Answer:
The investors should be willing to pay $49.50 for this stock
Explanation:
Hi, first, we need to find out what the cost of equity is in order to find the price of the stock. that is:
Where:
rf= Risk free rate
rm=return on the market
r(e)=cost of equity
After finding r(e), we would need to find the price using the following equation.
Where:
Do= last dividend
g= growth rate
r(e)= cost of equity.
ok, so, let´s find out what the cost of equity is.
So, the r(e)=15%, now let´s find the price of this stock
Therefore, the price of this stock is $49.50
Best of luck.
Answer:
The value of the call option today is $7.73
Explanation:
The value or price of the call option under the two state model is calculated based on the assumption that there is no opportunity for arbitrage profit. The value of call option will be based on the return in case the call option is exercised and the probability of earning that return.
The strike price is $105
The return if price goes to $122 and option is exercised is 122 - 105 = $17
The return if the price goes down to $88 will be 0 as the call option will not be exercised.
Thus, the expected return is = 0.5 * 17 + 0.5 * 0 = $8.5
This return will be earned after 1 year. To calculate the value of the call option today, we need to discount this return to present value using the risk free rate.
V0 or value today = 8.5 / (1+0.1) = $7.727 rounded off to $7.73
Answer:
The answer is put is bankruptcy if there aren't any choices
Securitization has allowed banks to concentrate on the safety of the money they hold. They can also give more protection for the banking transactions
Answer and Explanation:
The transactions 3 6 and 8 represents that the expenses are incurred which results in increased and expenses and the transaction 4 and 5 shows that there is an increased in revenue
The journal entry is shown below:
For transaction 3
Rent expense
To Cash
(Being the rent expense is paid for cash is recorded)
As the expense has debit balance so it would be increased
For transaction 6
Electricity expenses Dr
To Cash
(Being the energy usage is paid for cash is recorded)
As the expense has debit balance so it would be increased
For transaction 8
Advertising expense Dr
To Account payable
(Being the advertising expense is recorded)
As the expense has debit balance so it would be increased
For transaction 4
Account receivable Dr
To Service revenue
(Being the service is provided)
As the revenue has credit balance so it would be increased
For transaction 5
Cash Dr
To Service revenue
(Being the service provided is recorded)
As the revenue has credit balance so it would be increased
The attachment is provided for better understanding
The other transactions represent the assets, liabilities and stockholder equity
