The following data has been collected about Keller Company's stockholders' equity accounts: Common stock $10 par value 20,000 sh
1 answer:
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Answer:
The investors should be willing to pay $49.50 for this stock
Explanation:
Hi, first, we need to find out what the cost of equity is in order to find the price of the stock. that is:
Where:
rf= Risk free rate
rm=return on the market
r(e)=cost of equity
After finding r(e), we would need to find the price using the following equation.
Where:
Do= last dividend
g= growth rate
r(e)= cost of equity.
ok, so, let´s find out what the cost of equity is.
So, the r(e)=15%, now let´s find the price of this stock
Therefore, the price of this stock is $49.50
Best of luck.
Answer:
a) Fund pre-tax Amount $ 179,084.77
b) Funds after-tax $ 163,267.82
c) Dividends after-tax amount : $ 159,813.27
Explanation:
We calcuale the future value of the fund at 6% annual rate over a 10-years period:
Principal 100,000.00
time 10.00
rate 0.06000
Amount 179,084.77
after taxes, as this were held for a longer period will be considered long term gain and taxes at 20%:
179,084.77 - 100,000 = 79,084.77 capital long-term gain subject to taxation
79,084.77 * (1-0.20) = 63,267.82
Now we add the 100,000: 163,267.82
Alternative scenario:
6% less 20% dividends tax after-tax return on dividends:
0.06 x (1 - 0.2) = 0.048
We calcualte the future value using this rate:
Principal 100,000.00
time 10.00
rate 0.04800
Amount 159,813.27