I think the answer is <span>unit-elastic over this price range. This happens when a company earns the same revenue even with some slight changes on the prices. It means that slight increase or even decrease in price does not affect the revenue of the company.</span>
Answer:
A) 10.15%
Explanation:
Cost of equity (Re) = 14.06% or 0.1406
cost of preferred stock (Rp) = 7/65 = 0.10769
cost of bonds (Rb) = 7.5% or 0.075
outstanding shares = 2.5 million shares x $42 = $105 million
bonds outstanding = $1,000 x 80,000 bonds = $80 million
preferred stock = $65 x 750,000 = $48.75 million
corporate tax rate = 38% or 0.38
total market value of equity + debt (in millions) = $105 + $48.75 + $80 = $233.75
WACC = [(outstanding shares / total market value) x Re] + [(preferred stock / total market value) x Rp] + {[(bonds outstanding / total market value) x Rb] x (1 - tax rate)}
WACC = [($105m / $233.75m) x 0.1406] + [($48.75m / $233.75m) x 0.10769] + {[($80m / $233.75m) x 0.075] x (1 - 0.38)}
WACC = 0.06316 + 0.02246 + 0.01591 = 0.10153 or 10.15%
Answer:
Worth of both the property will be same.
Explanation:
Data provided in the question:
Cap rate for the Property A which is a self storage capacity = 6%
Cap rate for the Property B which is an office building = 6%
NOI of both the buildings are equal
Now,
Mathematically,
Cap rate is given as = [ NOI ] ÷ [ Worth of the property ]
or
Worth of the property = [ NOI ] ÷ [ Cap rate ]
Since, the NOI and cap rate for both the buildings are same
Therefore,
Worth of both the property will be same.
I think the answer is a but I am not for sure
Answer:
d. 13.31%
Explanation:
IRR is the rate at which NPV = 0
IRR 13.31%
Year 0 1 2 3
Cash flow stream -1100.000 450.000 470.000 490.000
Discounting factor 1.000 1.133 1.284 1.455
Discounted cash flows project -1100.000 397.136 366.060 336.804
NPV = Sum of discounted cash flows
NPV Project = 0.000
Where
Discounting factor = (1 + discount rate)^(Corresponding period in years)
Discounted Cashflow = Cash flow stream/discounting factor
IRR = 13.31%
Therefore, The project's IRR is 13.31%
