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ale4655 [162]
2 years ago
5

Wilde Software Development has a 12% unlevered cost of equity. Wilde forecasts the following interest expenses, which are expect

ed to grow at a constant 3% rate after Year 3. Wilde's tax rate is 25%. Year 1 Year 2 Year 3 Interest expenses $80 $95 $140 What is the horizon value of the interest tax shield
Business
1 answer:
raketka [301]2 years ago
6 0

Answer: $400.56

Explanation:

Horizon value = Tax shield in 3rd year * (1 + growth rate) / (Required return - Growth rate)

Tax shield in year 3 = Interest expense * tax rate

= 140 * 25%

= $35

Horizon value = 35 * ( 1 + 3%) / (12% - 3%)

= $400.56

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but why not save your points for when you have a question?

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production for that product will increase.

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Henry wants to send his son to computer school which will start one year from today. Payments of $2,000 are due at the end of ea
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Answer:

Henry shall invest $3,018 at present to get $2,000 at each year end for 2 years.

Explanation:

Provided interest rate = 12%

Payment to be made is at the end of year 2 and at the end of year 3

Because it is provided that the payment has to be made at the end of next two years,

Therefore,

Present value interest factor (PVIF) @ 12% for second and third year will be considered.

As today we are at beginning of year 1

First payment will be made at end of next year that is year 2

Second payment at end of third year that is year 3

PVIF

Year 2 = \frac{1}{(1+0.12)^2} = 0.797 \times 2,000 = $1,594

Year 3 = \frac{1}{(1+0.12)^3} = 0.712 \times 2,000 = $1,424

Present value of investment = $1,594 + $1,424 = $3,018

Final Answer

Henry shall invest $3,018 at present to get $2,000 at each year end for 2 years.

8 0
3 years ago
Countries participate in foreign trade because?
Sphinxa [80]

Countries participate in foreign trade because it does not have the comparative advantage in the production of all goods.

<h3>What is comparative advantage?</h3>

A country has comparative advantage in production if it produces at a lower opportunity cost when compared to other countries. For example, some countries do not have crude oil, so it would have to import from countries that produce crude oil. It would be more efficient for these countries to import crude oil.

To learn more about comparative advantage, please check: brainly.com/question/10606157

8 0
2 years ago
The​ long-run Phillips curve​ _______. A. is a vertical curve at the natural unemployment rate B. slopes downward as the inflati
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Answer:

A. is a vertical curve at the natural unemployment rate

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Philips curve is a relationship between inflation and unemployment rate.

In the long run, Philips curve is vertical since there is no trade off between inflation and unemployment.

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