Answer:
a.Year Cashflow [email protected]% PV [email protected]% PV
$ $ $
0 (1,000) 1 (1,000) 1 (1,000)
1-15 72 11.1184 800 7.6061 548
15 1,000 0.5553 555.3 0.2394 239
NPV 355.3 NPV 213
Kd = LR + NPV1/NPV1 + NPV2 x (HR – LR)
Kd = 4 + 355.3/355.3 + 218 x (10 – 4)
Kd = 4 + 355.3/573.3 x 6
Kd = 7.72%
b. Kp = D/Po
Kp = $100/$1,111
Kp = 0.09 = 9%
c. Ke = D1/Po (1 – FC) + g
Ke = $4.3995/$50(1-0.15) + 0.05
Ke = $4.3995/$42.50 + 0.05
Ke = 0.1535 = 15.35%
WACC = Wdrd(1 – T) + Wprp + Were
WACC = 0.3(7.72)(1-0.4) + 0.1(9) + 0.6(15.35)
WACC = 1.39 + 0.9 + 9.15
WACC = 11.44%
Explanation:
In this case, we need to calculate cost of debt, cost of preference shares and cost of equity. Cost of debt is calculated based on internal rate of return. Cost of preferred stock is the ratio of dividend paid to the market price. Cost of equity is a function of D1 divided by current market price after floatation cost plus growth rate. WACC is equal to cost of each source multiplied by respective weights.
I believe the answer is: c. nominal variables are measured in market prices; real variables are measured in quantities of goods and services.
the nominal value of a certain good would be fluctuated (could either increased or decreased) depending on the power of the supply and demand in the market. the real value on the other hand is valued using the price of a base year.
<span>profit-and-loss statement</span>
Answer:
(A) $425,000
(B) $24,350
Explanation:
(a) Average Operating Assets:
= (Beginning Operating Assets + Ending Operating Assets) ÷ 2
= ($390,000 + $460,000) ÷ 2
= $425,000
Therefore, the average operating assets is $425,000.
(b) Residual Income:
= Operating Income - (Minimum Rate of Return × Average Operating Assets)
= $66,850 - (10% × $425,000)
= $66,850 - $42,500
= $24,350