Answer:
b. $12.67
Explanation:
The value of the company is the present value of its future dividends payments discounted at the company's cost of equity.
Year 1 dividend=current year dividend*(1+12%)
Year 1 dividend=$60m*(1+12%)=$67.20m
Year 2 dividend=$67.20m*(1+12%)=$75.26m
Year 3 dividend=$75.26m*(1+12%)=$ 84.30m
Year 4 dividend=$ 84.30m*(1+12%)=$ 94.41m
Year 5 dividend=$ 94.41m*(1+12%)=$105.74m
the terminal value of dividends=Year 5 dividend*(1+terminal growth rate)/(cost of equity)
the terminal value of dividends=$105.74m*(1+8%)/(16%-8%)=$1427.49m
value of the company=$67.20/(1+16%)^1+$75.26/(1+16%)^2+$ 84.30/(1+12%)^3+$ 94.41/(1+16%)^4+$105.74/(1+16%)^5+$1427.49/(1+16%)^5
value of the company=$956.00 m
value of one share=$956.00 m/75m=$12.75(the correct option is $12.67 the difference is due to rounding error)
Answer and Explanation:
The computation is shown below:
a. The predetermined overhead rate is
= $660,000 ÷ 100,000
= $6.60
(b) The amount is
For Job 345, it is
= 560 hours × $6.60
= $3,696
And,
For Job 777, it is
= 800 hours × $6.60
= $5,280
(c) The journal entry is
Work in Process $8,976
To Factory Overhead $8,976
(Being the factory overhead applied is shown below:
= $3,696 + $5,280
= $8,976
Answer:
The Gain of $700.
Explanation:
For the computation of gain or loss first we need to find out the book value which is shown below:-
Book value = Purchase cost - Accumulated Depreciation
= $36,000 - $26,500 = $9500
Gain or Loss = Selling Price - Book Value
= $10,200 - $9500
= $700
So, there is a
The Gain of $700 as selling price is more than the book value
Therefore for computing the gain or loss we simply applied the above formula.
Answer:
7.37%
Explanation:
First of we calculate Future value of coupon payments:
Annual Payment= 65
Interest = 6%
Time = 5 years
Present value = 0
Future value = 65 + 65 * (1.06) + 65 * (1.06)^2 + 65 * (1.06)^3 + 65 * (1.06)^4
Future value = 366.41
Now after 5 years the interest rate will become 7%, we will calculate present value of bond after 5 years:
Annual Payment= 65
Interest = 7%
Time = 15 years
Present value = 65/ (1.07) + 65/ (1.07)^2 + .......+ 65/(1.07)^15 + 1000/ (1.07)^15
Present value = 954.46
Total future value = 954.46 + 366.41 = 1,320.87
($925.50) * (1 + r)^5 = $1,320.87
r = 7.37%
Answer:
The equivalent interest rate under continuous compounding is 5.8%
Explanation:
Annual compounding
A = P(1+r)^n
P = $1,000
r = 6% = 0.06
n = 1 year
A = 1000(1+0.06)^1 = 1000(1.06) = $1060
Continuous compounding
A = Pe^rt
A = $1060
P = $1000
t = 1 year
1060 = 1000e^r
e^r = 1060/1000 = 1.06
e^r = 1.06
r = ln 1.06 = 0.058 = 5.8%
