Which country has had a higher growth rate than the US over about the last 120 years?
1 answer:
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Answer:
11.61%
Explanation:
First, find the annual percentage return (APR) of this annuity. Using a financial calculator, input the following;
Recurring payment; PMT = -450
Future value ; FV = 27,000
Duration of investment ; N = 4*12 = 48 months
One -time present value; PV = 0
then compute interest rate; CPT I /Y= 0.92% (this is monthly rate)
APR = 0.92*12 = 11.035%
Effective Annual Rate (EAR) formula is as follows;
EAR = (1+ ) ^m -1
EAR = 1+ )^12 -1
EAR = 1.1161 -1
EAR = 0.1161 or 11.61%
Answer:
a)
Cost of debt (after tax) = 5.4%
Cost of preferred stock () = 10.53%
Cost of common stock () = 16.18%
b)
WACC = 14%
c)
project 1 and project 2
Explanation:
Given that:
Debt rate () = 9% = 0.09
Tax rate (T) = 40% = 0.4
Dividend per share () = $6
Price per share () = $57
Common stock price ()= $39
Expected dividend () = $4.75
Growth rate (g) = 4% = 0.04
The target capital structure consists of 75% common stock (), 15% debt (
), and 10% preferred stock (
)
a)
Cost of debt (after tax) =`
Cost of debt (after tax) = 5.4%
Cost of preferred stock () =
= 10.53%
= 10.53%
Cost of common stock () =
= 16.18%
b)
WACC = 14%
c) Only projects with expected returns that exceed WACC will be accepted. Therefore only project 1 and project 2 would be accepted