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enot [183]
3 years ago
13

What is the value of a preferred stock that pays a perpetual dividend of $125 at the end of each year when the interest rate is

5 percent?
Business
1 answer:
Alina [70]3 years ago
6 0

Answer: $2500

Explanation:

The value of a preferred stock that pays a perpetual dividend of $125 at the end of each year when the interest rate is 5 percent will be calculated by using the formula:

= Cf/i

where,

Cf = Cash flow = $125

i = Interest rate = 5% = 0.05

Therefore, the value of the preferred stock will be:

= Cf/i

= $125/0.05

= $2500

The value of the preferred stock is $2500.

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Suppose that five years ago you borrowed $300,000 using a 30-year fixed-rate mortgage with an annual interest rate of 10% with m
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Answer:

Please check the explanation below.

Explanation:

Rate of Interest =10% or 0.83% monthly

Monthly Payment under this plan=PMT(0.0083, 360, 300000) =$2,632.71

Loan outstanding after 5 years of payments =$289,723

New Interest Rate =8.5% or 0.7083% monthly

Balance Tenure= 25 years

New Monthly Installment =PMT(0.007083,300,289723) =$2,332.93

Monthly savings in installment reduction =$2,632.71 - 2,332.93 =$299.78

a. Net present value of refinancing = -0.05x289,723 + 299.78x{(1-(1+0.007083)-300)/0.007083}

                                                  = -14,486.15 + 299.78x124.1886

                                                  = -14,486.15 + 37,229.25

                                                  = 22,743.10

b. With new monthly installment, balance outstanding at the end of 8th year =$278,258

Net Present Value of Refinance = -0.05x289,723 + 299.78x{(1-(1+0.007083)-36)/0.007083}

                                                  = -14,486.15 + 299.78x31.68

                                                  = -14,486.15 + 9,446.46

                                                  = -4,989.68

c. For refinance loan to have net present value positive, let n payments are required,

NPV = -0.05x289,723 + 299.78x{(1-(1+0.007083)-n)/0.007083}

14,486.15 = 299.78x{(1-(1+0.007083)-n)/0.007083}

14,486.15x0.00783/299.78 =(1-(1.007083)-n)

0.3423 = 1-(1.007083)-n

(1.007083)-n = 0.6577

(1.007083)n = 1.5204

Taking Log both sides,

n = log(1.5204)/log(1.007083)

n = 59.36

Hence, he would need to make 60 payments for making NPV of refinance as zero.

3 0
3 years ago
When you construct the replicating portfolio for the option in the previous question how many dollars do you need to invest in t
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Answer: The same amount of dollars

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During the year, Belyk Paving Co. had sales of $2,560,000. Cost of goods sold, administrative and selling expenses, and deprecia
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Answer:

Net income -$268,000

Operating Cash Flow $511,000

Explanation:

A. Calculation for the Net income

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Cost of goods sold $1,364,000

Other expenses $685,000

Depreciation $477,000

EBIT $34,000

Interest $302,000

Taxable income -$ 268,000

($34,000-$302,000)

Taxes (24%) 0

Net income -$268,000

CALCULATION FOR EBIT

Sales $2,560,000

LESS:Cost of goods sold ($1,364,000)

Other expenses ($685,000)

Depreciation ($477,000)

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Based on the information given we were told that we should ignore any tax loss which was why Taxes (24%) was $0

The taxes are zero since we are ignoring any carryback or carryforward provisions.

Therefore NET INCOME is -$268,000

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Using this formula

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Let plug in the formula

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People often visits tourist attraction sites.  That there has been an increase in ecotourism, which is tourism to exotic, often threatened natural environments refers to <u>ecological </u>factors.

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Learn more about Tourism from

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