Answer:
stock price = (Div 1 / r - g1) x {1 - [(1 + g1) / (1 + r)]ⁿ} + (Div 1 / r - g2) x [(1 + g1) / (1 + r)]ⁿ⁻¹
Explanation:
since the company will first grow at g1 for n years, and then at g2 forever, we need to first determine the present value of the dividends growing at g1 for n years:
present value of the dividends during n = (Div 1 / r - g1) x {1 - [(1 + g1) / (1 + r)]ⁿ}
e.g. div = $2, n = 5 years, g1 = 8%, r = 12%
(2 / 12% - 8%) x {1 - [(1 + 8%) / (1 + 12%)]⁵} = 50 x 0.166263 = $8.31
now we find the formula to calculate the present value for the growing perpetuity g2 at n - 1 years:
= (Div 1 / r - g2) x [(1 + g1) / (1 + r)]ⁿ⁻¹
following the same example but changing g1 for g2, and g2 = 5%
= (2 / 12% - 5%) x [(1 + 5%) / (1 + 12%)]⁵⁻¹ = 28.5714 x 0.772476 = $22.07
we now add both parts to finish our example = $8.31 + $22.07 = $30.38
Answer:
$1,565
Explanation:
Interest expense = Interest payment + Amortization expense
also,
Interest payment = 22,000 × 14% × [ 6 ÷ 12 ] [∵ 6 ÷ 12 ; since payment are semiannual ]
Thus,
Interest payment = $1,540
and,
Amortization expense = [22,000 - 21,700 ] ÷ [6 × 2]
= $25
Therefore,
Interest expense = $1,540 + $25
= $1,565
Answer:
Common market.
Explanation:
In this scenario, Countries A, B, and C are at a particular level of economic integration. All these countries enjoy reduced or eliminated internal tariffs on trade between them and have added a common external tariff on products imported from countries outside the union. If these countries remove all restrictions on the free flow of capital and labor among themselves, they represent a common market.
A tariff can be defined as a form of taxation employed by a country and applies to imported goods or services from another country.
A common market refers to a formal organization of countries who have collectively agree to trade freely with one another with reduced or eliminated internal tariffs but imposes a common external tariff on trade with other countries. It was founded in 1958 and was made up of countries like Luxembourg, France, Belgium, Netherlands, West Germany and Italy.
<em>The main purpose and advantage of the common market is that, it avails member countries the opportunity to move goods, people, services and capital freely. </em>
Answer : 4.34 %
Explanation: The effective interest rate a company pays on its debt obligation is called cost of debt. The cost of debt is denoted by [k]x_{d}[/tex] . As there is a tax shield available on debt interest it is generally calculated by subtracting the marginal tax rate from before tax cost of debt .
.
where,
c= coupon payment = 1000 * 6% = 60
p = current market price = $898
t= marginal tax rate
therefore :-
= 
= 4.34 %
