Answer:
$ 75131
Explanation:
Given:
Amount inherited = $ 300000
Present amount of annuity = $ 300000
Interest rate, i = 8% = 0.08
number of years, n = 5
Now,
the formula for the present amount of annuity is given as:
Present amount of annuity =
where,
P is the periodic payment
n is the number of years
now, on substituting the values, we get
$ 300000 =
or
$ 300000 = P × 3.993
or
P = $ 75131.48 ≈ $ 75131
hence, the amount he can withdraw is $ 75131
Answer:
WACC 6.18%
Explanation:
to get the cost of capital we solve using the gordon model:
D1 1.55
P 28
f 0.00
g 0.02
Ke 0.075357143
Then for the cost of debt, we need to calculate the YTM of the bonds:
which is the rate at which the present value of the coupon payment and maturity equals the market price:
For the complexity this is done with excel or a financial calculator there is also an approximation formula
YTM with excel: 0.073516565
now that we good this we need to determinate the weigth of equity and debt:
250,00 shares x 28 dollars each = 7,000,000
1,500 bonds of $1,000 each at 98% = 7,350,000
value of the company: 7,000,000 + 7,350,000 = 14,350,000
Ew: 7,000,000 / 14,350,000 = 0.487804878
Dw: 7,350,000 / 14,350,000 =0.512195122
Now we got all values and we can determinate the WACC:
Ke 0.075357143
Equity weight 0.487804878
Kd 0.074
Debt Weight 0.512195122
t 0.34
WACC 0.0617752 = 6.18%