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scZoUnD [109]
3 years ago
11

Ted Corporation expects to generate free-cash flows of $200,000 per year for the next five years. Beyond that time, free cash fl

ows are expected to grow at a constant rate of 5 percent per year forever. If the firms average cost of capital is 15 percent, the market value of the firms debt is $500,000, and Nico has a half million shares of stock outstanding, what is the value of Ted stock?
Business
1 answer:
wariber [46]3 years ago
7 0

Answer:

The value of Ted stock is $2.43

Explanation:

Free cash flow From Year 1 to 5 = $200000

Cash Flow Year 6 = 200000*1.05

                              = $210000

This cash flow is expected to grow forever, so the terminal value can be caluclated at Year 5 of the above perptuity by Gordon Growth model

Terminal Cash FLow Value at Year 5 = 210000/(15% - 5%)

                                                              = $2100000

Present Value of above stream

= 200000*PVIFA(5 yr, 15%) + 2100000*PVIF(5 yr, 15%)

= $200000*3.352 + $2100000*0.497

= $1714100  

Value of equity = Present Value of Firm - Value of debt

                          = $1714100 - $500000

                          = $1214100  

Number of shares = 500000

Value per share = $1214100/500000

                           = $2.43

Therefore, The value of Ted stock is $2.43

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navik [9.2K]
The right answer for the question that is being asked and shown above is that: "<span>B. debit to Sales Returns and Allowances for $125.00. " </span>Five necklaceswere returned prior to payment. The entry to record the return would include a B. debit to Sales Returns and Allowances for $125.00. 
5 0
3 years ago
Suppose a​ 40-year-old person deposits ​$12 comma 00012,000 per year in an Individual Retirement Account until age 65. Find the
tatiyna

Answer:  interest earned = $8942372340

$8942672340 this is amount after 25 years.

Explanation:

formula used:    S= R*[ (1+<em>i </em>)ⁿ-1 / <em>i </em>]

where:

S is future value

R is periodic payment

<em>i </em> is interest rate period

n is number of periods

R= $3000

n= 65-40=25   now 25*4=100   QUARTERLY that is why we used 4

<em>i </em>= 55% which is equal to 0.55

so, for quarterly <em>i= </em>0.55/4= 0.138

now putting them in formula given above

S= 3000*[ (1+0.138)¹⁰⁰-1] / 0.138

S= $8942672340 (future value )

total money deposited = number of period * periodic amount

                                        = $3000*100 = $300,000

interest earned = future value - total money deposited

                           = 8942672340 - 300,000

 interest earned = $8942372340

8 0
3 years ago
Please see image I need help
Jlenok [28]

Answer:

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Explanation:

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6 0
3 years ago
This company was incorporated as a new business on January 1, 2019. The company is authorized to issue 50,000 shares of $5 par c
weqwewe [10]

Answer:

Amount of the company's total capital stock at December 31, 2019:

Common stock = 8,000 x $15 =                 $120,000

Preferred stock = 2,000 x $30 =               <u>$60,000</u>

Total issued share capital                          $180,000

Add: Net income at 31 December, 2019    <u>$375,000</u>

Total capital stock                                        <u>$ 555,000</u>

<u />

Explanation:

Total capital stock is the aggregate of par value of common stock, par value of preferred stock and net income.

8 0
3 years ago
For 2019, Skresso Co. reported $1.82 of earnings per share of common stock. During 2020, the firm had a 4% common stock dividend
mart [117]

Answer:

$1.75

Explanation:

Earnings per share to be reported = Earnings per share of commo stock * (1 - 4%)

Earnings per share to be reported = $1.82 * 96%

Earnings per share to be reported = $1.7472

Earnings per share to be reported = $1.75

So, the 2019 earnings per share to be reported in the annual report for 2020 are $1.75.

4 0
3 years ago
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