Answer:
a. The cost of equity is 5.538%
b.The cost of equity is 13.475%
Explanation:
a.
The DDM approach has several models that are used to calculate the price of the share. As the dividend growth is constant forever, we use the constant growth model of DDM to estimate the required rate of return or cost of equity as other variables are known.
The formula for price using the constant growth model is:
P0 = D0 * (1+g)/ r - g
Plugging in the value,
78 = [0.4 * (1+0.05)] / (r - 0.05)
78 * (r - 0.05) = 0.42
78r - 3.9 = 0.42
78r = 3.9 + 0.42
r = 4.32 / 78
r = 0.05538 or 5.538%
b.
The SML approach uses the risk free rate and market risk premium along with stock's beta to calculate the cost of equity or required rate of return.
The cost of equity using SML is:
r = 0.061 + 1.25 * (0.12 - 0.061)
r = 0.13475 or 13.475%
Answer:
a. $ 0.45
b. $148.50
Explanation:
Production Cost Schedule for 4,200 toy flutes
Raw materials costing $490.00
Direct Labor $357.00
Overheads ($5.60 × 36) $201.60
Overheads ($357 × 240%) $856.80
Total Cost $1,905.40
Cost per unit = Total Cost / Total Number of Units produced
= $1,905.40 / 4,200
= $ 0.45
Closing Inventory = Units Left × Cost per unit
= (4,200 - 3,870) × $ 0.45
= 330 × $ 0.45
= $148.50
Answer:
?
Explanation:
I really dont know man like for real
Answer:
NPV = $1.22 million
Explanation:
<em>The Net present value (NPV) is the difference between the Present value (PV) of cash inflows and the PV of cash outflows. A positive NPV implies a good investment decision and a negative figure implies the opposite. </em>
<em>NPV of an investment: </em>
NPV = PV of Cash inflows - PV of cash outflow
To work oit the NPV we would need to determine the discount rate i.e cost of capital as follows:
Cost of capital -discount rate -
WACC = We×Ke + Wd×Kd
After cost o debt = 5.94× (1-0.4)=3.56
WACC = (0.71×3.56
%) + (0.29×11.49%)=5.86
%
PV of cash inflow = A× (1- (1+r)^(-n))/r
A- annul cash inflow, r- 5.86%, n- 7
PV of cash inflow= 1.84 million × (1- 1.0586^(-7))/0.0586 =10.32
Initial cost = 9.1 million
NPV = 10.32 - 9.1 = 1.22
million
NPV = $1.22 million
Answer:
See
Explanation:
Rahal's final balance in its allowance for uncollectible accounts at December 31, will be calculated as:
Step 1:
$404,400 × 1%
= $404,400 × 0.01
= $4,044
Step 2:
$2,100 - $2,340
= ($240)
Step 3:
$4,044 + ($240)
$3,804
Therefore, Rahal's final balance in its allowance for uncollectible accounts at December 31, 2021 is $3,804