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
Google Ads offers a variety of campaign types which determine where your ad will appear and the format in which it will be displ
Stells [14]

Answer: D. Search, Display, Video, Shopping and App

Explanation: Advertising with Google Ads starts with creating a campaign based on your business objectives. Each campaign type determines where your ads appear and the format in which those ads are displayed. Different campaign types — Search, Display, Video, Shopping, and App — can support your business objectives.

3 0
3 years ago
Zappos, an online shoe company, knows shoes are typically a(n) ________ good, with consumers often spending time comparing alter
Leona [35]

Answer:

shopping

Explanation:

Shopping products are the ones that customers tend to compare in order to buy them considering different characteristics like price, style and quality. Because of this, customers take some time before deciding what to purchase and shoes can be considered a shopping good as consumers will make comparisons before deciding which one to buy.

8 0
3 years ago
You are given the following long-run annual rates of return for alternative investment instruments: U.S. Government T-bills 3.10
Dvinal [7]

Answer:

The real rate of return is 0.10%

Explanation:

For computing the real rate of return, we need to apply the formula which is shown below:

( 1 + nominal rate) = ( 1 + real rate) × (1 + inflation rate)

So,

The real rate = {(1 + nominal rate) ÷  (1 + inflation rate)} - 1

                     = ((1 + 3.10%) ÷  (1 + 2%)} - 1

                     = (1.031 ÷ 1.02) - 1

                     = 1.0107 - 1

                     = 0.10

The Government T-bills is only the nominal rate so we considered this only

5 0
4 years ago
A customer purchases $340 worth of merchandise from The GAP using a gift card. What is the journal entry The Gap records?
OLga [1]

Answer:

Option (d) is correct.

Explanation:

Given that,

Customer purchases $340 worth of merchandise from The GAP using a gift card.

A gift card is having an amount of money that is used by the gift card holder for the purpose of purchasing goods. So, in the books of GAP, the value of gift card is debited as an unearned revenue and the sales revenue is credited.

The journal is as follows:

Unearned revenue A/c Dr. $340

         To sales revenue A/c         $340

(To record the merchandise sold for a gift card)

6 0
3 years ago
This​ year, FCF Inc. has earnings before interest and taxes of ​$10 comma 400 comma 000​, depreciation expenses of ​$1 comma 000
krek1111 [17]

Answer:

Free cash flow is $8,925,000

Explanation:

Free cash flow is the net cash cashflow available for the shareholders or for the reinvestment after paying all capital expenditure.

Free Cash flow

Earning Before Interest and Tax            $10,400,000

Add: Depreciation expenses                  $1,000,000

Less: Capital expenditures                      ​$1,900,000

Less: Increase in net working capital     <u>$575,000    </u>

Free cashflow                                           $8,925,000

8 0
3 years ago
Other questions:
  • What is the point at which supply and demand intersect at a given price?
    10·2 answers
  • Ted earned $150,000 during the current year. He paid Alice, his former wife, $75,000 in alimony. The couple divorced in 2016. Un
    7·1 answer
  • Hope receives an $18,500 scholarship from State University. The university specifies books, supplies, and equipment, while $10,0
    6·1 answer
  • Apple Inc.'s decision to acquire Beats Electronics and Beats Music in 2014 for $3 billion rather than enter into a joint venture
    14·1 answer
  • 6. (a) Outline two forms of assistance given to Entrepreneurs by the government.
    14·1 answer
  • Pension data for David Emerson Enterprises include the following:
    11·1 answer
  • Machinery was purchased for $340,000 on January 1, 2017. Freight charges amounted to $14,000 and there was a cost of $40,000 for
    11·1 answer
  • Leaders often see the world from a big-picture perspective.<br> True<br> False
    5·2 answers
  • A(n) _____ system is a computer-based information system that produces standardized reports in summarized structured form to sup
    7·1 answer
  • While in the short run an economic profit is more likely in an unregulated monopoly, ___________ may group competing resources a
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!