<span>You might be able to cope with future issues more easily this the correct answer. : )</span>
Answer:
P0 = $66.6429 rounded off to $66.64
Option c is the correct answer
Explanation:
Using the two stage growth model of dividend discount model, we can calculate the price of the stock today. The DDM values a stock based on the present value of the expected future dividends from the stock. The formula to calculate the price of the stock today is,
P0 = D0 * (1+g1) / (1+r) + D0 * (1+g1)^2 / (1+r)^2 + ... + D0 * (1+g1)^n / (1+r)^n + [(D0 * (1+g1)^n * (1+g2) / (r - g2)) / (1+r)^n]
Where,
- g1 is the initial growth rate
- g2 is the constant growth rate
- r is the required rate of return
P0 = 2* (1+0.2) / (1+0.1) + 2 * (1+0.2)^2 / (1+0.1)^2 + 2 * (1+0.2)^3 / (1+0.1)^3
+ 2 * (1+0.2)^4 / (1+0.1)^4 + 2 * (1+0.2)^5 / (1+0.1)^5 +
[(2 * (1+0.2)^5 * (1+0.04) / (0.1 - 0.04)) / (1+0.1)^5]
P0 = $66.6429 rounded off to $66.64
Answer: $47 million
Explanation:
Pension expense arises as a result of the amounts owed to employees in relation to pension liabilities.
It is calculated by;
= Service Cost + Interest expense - Expected return on plan assets + Amortization of prior service cost + Amortization of net loss
= 48 + ( 440 * 5%) - 23
= $47 million
Answer:
e. None of the above
Explanation:
The taxable asset purchases allows the individual to increase or step up the tax basis of acquired assets so as to reflect the price of the purchases made.
If one buy an assets, then he or she wants to allocate total purchase price in a way which gives a favorable postacquisition tax results.
In case of taxable asset purchases, the tax credits or the net operating losses cannot be transferred from the target firm to the acquiring firm.
Answer: 9.7%
Explanation:
Given Data
Rf = Risk free return = 6%,
Rpm = Risk premium = 4%,
Beta = 0.9
Wd = Debt = 20%
rd = cost of debt = 8%
We = equity = 80%
Re = Rf + Beta (Rpm)
= 0.06 +0.9 (0.04)
= 0.096 * 100
= 9.6%
Unlevered Equity Cost ;
ReU= Wd × rd + We × re
= 0.20 × 8% + 0.80 × 9.6%
= 9.28%
Levered Equity Cost:
New Debt = 60%,
New Equity = 40%,
New rd = 9%
ReL = ReU + (ReU - rd) (D ÷ E)
= 9.28% + (9.28% - 9%) (0.60 ÷ 0.40)
= 0.097 * 100
= 9.7%
