Answer:
Kd = 7%
Ke = D1 + g
Po(1 - FC)
Ke = $2 + 0.09
$40(1 - 0.15)
Ke = $2 + 0.09
$34
Ke = 0.1488 = 14.88%
WACC = Ke(E/V) + Kd(D/V)(1-T)
WACC = 14.88(60/100) + 7(40/100)(1 - 0.40)
WACC = 8.928 + 1.68
WACC = 10.6%
Explanation:
In this case before-tax cost of debt is given. Cost of equity is expected dividend divided by current market price after flotation cost plus growth rate. WACC is calculated as cost of equity multiplied by the proportion of equity in the capital structure plus after-tax cost of debt multiplied by proportion of debt in the capital structure.
Answer:
General administration
Explanation:
In a telephone operating company, negotiating and maintaining ongoing relations with regulatory bodies can be among the most important activities for competitive advantage, this type of value chain support activity is known as "General administration".
General administration is a powerful source of competitive advantage which consists of a number of activities, including general management, planning, finance, accounting, legal and government affairs, quality management, and information systems, it typically supports the entire value chain and not individual activities.
Part a: The market capitalization rate is 9.25%
Part b: The intrinsic value of the stock is $70.59
Market capitalization rate is another name for the stock's required rate of return. It is called the market capitalization rate because we can infer it by observing the market value of the stock. One way to find this rate is the capital asset pricing model (CAPM).
Part a:
Let,
r = market capitalization rate
f = risk free rate = 5%
m = return on the market = 10%
We can find the market capitalization rate with the help of the capital asset pricing model (CAPM),
The market capitalization rate is 9.25%.
Part b:
Let,
D be the dividend expected = $3
r be the interest rate = 9.25%
g = growth rate of dividends = 5%
The price is given by the dividend growth model:
The intrinsic value of the stock is $70.59
Learn more about CAPM:
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Answer:
The accounting entries is as follows:
Debit Retained Earnings($35 by 30,000 shares) $1,050,000
Credit: Common Shares Account at Par Value($1 by 30,000 shares) $30,000
Credit Share Premium Account for Additional Paid in Capital ($34 by 30,000) = $1,020,000
Explanation:
A stock dividend is payment to shareholders by the company in the form of additional shares rather than dividend payment. This is common where the company is short of liquid funds to effect payment of dividends to its shareholders. They are usually issues in the form of fractions of existing holdings. Stock dividend increases the overall share holdings of the shareholder.
For Stock Dividend, the accounting entry is to transfer from the Retained Earnings to the Share Account and Share Premium or Additional Capital account.
The Share account is credited with the par value of the additional shares issued while the difference between the par value and the market value is credited to the Share Premium account. The full amount of the stock dividend is likewise debited to the Retained Earnings account.
