Answer:
$20 mm
Explanation:
Calculation for What is the decrease in the firm's value due to expected financial distress costs
First step is to calculate the Value of unlevered firm using this formula
Value of unlevered firm = EBIT x (1 - tax) / Cots of capital
Let plug in the formula
Value of unlevered firm = 50 x (1 - 30%) / 10%
Value of unlevered firm= $350 mm
Now let calculate expected financial distress costs
Using this formula
Market Value of equity = Value of unlevered firm + Tax shield - Debt - Expected Financial Distress
Let plug in the formula
260mm= 350 mm+ 30% x 100mm - 100mm - Expected Financial Distress
260mm= 350 mm+ 30mm - 100mm - Expected Financial Distress
260mm= 280mm-Expected Financial Distress
Expected Financial Distress = $20 mm
Therefore the decrease in the firm's value due to expected financial distress costs will be $20 mm
Donler's revenue was 10,200 with costs totalling 5,400. To find net income, you simply subtract costs from revenue.
In this case 10,200 - 5,400= 4,800 net income
C looks great! But D is also there, A caught your attention too but B is there replaced
Answer:
The required return on the stock is 11.89%.
Explanation:
To calculate this, the Gordon growth model (GGM) formula is used as follows:
P = d1 / (r – g) ……………………………………… (1)
Where;
P = current share price = $77
d1 = next dividend = Recent dividend * (1 + g) = $5.37 * (1 + 0.046) = $5.61702
r = required return = ?
g = dividend constant growth forever = 4.6%, or 0.046
Substituting the values into equation 1) and solve for r, we have:
77 = 5.61702 / (r - 0.046)
77(r - 0.046) = 5.61702
77r - 3.542 = 5.61702
77r = 5.61702 + 3.542
r = 9.15902 / 77
r = 0.1189, or 11.89%
Therefore, the required return on the stock is 11.89%.