Answer:
The value of the firm or worth of the firm is $147058.82 rounded off to 2 decimal places
Explanation:
We first need to calculate the required rate of return for this firm that will be used as the discount rate in the valuation of the firm using the discounted cash flow methods.
Using the CAPM we can calculate the required rate of return as,
r = rRF + Beta * (rM - rRF)
Where,
- rRF is the risk free rate
- rM is the return on Market
So,
r = 0.04 + 0.4 * (0.11 - 0.04)
r = 0.068 or 6.8%
As the cash flows the firm can generate are expected to remain constant through out and they are generated after equal interval of time, this can be treated as a perpetuity.
The present value of a perpetuity is calculated as follows,
Present Value of perpetuity = Cash Flow / r
Present value of perpetuity = 10000 / 0.068
Present value of perpetuity = $147058.8235
So, the value of the firm or worth of the firm is $147058.82 rounded off to 2 decimal places
Due to the increase in the price of the pizza, it is conclusive that the demand will decrease. Assume that the amount he will earn will stay the same and it is the product of the number of pizza and the price, the choice that would satisfy this is the third choice.
Answer:
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Explanation:
Answer:
- Gain = $271,310
- Net reduction in retained earnings = $105,690
Explanation:
Gain = (Ivanhoe market price - Purchase price) * Number of shares issued as property dividend
Purchase price = 130,000 / 16,000
= $8.13
Number of shares issued as property dividend = 130,000 shares of Concord / 10
= 13,000 Ivanhoe shares
Gain = (29 - 8.13) * 13,000
= $271,310
Net reduction in retained earnings:
= Dividends payable - Gain
= (13,000 * 29) - 271,310
= $105,690
