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s2008m [1.1K]
3 years ago
6

Kendra Enterprises has never paid a dividend. Free cash flow is projected to be $80,000 and $100,000 for the next 2 years, respe

ctively; after the second year, FCF is expected to grow at a constant rate of 5%. The company's weighted average cost of capital is 16%. What is the terminal, or horizon, value of operations? (Hint: Find the value of all free cash flows beyond Year 2 discounted back to Year 2.) Round your answer to the nearest cent. $ Calculate the value of Kendra's operations. Do not round intermediate calculations. Round your answer to the nearest cent. $
Business
1 answer:
Lena [83]3 years ago
8 0

Answer:

$856,376.30

Explanation:

What is the terminal, or horizon, value of operations?

2 years, FCF 1 = 80,000, FCFC 2 = 100,000, Growth rate= 5%, WACC = 16%

==> 100,000*(1+0.05)/(0.16-0.05)

==> 100,000*(1.05/0.11)

==> 100,000*(9.545454(

==> 954,545

Calculating the value of Kendra's operations.

Years  Cash-flows   PVF at 16%    Present value

1           800,000       0.86206         68964.80

2          105,000        0.74316           78031.80

2          954,545        0.74316           <u>709379.70</u>

            Total value                           <u>856,376.30</u>

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Roland Company uses special strapping equipment in its packaging business. The equipment was purchased in January 2016 for $10,0
Anuta_ua [19.1K]

Answer:

Consider the following calculations

Explanation:

Answer:(a) Carrying value of asset: $10,000,000 - $2,500,000 = $7,500,000.

($10,000,000 ÷ 8) x 2 = $2,500,000

Future cash flows $6,300,000

Carrying value $7,500,000

Impairment entry:

Loss on Impairment A/C Dr. $1,900,000

      To Accumulated Depreciation A/C    $ 1,900,000

(7,500,000 - 5,600,000 = 1,900,000)

(b) Depreciation Expense A/C Dr. $ 1,400,000

           To Accumulated Depreciation A/C $ 1,400,000

($5600000/4=$1400000)

(c ) No depreciation is recorded on impaired assets to be disposed of.

Recovery of impairment losses are recorded.

Loss on Impairment A/c Dr. $1,900,000

      To Accumulated Depreciation A/C    $ 1,900,000

12/31/2015 Accumulated Depreciation A/C Dr. $ 300,000

                                          To Recovery of Impairment Loss A/C $ 300,000

5 0
3 years ago
Upon what specific assumptions is this production possibilities curve based?
mihalych1998 [28]

Answer:

C. Full employment, fixed supplies of resources, fixed technology, and two goods

Explanation:

Production Possibility curve: It is a curve that shows all possible combinations to the amounts of the two goods that can be produced with the available resources and technology.

In simple words, all resources which are used to produce the possible combinations are called full employment. Thus, these specific assumptions plays vital role in production possibilities curve.

So, A, B, and the D are incorrect options.

3 0
3 years ago
Corporate owners earn a return​ ________. A. through interest earnings and earnings per share B. through capital appreciation an
TEA [102]

Answer:

C. By realizing gains through increase in share price and cash divideneds.

Explanation:

For most corporations, the management must strive to ensure the firm is doing well in the market space. Once a company is doing well, it will affect its share price positively on the stock exchange.

An increase in the share price of fim is a gain to the firm and its corporate owners. I.e sharedholders. This means that the value of their investment in the firm has appreciated.

Furthermore, the firm must try to make profit which is one of the reason of being in business. A firm that is making profit will be able to declare same at the end of the financial period, hence corporate holders(shareholders) would be have part in profit declaration through dividened.

7 0
2 years ago
Springfield mogul Montgomery Burns, age 80, wants to retire at age 100 so he can steal candy from babies full time. Once Mr. Bur
masha68 [24]

Answer:

Springfield mogul, Montgomery Burns

How large of an annual deposit must be made to fund Mr. Burns retirement plans:

= $94,644,751.67

Explanation:

a) Data and Calculations:

Age of Mr. Burns now = 80 years

Retirement age = 100 years

Annual withdrawal at the beginning of each year for 10 years = $500 million

Special offshore account pays interest = 18% annually

Investment for funding retirement:

Deposits = 20 equal end-of-the year deposits in the same special offshore account above.

b) Calculation of Future value of annual deposit after 20 years:

FV (Future Value) $13,877,572,093.01

PV (Present Value) $2,651,510,914.01

N (Number of Periods) 10.000

I/Y (Interest Rate) 18.000%

PMT (Periodic Payment) $500,000,000.00

Starting Investment $0.00

Total Principal $5,000,000,000.00

Total Interest $8,877,572,093.01

c) Calculation of Annual Deposit to reach the future value target of $13,833,567,810.87:

FV (Future Value) $13,877,567,810.87

PV (Present Value) $506,609,362.98

N (Number of Periods) 20.000

I/Y (Interest Rate) 18.000%

PMT (Periodic Payment) $94,644,751.67

Starting Investment $0.00

Total Principal $1,892,895,033.42

Total Interest $11,984,672,777.45

d) Mr. Burns will need to contribute $94,644,751.67 at the end of each period to reach the future value of $13,877,572,093.01.  Both the future value of deposits of $13,877,567,810.87  and the annual periodic payment of $94,644,751.67  are determined using online financial calculator.

4 0
3 years ago
Journalize the following transactions in the general journal: Sept. 1 Sold common stock for cash $60,000. 1 Paid rent for the mo
faust18 [17]

Answer: See explanation

Explanation:

September 1:

Debit Common stock $6000

Credit: Cash $60000

September 1:

Debit: Rent $1500

Credit: Cash $1500

September 3:

Debit: Cash $10000

Credit: Note payable $10000

September 3:

Debit: Cleaning Equipment $5,500

Credit: Cash $3,000

Credit: Account payable $2,500

September 4:

Debit: Supplies $4200

Credit: Cash $4200

September 10:

Debit: Cash $3500

Credit: Service revenue $3500

September 21:

Debit: Account receivable $3800

Credit: Service revenue $3800

September 23:

Debit: Account payable $2500

Credit: Cash $2500

September 28:

Debit: Bank $2800

Credit: Account receivable $2800

September 29:

Debit: Electricity expense $85

Credit: Electricity payable $85

September 30:

Debit: Wages $1950

Credit: Cash $1950

September 30:

Debit: Gasoline $275

Credit: Cash $275

September 30:

Debit Dividend $900

Credit Cash $900

3 0
2 years ago
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