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sashaice [31]
3 years ago
13

Assume Time Warner shares have a market capitalization of $60 billion. The company is expected to pay a dividend of $0.30 per sh

are and each share trades for $40. The growth rate in dividends is expected to be 7% per year. Also, Time Warner has $20 billion of debt that trades with a yield to maturity of 8%. If the firm's tax rate is 35%, compute the WACC
Business
1 answer:
den301095 [7]3 years ago
3 0

Answer:

WACC = 7.2%

Explanation:

<em>Weighted average cost of capital is the average cost of all of the long-term types of finance used by a company weighted according to the that amount of finance used in relation to the total pool of fund</em>

To compute the WACC , we will follow the steps below:

Step 1

<em>Calculate the cost of the individual sources of finance:</em>

Cost of debt =   Before-tax deb × (1-T)

                    = 8% × (1-0.35)

                    = 5.2%

Cost of equity = (Do(1+g)/Po ) + g

                        = (0.30 (1+0.07)/ 40)   + 0.07

                        = 7.8%

Step 2

<em>Calculate the market value of the individual sources of finance</em>

Equity = $60 billion  

Debt = $20 billion

Step 3

<em>Calculate WACC</em>

            =  7.8% × 80 billion = 4.6815

            =    5.2% ×  $ 20 billion = 1.04

Total value of debt and equity = 60 + 20 = $80 billion

WACC =  (4.68  + 1.04)/ 80 × 100

         = 7.2%

WACC = 7.2%

               

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A borrower takes out a 30-year adjustable rate mortgage loan for $200,000 with monthly payments. The first two years of the loan
lara31 [8.8K]

Answer:

1003

Explanation:

Given:

Period= 30 years, Loan amount= $200,000,

Payments- Monthly,

Teaser rate for first 2 years = 4%,

Annual payment cap=5%, Composite rate on reset date= 6%

Annual rate for 2 years =4%

Monthly rate will be 4/12 = 0.3333% = 0.003333

n=30years=360 months

Monthly payment for first 2 years = Pr(1+r)^n/((1+r)^n-1)

= 200000\times0.0033\times1.033^{360}/(1.033^{360}-1)

= 954.83

or by Excel function = PMT(0.003333,360,200000,0) = 954.83

Loan balance after 2 years = PV(0.003333,336,-954.83,0) = 192,812.36 or

Balance=A(1+r)^n-PMT\times(1+r)^n-1)/i

=200000(1.0033)^{24}-954.83(1+0.003333)^{24}-1)/0.003333

= 192,812.36

Composite rate is 6% but payment is capped at 5%. So new payment from year 3 is 954.83×1.05=1002.57=1003

6 0
2 years ago
You have decided to buy a used car. The dealer has offered you two options: (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use
Marysya12 [62]

Answer:

1. In option (a), the dealer would charge $18,213.54.

b. In present value terms, the one-time payment (option (b) is a better deal for the purchaser.

Explanation:

a) Data and Calculations:

Monthly payment for a used car = $620

Payment period = 20 months

Additional payment at the end of 20 months = $12,000

Annual interest rate = 24%

One-time payment for the car purchase = $16,864

From an online financial calculator, the present value of the payments is:

N (# of periods)  20

I/Y (Interest per year)  24

PMT (Periodic Payment)  620

FV (Future Value)  12000

Results

PV = $18,213.54

Sum of all periodic payments = $12,400.00

Total Interest = $6,186.46

3 0
2 years ago
Stealth bank holds deposits of $200 million. It holds reserves of $15 million. It has purchased government bonds worth $75 milli
tiny-mole [99]

Answer:

$220 million

Explanation:

Stealth bank total value of liabilities will be:

Reserves $15 million

Government bonds purchased $75 million

Market value (loan) $130 million

Value of bank liabilities $220 million

4 0
2 years ago
The physical flow reconciliation is a report that:
Diano4ka-milaya [45]

Answer: The correct answer is "A. reconciles the physical units started in a period with the physical units completed in that period.".

Explanation: The physical flow reconciliation: reconciles the physical units started in a period with the physical units completed in that period.

Through this process it is possible to control, how many units are started in a period and how many are finished in that period.

5 0
3 years ago
100 points &amp; brainliest!!
GrogVix [38]

Answer:

i believe its b

Explanation:

8 0
2 years ago
Read 2 more answers
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