1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Nataly_w [17]
3 years ago
15

Costco Wholesale Corp. has FCFE of $2.00 billion in the most recent year. The cash flows are expected to grow at the annual rate

of 3%. Costco has the weighted average cost of capital of 9% and the cost of equity of 12%. The book value of debt is $20.72 billion and the market value of debt is $24.44. Given these assumptions, which of the following is closest to the current firm value of Costco?
a. $47.3 billion
b. $43.6 billion
c. $58.8 billion
d. $46.7 billion
Business
1 answer:
Svetlanka [38]3 years ago
7 0

Answer:

a. $47.3 billion

Explanation:

The computation of the current value of the firm is as follows;

Value of Equity = FCFE × (1+ g ) ÷ (ke - g)

= $2 billion × (1 + 0.03) ÷ (0.12 - 0.03)

= $22.89 billion

Now  

Current Value of Firm = Market Value of equity + market Value of Debt

= $22.89 billion + $24.44 billion

= $47.3 billion

Hence, the current value of the firm is $47.3 billion

hence, the correct option is A.

You might be interested in
When using the book value of equity, the debt to equity ratio for Luther in 2009 is closest to: Group of answer choices 0.43 2.2
Ostrovityanka [42]

Answer:

2.29%

Explanation:

The computation of the debt to equity ratio using book value of equity is as follows;

As we know that

Debt to Equity Ratio = Debt ÷ Equity

where,  

Debt = $239.7 + $10.7 + $39.9    

= $2901.1

And, equity is $126.6

Now    

Debt to Equity Ratio is

= $290.1 ÷ 126.6  

= 2.29%

4 0
3 years ago
Explain the difference between direct and indirect strategy when writing reports​
nika2105 [10]

Answer:

A direct report is an employee who formally reports to you. This generally means that you are directly responsible for assigning them work and managing their performance. An indirect report are the employees who report to your direct reports and their subordinates.

plz give brainliest to help you with further questions :'D

3 0
4 years ago
Read 2 more answers
Airborne Airlines Inc. has a $1,000 par value bond outstanding with 10 years to maturity. The bond carries an annual interest pa
yanalaym [24]

Answer:Yield to maturity is 9.59%;  After tax cost of debt =7.672%

Explanation:

 A)   Yield to maturity ={ C + (FV-PV)/t} /  {(FV +PV)/2}

Where C – Interest payment    = $90

FV – Face value of the security

= $1000

PV – Present value/curent market value = $960

t – years it takes the security to reach maturity= 10 years

imputing the values and calculating,

yield to maturity ={ C + (FV-PV)/t} /  {(FV +PV)/2}

= $90 + (1000-960)/10} / 1000 + 960 /2

$90 + 4= $94 /980= 0.0959

therefore Yield to maturity is 9.59%

B)   After tax cost of debt =    Yield To Maturity  x (1 - tax rate)

=9.59% x (1-20%)= 9.59% x (1-0.2 )= 9.59% x 0.8 =

9.59 % x 80%=7.672%

4 0
3 years ago
Your college is considering renting space in the student union to one or two commercial textbook stores. The rent the college ca
poizon [28]

Answer and explanation:

In both cases, in terms of rent and terms of students benefits, it will be better for the college to have two stores, In that way, the college makes sure the profits will be higher than just by having one store on campus and students are benefited because of the variety of books they could find in the two stores, not just in one.

5 0
3 years ago
Investment X offers to pay you $7,100 per year for 9 years, whereas Investment Y offers to pay you $9,700 per year for 5 years.
Dmitry_Shevchenko [17]

Answer:

a.

NPV X 44352,90

NPV Y 38729,29

b.

NPV X 28619,86

NPV Y 29008,94

Explanation:

To get the present value of each cash flow we use excel or spreadsheets.

File is attached with the comparison of both investments.

<u>Investment X </u>

Net Present Value (NPV) 44353   (Interest rate 8%)

Net Present Value (NPV) 28620 (Interest rate 20%)

<u>Investment Y </u>

Net Present Value (NPV) 38729 (Interest rate 8%)

Net Present Value (NPV) 29009 (Interest rate 20%)

4 0
3 years ago
Other questions:
  • The management of the nation's natural resources is part of the responsibilities of which of the following departments?
    12·1 answer
  • Minot Corporation is preparing its cash budget for August. The following information is available concerning its accounts receiv
    15·1 answer
  • What happens if there is zero inflation and no standard cost of living?
    7·1 answer
  • A famous quarterback just signed a $15 million contract providing $3 million a year for 5 years. A less famous receiver signed a
    10·1 answer
  • Virginia Supply offers their customers trade credit with terms 2/15, net 30. This implies that: Virginia's customers have very l
    10·1 answer
  • A manager who possesses the skills to account for every task and resource in his department excels at which of the six managemen
    8·1 answer
  • You are considering the following two mutually exclusive projects. The required rate of return is 14.6 percent for project A and
    8·1 answer
  • You have agreed to deliver the underlying commodity on a futures contract in 90 days. Today the underlying commodity price rises
    15·1 answer
  • Suppose a firm produce 20 units per month and has a total variable cost of R3000 per month.If it's average fixed costs are R400
    8·1 answer
  • What is consumer behavior? it is a complex, multi-dimensional process it is studied via market research it is not required to ma
    14·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!