Answer:
The cost of common equity from reinvested earnings is 11.84%
Explanation:
The constant growth model of DDM or DCF approach is used to calculate the price of a stock today whose dividends are expected to grow at a constant rate forever. The model values the stock based on the present value of the expected future dividends form the stock.
The formula for price today under this model is,
P0 = D0 * (1+g) / (r - g)
Where,
- P0 is price today
- D0 is the dividend today
- r is the cost of equity
- g is the growth rate in dividends
Plugging in the available values for all the variables, we can calculate the r or cost of common equity to be,
22.5 = 0.8 * (1+0.08) / (r - 0.08)
22.5 * (r - 0.08) = 0.864
22.5r - 1.8 = 0.864
22.5r = 0.864 + 1.8
r = 2.664 / 22.5
r = 0.1184 or 11.84%
Answer:
$28,065
Explanation:
The moving averages method uses the means of the previous months as the forecast for the next months.
The formula for the moving average is as below.
Moving Average = (n1 + n2 + n3 + ...) / n
In this case, the Moving average = $26,908 +$28,386 +$28,730, $27,290+ $29,009 / 5
= $140,323 /5
=$28,064.6
=$28,065
Answer: Option (C)
Explanation:
Sales mix is referred to as or known as the calculation that tends to determine proportion of each commodity or product that a business/organization sells relative to the total sales. Sales mix is mostly significant since some of the products, commodity or services tends to be much more profitable than the others, and thus if an organization's sales mix changes,so will its profits.
Answer:
See below ~
Explanation:
<u>Equity Capital Structure</u>
Equity capital refers to the money owed by the owners or shareholders of the company.
- Fast growing companies like software
- Businesses in the growth stage
- Companies with high growth rate or credibility
- Companies not in a position to provide collateral
<u>Debt Capital Structure</u>
Debt capital in the capital structure of the company refers to the borrowed money at work.
- Managers with conservative management style
- Companies want to show high credit rating
The yield to maturity on the bonds is 10.0868%
<u>Explanation</u>:
Given,
Annual coupon rate = 8% = 0.08
Par value = $ 1000
Price = $ 865
N = 11
1 .
PV = $ 865
PMT = ( Par Value
The coupon rate) / F
= ( 1000
0.08 ) / 1
= 80.
FV = 1000.
Financial calculator solution
the yield to maturity = I = 0.1008668
= 10.0868% .