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leva [86]
3 years ago
14

Qualcomm has developed a groundbreaking new CPU chip. The patent on the chip will last 17 years. You expect that the chip’s prof

its to be $4 million in its first year and that this amount will grow at a rate of 5% per year for the next 17 years. Once the patent expires, Intel will be able to produce the same chip and competition will likely drive profits to zero. What is the present value of the new chip if the interest rate is 8% per year?
Business
1 answer:
umka21 [38]3 years ago
4 0

Answer:

$50.74 million

Explanation:

Interest rate per annum = 8%

Number of years = 17

Number of compounding per annum = 1

Interest rate per period (r) = 8%/1 = 8%

Number of period (n) =17 * 1 = 17

Growth rate (g) = 5%

First payment (P) = 4 ($'million)

PV of the new Chip = p/(r-g) * [1 - [(1+g)/(1+r)]^n]

PV of the new Chip = 4/(8%-5%) * [1 - [(1+5%)/(1+8%)]^17]

PV of the new Chip = 4/0.03 * [1 - [1.05/1.08]^17]

PV of the new Chip = 4/0.03 * [1 - 0.972222^17]

PV of the new Chip = 133.333 * (1 - 0.6194589804)

PV of the new Chip = 133.333 * 0.3805410196

PV of the new Chip = 50.7386757663268

PV of the new Chip = $50.74 million

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tatyana61 [14]

The guidance of the income assertion for the 12 months ended December 31 is $22,000.

income $94,000

value of products bought

Beginning end items inventory $20,000

add: a fee of goods synthetic $ forty-one,000

a fee of goods available for sale $ sixty-one,000

less: ending end goods inventory -$17,000

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Gross margin $50,000

much less: running expenses

popular and advertising expenses $15,000

general running fees $28,000

working earnings of $22,000

extra approximately the earnings statement right.

Monetary statement assertions are an employer's reputable announcement that the figures the agency is reporting are accurate. Assertions are made to attest to the authenticity of facts on balance sheets, profits statements, and cash flow statements.

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8 0
2 years ago
Sin Qua Corporation is a company listed on the stock exchange and issues corporate bonds. Which statement is most likely true?
ch4aika [34]

Answer:

Investors will have to pay tax on the interest income received from the bonds.

Explanation:

Interest earned from corporate bonds and capital gained through corporate bond transactions is taxable income.  The interest earned from a corporate bond is subject to taxation by both the federal and state governments.

The government will not sell sin Qua corporation bonds as it is a public company.  Bonds do not pay interest quarterly but rather semi-annually or annually.  Again, the maturity of the bond is determined at the time they are issued. Creditworthiness will only affect the bond price but not its maturity period.

Investors will have to pay tax on the interest income received from the bonds is thus the correct statement.

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3 years ago
Targaryen Corporation has a target capital structure of 65 percent common stock, 5 percent preferred stock, and 30 percent debt.
Juli2301 [7.4K]

Answer:

  • a. What is the company’s WACC?

R_Wacc =  13% (65%) + 5% (5%) + 6% (30%) * (1-0,25) =  10,05%

  • b. What is the aftertax cost of debt?

The aftertax cost of debt is:    

R_Debt :  (1 - 0,25) x 6% = 4,50%

Explanation:

The WACC it's defined by the formula :

WACC: E/V*Re + D/V*Rd *(1-0,25)

Re:   13,00%  Cost of Common Equity    

Re:   5,00%  Cost of Preferred STOCK  

Re:   6%     Cost of Debt  

E/V:   65%   Percentage of financing that is Common Equity  

PS/V:   5%     Percentage of financing that is Preferred Stock  

DB/V:   30%    Percentage of financing that is Debt  

Tax:  25%    Corporate tax rate  

Now we have all of the components to calculate the WACC.

The WACC is:      

R_Wacc =  13% (65%) + 5% (5%) + 6% (30%)*(1-0,25) =  10,05%  

The aftertax cost of debt is:    

R_Debt :  (1 - 0,25) x 6% = 4,50%

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