You just sold 900 shares of Alcove stock at a price of $34.08 a share. Last year you paid $39.20 a share to buy this stock. You
1 answer:
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Answer:
b. 8.225%
Explanation:
In this question, we use the Rate formula which is shown in the spreadsheet.
The NPER represents the time period.
Given that,
Present value = $754.08
Assuming figure - Future value or Face value = $1,000
PMT = 1,000 × 7.25% ÷ 2 = $36.25
NPER = 9 years × 2 = 18 years
The formula is shown below:
= Rate(NPER,PMT,-PV,FV,type)
The present value come in negative
So, after solving this,
1. The pretax cost of debt is 11.75%
2. And, the after tax cost of debt would be
= Pretax cost of debt × ( 1 - tax rate)
= 11.75% × ( 1 - 0.30)
= 8.225%
Answer:
a)
$34.4
b)
$37.20
c) $59.57
Explanation:
Given:
Dividend paid = $2.15
Growth rate = 4% = 0.04
Required return = 10.5% = 0.105
Now,
a) Present value =
for the current price n = 1
thus,
Current price =
=
= $34.4
b) Price in 3 years
i.e n = 3
=
=
=
$37.20
c) Price in 15 years
i.e n = 15
=
=
= $59.57