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zlopas [31]
2 years ago
9

"MMP Incorporated generated FCF in the most recently completed year of $780,000. We expect FCF to grow by 10% in year 1, 8% in y

ear 2 and 7% in year three. Beginning in year four, FCF will begin to grow at a constant rate of 6%. The required rate of return on this investment is 13%. MMP has debt of $2,000,000, preferred stock of $1,000,000 and 400,000 shares of common stock outstanding. What is each share of common worth today
Business
1 answer:
dimaraw [331]2 years ago
6 0

Answer:

The value per share of common stock today is $23.94

Explanation:

To calculate the worth of the stock today, we first need to calculate the value of firm using FCF and then calculate the value of equity by deducting the market value of debt and preferred stock from the value of firm. Then we will divide the value of equity by the number of common stock shares.

Value of firm will be calculated using the discounted cash flows model approach. The value of firm will be,

Value of firm = 780000 * (1+0.1) / (1+0.13)   +   780000 * (1+0.1) * (1+0.08) / (1+0.13)^2  +  780000 *(1+0.1)*(1+0.08)*(1+0.07) / (1+0.13)^3  +  

[ 780000 *(1+0.1) *( 1+0.08) *(1+0.07) *(1+0.06)) / (0.13 - 0.06)] / (1+0.13)^3

Value of firm = $12,577,754.16

Value of equity = $12,577,754.16  -  (2000000 + 1000000)  = $9,577,754.159

Value per share = $9,577,754.159 / 400000

Value per share = $23.944 rounded off to $23.94

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On december 1, hansen co. Borrowed $100,000 cash from national bank by signing a 90-day, 6% interest-bearing note. On december 3
Lera25 [3.4K]

On March 1, the due date of the note, Hansen will record interest expense as a  <u>debit</u> in the amount of $600.

Interest expense is the cost associated with borrowing money in the form of loans, bonds, and lines of credit. It is the amount paid to lenders for the use of their money and is typically reported as a line item on an income statement.

On March 1, Hansen will record interest expense as a debit in the amount of $600 ($100,000 x 6% x 90/360). The adjusting entry on December 31 was to record the interest accrued on the note between December 1 and December 31 ($100,000 x 6% x 30/360 = $500). Therefore, the interest payable on March 1 is the amount of the loan times the interest rate times the number of days outstanding ($100,000 x 6% x 90/360 = $600).

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3 0
1 year ago
Banc Corp. Trust is considering either a bankwide overhead rate or department overhead rates to allocate $396,000 of indirect co
joja [24]

Answer:

The correct answer is A.

Explanation:

Giving the following information:

Estimated overhead= $396,000

Department:

Consumer= 700

Commercia= 300

To calculate the estimated manufacturing overhead rate we need to use the following formula:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= 396,000/1,000= $396 per loan processed.

Now, we can allocate overhead:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Allocated MOH= 396*300= $118,800

4 0
2 years ago
HELPPPPP
Rashid [163]

Answer:

Yes, that sounds about right

Explanation:

Till the age of retirement, a person's mostly expenses are finished, like growing his children, educate them, get them married, etc. He is left with only few expenses like running the house or meet his personal expenses. So the Social Security and some regular savings would be enough for him to lead a respectable life in the society. Also, his children are settled enough to fulfill his expenses at this point of his life. So there is no necessity to invest in a retirement plan that pays you 80% of your regular income. Social security and savings would be enough for the person.

4 0
2 years ago
Paraguay’s economy is afflicted by poverty and an absence of opportunities and advantages. However, a positive aspect of this si
Art [367]

Paraguay's economy is afflicted by poverty and an absence of opportunities and advantages. However, a positive aspect of this situation is none.

The economy of Paraguay is a market financial system that is distinctly depending on agriculture products. In latest years, Paraguay's economic system has grown because of improved agricultural exports, especially soybeans. Paraguay has the monetary benefits of a young population and great hydroelectric energy.

Paraguay has been one of the poorest and most unequal nations at the continent for a long term. the total poverty rate — defined by using the world financial institution as those with an income of much less than $3.10 a day — in Paraguay rose in 2016 from 26.6 percent to 28.8 percent.

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7 0
1 year ago
Peters, Chong, and Aaron are dissolving their partnership. Their partnership agreement allocates each partner an equal share of
il63 [147K]

Answer and Explanation:

The journal entry is shown below:

Peter ($174,000 - ($66,000 ÷ 2)) $141,000

Chong ($162,000 - ($66,000 ÷ 2)) $129,000

        To Cash $270,000

(Being the distribution should be recorded)

For this the capital accounts are debited as it reduced the stockholder equity and credited the cash as it also decreased the assets

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