Answer:
b) Income is allocated on a pro rata basis
Explanation:
A partnership is an agreement between two or more people to oversee a business and share in the profit and losses made by the business.
In a partnership when income comes in it is shared.on a pro rata basis.
This means income is given based on the level of ownership of the business.
For example a partner that has 60% ownership of the partnership is expected to collect 60% of the business income.
Pro rata is also called proportional rate.
Answer:
the discount rate is 28.57%
Explanation:
The computation of the discount rate is shown below:
Discount rate = Dividend ÷Share Price of Preferred stock
= $20 ÷ $70
= 28.57%
By dividing the dividend from the price of the preferred stock we can get the discount rate
Hence, the discount rate is 28.57%
Answer:
5.80%
Explanation:
Computation of after-tax return
Based on the information given the total before-tax income will be $3.
Since the firm is in the 30% tax bracket this means that the taxable income will be calculated as:
Taxable income =(0.30 ×$3)
Taxable income = $0.9
The next step is to calculate for the Taxes
The taxes will be = (0.30 ×$0.9) = $0.27
Now let calculate for the After-tax income
After-tax income = ($3 - $0.27) = 2.73
The last step is to find the After-tax rate of return using this formula
After-tax rate of return =After-tax income/Share of preferred stock
Let plug in the formula
After-tax rate of return = ($2.73/$47)
After-tax rate of return=0.058×100
After-tax rate of return = 5.80%
Therefore After-tax rate of return will be 5.80%
Canada, Australia, and South Africa use tax brackets.
Answer:
$60.32
Explanation:
The intrinsic value of a company is the theoretical value of any company and is essentially the price that investors would want to pay given the level of risk associated with an investment in the company. Intrinsic value is calculated commonly from an investment appraisal standpoint whereby an investor may determine whether a stock is undervalued or overvalued or an investor may put a price on a stock that is not openly traded. There are multiple approaches towards calculating intrinsic value. The most comprehensive approaches are the ones that solely focus on "company centric" factors such as sales levels, cash flows, costs, discount rates and so on and so forth. This is commonly known as the discounted cash flow model in which you calculate the present value of all future cash flows of the company. Since this model is complicated to use, there are other approaches to calculate sort of a "back of the hand" intrinsic value. An example of such an approach is the relative/comparative valuation approach in which you calculate the price an investor would be willing to pay using examples of other similar instruments that an investor has made and assuming that a similar price would be paid for this investment as well.
The question at hand refers to a method known as the comparable company analysis in which an industry ratio is used to derive the price of Becker Products. So, the Price to Book value for the industry is given as 3.15 for the industry. Using comparative analysis we will assume that this ratio is the same for Becker (since it operates in the same industry and this is the industry average so the actual ratio should be close to the average). Formula for calculating PB is PB = Price per Share/Book Value per share. We have PB as 3.15 and Book Value per Share as 19.15. Re-arranging the formula becomes, Price per Share = PB x Book Value per Share = 3.15 x 19.15 = $60.32.
So we can estimate that, <em>relative </em>to the industry, the equity per share can be estimated as $60.32 per share which is the price investors would be willing to pay for the level of risk in the company.
Again, this is simply an <em>estimation</em> of the intrinsic value. Not the actual intrinsic value since the factors involved are external and industry specific. Discounted cash flows methods are better adopted to calculate the intrinsic value.