Answer:
5.925%
Explanation:
For computing the cost of debt, first we have to determine the YTM by using the Rate formula that is shown in the attachment
Given that,
Present value = $1,050
Assuming figure - Future value or Face value = $1,000
PMT = 1,000 × 8% = $80
NPER = 20 year - 1 year = 19 year
= Rate(NPER;PMT;-PV;FV;type)
The present value come in negative
So, after solving this,
1. The pretax cost of debt is 7.50%
2. And, the after tax cost of debt would be
= Pretax cost of debt × ( 1 - tax rate)
= 7.50% × ( 1 - 0.21)
= 5.925%
If Lauryn's has a reported equity beta of 1.5, a debt-to-equity ratio of .3, and a tax rate of 21 percent.. The Free Cash Flow (FCF) of Lauryn's for the year is 20.45
FCF = (EBIT -Depreciation)× ( 1- Tax rate) + Depreciation - Capital expenditure - Working Capital investment = (45 -4.5 ) × ( 1 - 40%) + 4.5 - 4.25 -4.1 = 20.45
Beta Asset = Beta Equity /( 1 + (1-tax rate)×D/E) = 1.5/( 1 + ( 1-40%)× 0.3) = 1.2712
According To Capm WACC = Risk free rate + Betaasset × Market Risk Premium = 4% + 1.2712 × 12% = 19.2544%
Value of The firm = FCFF × ( 1+growth)/(Return - Growth) = 20.45 × 1.02/(19.2544% - 2%) = 120.89 million
- Free cash flow (FCF) is the money a business makes after subtracting the cash it must spend to run its business and maintain its capital assets. Or to put it another way, free cash flow is the money that remains after a business pays its operating expenses (OpEx) and capital expenditures (CapEx).
- A corporation may do whatever it wants with FCF, which is the money that is left over after paying for expenses like labor, rent, and taxes. A company's cash management will be aided by knowing how to compute and analyze free cash flow. Investors can improve their investment choices by using the FCF calculation to get insight into a company's financials.
Learn more about Free cash flow (FCF), here
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The guess the correct answer is much less.
Assume a systems development project effort calculation determines that the system will require 240 function points. If the developers choose to implement this system in the C programming language, approximately 31,200 lines of code will have to be written. If the developers choose Visual Basic to implement the system, the number of lines of code will be much less.
Answer:
Risk-free rate (Rf) = 8%
Return on market portfolio (Rm) = 15%
Beta (β) = 1.2
Ke = Rf + β(Rm - Rf)
Ke = 8 + 1.2(15 - 8)
Ke = 8 + 1.2(7)
Ke = 8 + 8.4
Ke = 16.40%
Earnings per share (EPS) = $10
Current dividend paid (Do) = 40% x $10 = $4
Retention rate (b) = &6/$10 x 100 = 60% = 0.6
ROE (r) = 20% = 0.2
Growth rate (g) = b x r
= 0.6 x 0.2
= 0.12 = 12%
Current market price (Po)
= Do<u>(1 + g) </u>
Ke - g
= $4<u>(1 + 0.12)</u>
0.1640 - 0.12
= $4<u>(1.12)</u>
0.044
= $101.82
Explanation:
First and foremost, we need to calculate the cost of equity based on capital asset pricing model. Then, we will determine the growth rate, which is a function of retention rate (b) and return on equity(r).
Finally, we will calculate the current market price, which is dividend paid, subject to growth, divided by the excess of cost of equity over growth rate.
Cost of equity is calculated as -
Cost of equity = Risk free return + Beta * (Market risk - Risk free return)
Given,
Risk free return = 5.3 %
Market risk = 12 %
Beta = 1.05
Cost of equity = 5.3 % + (1.05*(12-5.3%))
Cost of equity = 12.335 % or 12.24 %
