Answer:
$37.05
Explanation:
Data provided in the question:
last dividend, D0 = $1.55
Dividend growth rate, g = 1.5% = 0.015
growth rate after 2 year = 8.0% = 0.08
Required rate of return , r= 12% = 0.12
Now,
Year 1 dividend = $1.55 × ( 1 + 0.015 ) = $1.57325
Year 2 dividend = $1.57325 × ( 1 + 0.015 ) = $1.5968
Stock price after year 2 = [ $1.5968 × ( 1 + 0.08) ] ÷ (0.12 - 0.08)
= $43.11
Therefore,
The current stock price = amounts discounted back to the present at the required rate of return
= ( $1.57325 ÷ 1.12 ) + ( 1.5968 ÷ 1.12² ) + ( $43.11 ÷ 1.12² )
= $37.05
Answer:
$38,448,000
Explanation:
Calculation to determine What will the book value of this purchase
First step
Depreciation = (cost - salvage)/useful life
Depreciation= (40,900,000 - 4,090,000 )/15
Depreciation=36810000/15
Depreciation=2454000
Now let determine the
Book value=Cost -Depreciation
Book value=$40,900,000-$2,454,000
Book value=$38,448,000
Therefore the book value of this purchase is$38,448,000
Answer and Explanation:
a. The computation of the wacc is as followS;
= cost of common stock × weight of common stock + cost of debt × weight of debt × (1 - tax rate)
= 0.16 × 0.70 + 0.08 × 0.30 × (1 - 0.30)
= 0.112 + 0.0168
= 0.1288
= 12.88%
b. The after tax cost of debt is
= 0.08 × (1- 0.30)
= 0.056
So the capital should use the cost of debt
