Answer:
Option A: is the expected rate of return on a capital investment.
Explanation:
A capital is usually the money used to start up any business.
Cost of capital is simply cost of company's long-term sources of funds: debt, preferred equity and others. It shows how the market views the risk of the firm's assets. A firm must earn required return to compensate investors for the financing the business.
Answer: $47.50
Explanation:
The Price per share under Plan I can be calculated by the formula;
Price per share = Value of debt / (Number of shares under all-equity plan - Number of shares under Plan)
= 109,250 / ( 15,000 - 12,700)
= 109,250 / 2,300
= $47.50
Answer:
correct option is b. 6.78%
Explanation:
given data
required return = 12%
stock sells = $43 per share
dividend = $1.00
expected to grow = 30%
D4 = $1.00 ×
= $2.8561
solution
we get here first present value of dividend for 4 year that is
year cash flow pv(13%) present value
1 $1.30 0.8929 $1.16
2 $1.69 0.7972 $1.35
3 $2.20 0.7118 $1.56
4 $2.86 0.6355 $1.82
so
present value of dividend for 4 year is = $5.8868
so
price of stock will be
price of stock = present value of dividend + price at year 4
43 = 5.8868 +
solve it we get
x = 6.78%
so correct option is b. 6.78%