Answer:
June 1
Cash $111,000 (debit)
Note Payable $111,000 (credit)
June 30
Interest expense $1,480 (debit)
Note Payable $1,480 (credit)
Nov 30
Note Payable $119,800 (debit)
Cash $119,800 (credit)
Explanation:
June 1
Recognize the Cash Asset received and a liability Note Payable
June 30
Interest for 1 month has accrued and this is calculated as :
Interest Expense = $111,000 × 8% × 1/6
= $1,480
Nov 30
Total Interest is capitalized to the Note Payable and the full amount is repaid
Total Interest = $111,000 × 8%
= $8,800
Ballon Amount = $111,000 + $8,800
= $119,800
Answer:
The customer will pay, disregarding commissions and accrued interest $9,546.88
.
Explanation:
According to the given data we have that A customer buys 10M of the notes "10 M" means that the customer is buying $10,000 par value of the notes-
The Treasury Note is quoted at 95-11 - 95-15
In this case A customer will buy at ask price, which is 95 and 15/32 nds = 95.46875%
Therefore, 95.46875% of $10,000 par = $9,546.88
The customer will pay, disregarding commissions and accrued interest $9,546.88
.
Cost of equity capital is closest to: 16 percent
Solution:
WACC is covered on page 120 Corporate Finance, under Capital Structure.
Using the standard equation for WACC = %wt Equity x cost of equity (re) + %wt Debt x cost of debt (rd).
Since there is a 20% tax rate for the firm, the cost of borrowing is reduced by that amount. So the cost of debt is 4%, not 5%.
Plug the formula: 10% = 50% x re + 50% x 4%
The formula ( i.e. 0.1+(0.1-0.05)(1)(1-0.2)) in CFAI reading is questionable.
The calculation is 0.1+(0.1-0.05*(1-0.2))*(1)=16%
Answer: Product differentiation strategy
Explanation: In the given case, the industry in which Thomas works depicts features of oligopoly with few firms operating at high level. Thus, increase in price by Thomas would shift the demand for consumers to other firms.
Hence Thomas should opt for product differentiation strategy and should increase those features which classify its products different from the others. In such industries, quality is the core essence and costumers are wiling to pay slight higher prices if the quality of the product offered is higher than others.
Hence Thomas should narrow the completion and should focus on inventing some unique features in his products.
Answer:
$44.12
Explanation:
For computing the current share price first we have to determine the price of the stock which is shown below:
Price of the stock = Next year dividend ÷ (Required rate of return - growth rate)
where,
Next year dividend equal to
= $12.25 + $12.25 × 5.25%
= $12.25 + 0.643125
= $12.893125
So, the price of the stock is
= $12.89 ÷ (13.25% - 5.25%)
= $12.89 ÷ 8%
= $161.1640625
Now the current share price is
= Present value of the dividend + present value of the price of stock
= $12.25 ÷ (1 + 13.25%)^11 + $161.1640625 ÷ (1 + 13.25%)^11
= $44.12
