Answer:
a. Debt holders have first claim on corporate value. The Preferred stockholders then have next claim and remaining is left for common stockholders.
b. The value of a financial asset is equal to present value of future cash flows which is provided by the asset. When investor buys a share of stock, (s)he typically expects to receive cash in the form of dividends and to sell the stock to receive cash from sale. However, the price any investor receives is highly dependent upon the dividends which the next investor expects to receive, and so on. Thus, the stock's value depends on cash dividends that the company is expected to provide and the discount rate used to find the present value of those dividends.
d. The formula to calculate present value of expected free cash flows is:
PVn=CFn(1+in)n
The formula for the present value of expected free cash flows when discounted at WACC is:
PV=∑Nn=0CFn(1+in)n
Explanation:
a. Debt holders have first claim on corporate value. The Preferred stockholders then have next claim and remaining is left for common stockholders.
b. The value of a financial asset is equal to present value of future cash flows which is provided by the asset. When investor buys a share of stock, (s)he typically expects to receive cash in the form of dividends and to sell the stock to receive cash from sale. However, the price any investor receives is highly dependent upon the dividends which the next investor expects to receive, and so on. Thus, the stock's value depends on cash dividends that the company is expected to provide and the discount rate used to find the present value of those dividends.
d. The formula to calculate present value of expected free cash flows is:
PVn=CFn(1+in)n
The formula for the present value of expected free cash flows when discounted at WACC is:
PV=∑Nn=0CFn(1+in)n
Answer:
value of the bond = $2,033.33
Explanation:
We know,
Value of the bond, ![B_{0} = [I * \frac{1 - (1 + i)^{-n}}{i}] + \frac{FV}{(1 + i)^n}](https://tex.z-dn.net/?f=B_%7B0%7D%20%3D%20%5BI%20%2A%20%5Cfrac%7B1%20-%20%281%20%2B%20i%29%5E%7B-n%7D%7D%7Bi%7D%5D%20%2B%20%5Cfrac%7BFV%7D%7B%281%20%2B%20i%29%5En%7D)
Here,
Face value of par value, FV = $2,000
Coupon payment, I = Face value or Par value × coupon rate
Coupon payment, I = $2,000 × 6.04%
Coupon payment, I = $128
yield to maturity, i = 6.1% = 0.061
number of years, n = 15
Therefore, putting the value in the formula, we can get,
![B_{0} = [128 * \frac{1 - (1 + 0.061)^{-7}}{0.061}] + [\frac{2,000}{(1 + 0.061)^7}]](https://tex.z-dn.net/?f=B_%7B0%7D%20%3D%20%5B128%20%2A%20%5Cfrac%7B1%20-%20%281%20%2B%200.061%29%5E%7B-7%7D%7D%7B0.061%7D%5D%20%2B%20%5B%5Cfrac%7B2%2C000%7D%7B%281%20%2B%200.061%29%5E7%7D%5D)
or, ![B_{0} = [128 * \frac{1 - (1.061)^{-7}}{0.061}] + [\frac{2,000}{(1.061)^7}]](https://tex.z-dn.net/?f=B_%7B0%7D%20%3D%20%5B128%20%2A%20%5Cfrac%7B1%20-%20%281.061%29%5E%7B-7%7D%7D%7B0.061%7D%5D%20%2B%20%5B%5Cfrac%7B2%2C000%7D%7B%281.061%29%5E7%7D%5D)
or, ![B_{0} = [128 * \frac{0.3393}{0.061}] + 1,321.3635](https://tex.z-dn.net/?f=B_%7B0%7D%20%3D%20%5B128%20%2A%20%5Cfrac%7B0.3393%7D%7B0.061%7D%5D%20%2B%201%2C321.3635)
or, ![B_{0} = [128 * 5.5623] + 1,321.3635](https://tex.z-dn.net/?f=B_%7B0%7D%20%3D%20%5B128%20%2A%205.5623%5D%20%2B%201%2C321.3635)
or, 
$711.9738 + 1,321.3635
Therefore, value of the bond = $2,033.33
Answer:
$ 5.34
Explanation:
Calculation for cost per equivalent unit for conversion costs for September
First step is to find the Equivalent units of production
To complete beginning work-in-process:
Conversion 12,000
[15,000 units × (100%-20% )]
Units started and completed 65,000
(89,000-24,000)
Ending work-in-process
Conversion 21,600
(24,000 units × 90%)
Equivalent units of production 98,600
Second step is to calculate the Cost per equivalent unit using this formula
Cost per equivalent unit =Cost added during the period ÷Equivalent units of production
Let plug in the formula
Cost per equivalent unit = $526,524÷98,600
Cost per equivalent unit = $5.34
Therefore The cost per equivalent unit for conversion costs for September is closest to $ 5.34
Answer:
a. $118,000
Explanation:
When preparing a cash flow statement, using indirect method we add decrease in current assets and we deduct increase in current assets.
Here it is provided that income reported = $110,000
Opening balance of accounts receivables = $40,000
Closing balance of accounts Receivables = $32,000
Change in Accounts receivables = Closing - Opening = $32,000 - $40,000 = - $8,000
Therefore there is decrease in accounts receivables which is a current asset.
Thus Cash Flow from operating activities
Net Income = $110,000
Add: Decrease in current assets = $8,000
Net cash flow from operating activity = $118,000
Correct option is
a. $118,000
Answer:
Increase interest deductions for the limited partners.
Explanation:
In the given scenario the general partner refinances an existing $5,000,000 mortgage on a $10,000,000 property to the original amount of $8,000,000. The interest rate on both mortgages is the same.
Refinancing a loan means that more money is disbursed to the borrower before the termination of the loan.
When a loan is refinanced at the same interest rate the borrower pays more interest.
For example if the mortgage remains at $5,000,000 the interest paid on this principal will be lower.
When the loan is refinanced to $8,000,000 at the same Interest rate the interest paid will be higher because principal is higher.
So the general partner aims to increase the amount of interest paid.
