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1 year ago

He wacc is the appropriate discount rate for use with projects but should be adjusted for higher risk ones

1 answer:

8 0

The WACC is the appropriate discount rate for use with average projects but should be adjusted upward for higher-risk ones.

Securities analysts may use WACC when evaluating the value of investment opportunities. For example, in discounted cash flow analysis, as a discount rate for future cash flows, he can apply WACC to derive the net present value of the firm.

Using the WACC discount rate makes the present value of investment appear higher than it actually is.

Businesses typically use the weighted average cost of capital (WACC) as the discount rate. This is to take into account the rate of return expected by shareholders. DCF has limitations. Primarily, it relies on estimates of future cash flows that may be inaccurate.

Learn more about WACC at

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What does a person need if he or she is not able to pay for a planned purchase in full with a check or cash? A. a credit card B.

Gennadij [26K]

Answer:

C. a long-term loan from a bank

Explanation:

A loan or credit facility is suitable when a person is unable to pay in cash or by check. Lenders such as banks and credit unions offer credit facilities to their customers. These institutions charge interest on loans advanced.

When planning for a capital intensive purchase, a long term bank loan is suitable. Banks can extend credit facilities for huge amounts of money. The monthly repayments and interest rates for a long-term loan are usually low, making it affordable to many borrowers.

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2 years ago

In what circumstances is it most important to use multistage dividend discount models rather than constant-growth models?

patriot [66]

Answer:

when valuing companies with temporarily high growth rates.

Explanation:

Discounted dividend models are methods to assess a company's share price based on the dividends that company will distribute in the future. Also known by its name in English dividend discount model (DDM).

These models are based on the theory that the price of a share must be equal to the price of the dividends that the company will deliver, discounted at its net present value.

If the price of the share in the market is lower than the result obtained by the discounted dividend model, the share is undervalued and therefore it is advisable to buy. If, on the contrary, the market price is higher than the model, it is understood that the share price is too high.

Multistage dividend growth models

It is very difficult for a company to experience the same growth every year as the Gordon model assumes, so multistage models assume different growths for each period.

The most common is to use two or three stage growths, where at first the growths are higher but then tend to stabilize at a smaller constant growth. As for example in early stage companies.

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3 years ago

A company issues a ten-year bond at par with a coupon rate of 6.4% paid semi-annually. The YTM at the beginning of the third

sladkih [1.3K]

Answer:

$\mathbf{current \ price \ of \ the \ bond= \$848.78}$

Explanation:

The current price of the bond can be calculated by using the formula:

$current \ price \ of \ the \ bond= ( coupon \times \dfrac{ (1- \dfrac{1}{(1+YTM)^{no \ of \ period }})}{YTM} + \dfrac{Face \ Value }{(1+YTM ) ^{no \ of \ period}}$

$current \ price \ of \ the \ bond= ( \dfrac{0.064 \times \$1000}{2} \times \dfrac{ (1- \dfrac{1}{(1+ \dfrac{0.091}{2})^{8 \times 2}})}{\dfrac{0.091}{2}} + \dfrac{\$1000 }{(1+\dfrac{0.091}{2} ) ^{8 \times 2}})$

$current \ price \ of \ the \ bond= \$32 \times $11.19 + \$490.70$

$current \ price \ of \ the \ bond= \$358.08+ \$490.70$

$\mathbf{current \ price \ of \ the \ bond= \$848.78}$

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3 years ago

Contingent Liabilities must have the following criteria (select all that apply): Select one or more: A. The obligation is certai

Leya [2.2K]

Answer: Option B and C

Explanation: In simple words , contingent liabilities refers to the liabilities the occurrence of which depends on the happening of an event that may or may not occur in the future.

These are recorded in the accounts only when the payment is to be made in future and that payment could be reasonably estimated.

Hence the correct option is B and C

3 0

3 years ago

Baxter Inc. owns 90 percent of Wisconsin Inc. and 20 percent of Cleveland Company.

dexar [7]

Answer:

$350,380

Explanation:

Calculation to determine the amount that would appear on the consolidated income

Consolidated income statement.

Sales$1,590,000

($1,000,000+$450,000+$280,000-$100,000-$40,000)

Less :Cost of goods sold ($1,015,000)

($670,000+$280,000+$190,000-$100,000-$25,000)

Less :Expenses ($200,000)

($110,000+$60,000+$30,000)

Dividend income$0

Consolidated net income $375,000

Noncontrolling interests in subsidiaries' income $24,620

Controlling interest in consolidated net income $350,380

Therefore the amount that would appear on the consolidated income will be $350,380

8 0

3 years ago

He wacc is the appropriate discount rate for use with ______ projects but should be adjusted ______ for higher risk ones

He wacc is the appropriate discount rate for use with projects but should be adjusted for higher risk ones