Answer:
The value of the stock today is $25.04
Explanation:
The value or price of stock today can be calculated using the two stage growth model of Dividend Discount Model approach. This model bases the value of a stock on the present value of the expected future dividends of the stock. The price of this stock under the two stage growth model will be calculated as follow,
P0 = 1.07 * (1+0.17) / (1+0.07) + [ (1.07*(1+0.17)*(1+0.02) / (0.07-0.02)) / (1+0.07) ]
P0 = $25.038 rounded off to $25.04
Answer:
B. $183,000
Explanation:
Calculation to determine The amount of cash that will be collected in July is budgeted to be
Budgeted collection in July = July sales (190,000*35%) + June sales (210,000*45%) + May sales (110,000*20%)
Budgeted collection in July =$66,500 +$94,500 + $22,000
Budgeted collection in July=$183,000
Therefore The amount of cash that will be collected in July is budgeted to be $183,000
Answer:
The cost of BBB rated bond will be more than 4.6% and lesser than 7.4%.
Explanation:
In order to calculate the cost of debt for XYZ based on prevailing market rates, we need to calculate first the following steps:
First, we have to calculate the cost of A rated bond using the following formula:
cost of A rated bond= Risk free rate+credit spread on A rated bond
=3.5%+1.1%
=4.6%
Next, we have to calculate the cost of A rated bond using the following formula:
cost of B rated bond= Risk free rate+credit spread on B rated bond
=3.5%+3.9%
=7.4%
Therefore, after having calculated the cost of A rated bond and the cost of B rated bond, we can conclude that the cost of BBB rated bond will be more than 4.6% and lesser than 7.4%.
Answer:
B, decrease the firm's cost of capital
Explanation:
When the tax rate of a levered firm is increased, there is a decrease in the firm's cost of capital because the value of a levered firm is the sum of the market value of the firm's debt and its equity.
An increased tax rate means it has a greater debt and as such the firm's capital after settling tax debt is very reduced.
I hope this helps. Cheers.