Answer: $89.68
Explanation:
The Ex-dividend measures how much a stock price drops as a result of the disbursement of dividends. It is calculated by subtracting the dividend from the current stock price.
In the above question the IRS require that taxes be withheld at the time that the dividend is paid.
This means that taxes have to be accounted for first before ex - dividend is calculated.
After tax dividend = 5.40 * ( 1 - 0.2)
After tax dividend = $4.32
Solving for Ex-dividend gives,
= 94.00 - 4.32
= $89.68
The ex-dividend price will be $89.68
Answer:
Total PV= $2,298.24
Explanation:
<u>First, we need to determine the effective annual rate:</u>
EAR= [1 + (i/n)]^n - 1
EAR= [1 + (0.08/4)]^4 - 1
EAR= 0.082
<u>Now, we can determine the present value of the cash flow, using the following formula:</u>
PV= ∑[Cf/(1+i)^n]
Cf1= 800 / 1.082= 739.37
Cf2= 800 / 1.082^2= 683.34
Cf3= 0
Cf4= 1,200 / 1.082^4= 875.53
Total PV= $2,298.24
Answer:
The WACC is 8.75%
Explanation:
The WACC or weighted average cost of capital is the cost of a firm's capital structure. The capital structure is made up of debt, preferred stock and common stock.
The formula for WACC is,
WACC = wD * rD * (1 - tax rate) + wP * rP + wE * rE
Where,
- w represents the weight of each component in the capital structure or value of each component as a proportion of total assets
- r represents the cost of each component
- we take after tax cost of debt. So we multiply cost of debt by (1 - tax rate)
The weight of common equity = 1 - (0.53 + 0.15) = 0.32 or 32%
The WACC is:
WACC = 0.53 * 0.0712 * (1 - 0.29) + 0.15 * 0.109 + 0.32 * 0.1387
WACC = 0.0875 or 8.75%
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Learn more about Self-monitoring here
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