Answer:
The answer is D.
Explanation:
The price of a stock is also known as price of equity. This is the price the equity of a company is presently worth. The price the potential investors will be able to purchase it. One of the ways of calculating price of a stock is the Dividend Discount Model which can be calculated by:
Ke = (D1÷Po) - g
Ke is the Cost of equity(i.e the required rate of return for investors)
D1 is the next year dividend payments
Po is the price of the stock
g is the expected dividend growth rate
To get Po, we can rewrite the formula as:
Po = D1÷Ke - g÷Ke
We can see now that the expected future dividends will be discounted at the ''Ke'' which is the investors'required rate of return
Answer:
cost of equity is 11.60 %
Explanation:
Given data
cost of capital = 10.9 percent
tax rate = 35 percent
earnings = $21,800
bonds outstanding = $25,000
rate = 6 %
to find out
cost of equity
solution
we will find first value of unlevered
value of unlevered = earning ( 1 - tax rate ) / cost of capital
value of unlevered = 21800 ( 1 - 0.35 ) / 0.109 = $130000
so
value of unlevered will be for firm = 130000 × bond outstanding × tax rate
value of unlevered will be for firm = 130000 × 25000 × 35%
value of unlevered will be for firm = $138750
so value of firm will be = bond outstanding + equity
so equity will be = 138750 - 25000
equity = $113750
so now
cost of equity will be = cost of capital + ( cost of capital - rate) (bonds / equity ) ( 1 - tax rate )
cost of equity will be = 10.9%+ ( 10.9 % - 6%) (25000 / 113750 ) ( 1-0.35)
so cost of equity = 11.60 %
Answer:
$1,049
Explanation:
Data given in the question
Par value = $1,000
Interest rate = 4.9%
Time period = 10 years
So, by considering the above information, the price paid to the bond holder is
= Par value + Par value × rate of interest
= $1,000 + $1,000 × 4.9%
= $1,000 + $49
= $1,049
Hence. the price paid to the bond holder is $1,049
Answer and Explanation:
The Journal entry is shown below:-
Carter's Capital Dr $600,000
To Able's Capital $450,000 (3 ÷ 4 × $600,000)
To Baker's Capital $150,000
(Being Carter’s withdrawal from the partnership is recorded)
For recording this we debited the carter capital as it shows the withdrawn amount and credited the able capital and baker capital so that the total withdrawn collected from these partners could come
Answer:
Make decisions that maximize benefits
Explanation:
The whole purpose of a cost-benefit analysis is to allow management to make the best decisions using the measurment of profitability in a specific project or system. The model calculates all the income and benefits as well as all the associated costs, substracting the costs from the benefits. This is how you can determine the opportunity cost for each project or system.
