of Retained Earnings + Net income
= $75,000 + $26,000
= $101,000
Dividend declared:
= Total Balance during the year - Ending retained earnings
= $101,000 - $91,000
= $10,000
Therefore, the amount of dividend declared by the Superior during its recent year of operation is $10,000.
Answer:
a. Firm M probably has a higher dividend payout ratio than Firm N.
Explanation:
The dividend payout ratio is commonly referred to a portion of the net income of the company which is paid to the various shareholders in dividends. Therefore, if we consider the statements made in the question, Firm M has a higher annual net income while the annual net income of Firm N is fluctuating, we can conclude that the dividend payout ratio of Firm M is more than that of Firm N.
Answer:
The correct option is e. The company's value of operations one year from now is expected to be 5% above the current price.
Explanation:
Free cash flow (FCF) refers to the cash that a company generates after taking into consideration cash outflows needed to support operations and maintain the capital assets of the company.
When the free cash flow of a company is expected to grow at a certain constant rate, the implication is that the the value of operations of that company one year from the current period is expected to be higher than the current price.
Based on the explanation above, the correct option is e. The company's value of operations one year from now is expected to be 5% above the current price.
<span>One criticism against the ‘supply-slide’ cuts in the marginal
tax rates is that they fail to increase the aggregate supply in a more rapid
way, in which are the goods and services in total that are available in the
market and that they fail to increase it more than of the aggregate demand
which is the goods and services’ final demand.</span>