Q: When an uncollectible account is recovered after it has been written off, which of the following…
A: When an uncollectible account is recovered after it has been written off, allowance for doubtful…
Q: ou to have the funds needed? ANS: $263,928.00 7. Brianna McGruder and Tanya Zoban own Extreme…
A: The objective of the question is to calculate the future value of a business and a retirement plan…
Q: Changes in Current Operating Assets and Liabilities-Indirect Method Mohammed Corporation's…
A: Cash Flows from Operating Activities: It is a section of Statement of Cash flow that explains the…
Q: are in essence an insurance contract against the default of one or more borrowers. O Credit default…
A: An insurance contract is a legal agreement between an insurance company (insurer) and an individual…
Q: Carrie D's has 5.9 million shares of common stock outstanding, 2.9 million shares of preferred stock…
A: Number of Equity = ne = 5.9 millionNumber of Preferred Stock = np = 2.9 millionNumber of Debt = nd…
Q: Find the EAR in each of the following cases. (Do not round intermediate calculations and enter your…
A: APR stands for the annual percentage rate. EAR stands for effective,annual,rate. EAR stands for…
Q: I would like to understand how to solve this in Excel. Hardware Inc. bonds are selling in the market…
A: Capital gain yield refers to the percentage of return other than the current yield on the yield to…
Q: Cupid Co. is evaluating the possible acquisition of a new machine to replace an existing machine.…
A: Cost of New Machine: $1,751,000Freight and Installation Costs: $140,000Increase in Inventory:…
Q: For each Petty Cash payment, the custodian of the account prepares a(n). O O O O O invoice receipt…
A: For each petty cash payment, the custodian of the account prepares a(n)""petty cash ticket". A Petty…
Q: An investor has $1000 initial wealth for investment and he borrows another $500 at the risk free…
A: Borrowings are the negative wealth.The portfolio consists of $1500 investment in market portfolio…
Q: Debby's Dance Studios is considering the purchase of new sound equipment that will enhance the…
A: Variables in the question: Cost of equipment=$20000 Cash Flow ($)…
Q: All of the following affect the value of a bond EXCEPT: A investors' required rate of return. B) the…
A: Usually the value of bonds is measured by their bond yields .Bond yield is price people pay to…
Q: PRESENT AND FUTURE VALUES OF A CASH FLOW STREAM An investment will pay $150 at the end of each of…
A: Present value refers to the current date value after discounting all the future cash flows with the…
Q: How specifically do you contribute to or impact the financial health of your organization?
A: The term financial health refers to the financial condition of an individual or organizations. The…
Q: Ways that a lender may respond to a defaulted loan without resorting to foreclosure include all of…
A: ExplnationThe lender's response options to a defaulted loan often involve alternatives to…
Q: The following data is regarding the Link Company: A target debt/equity ratio of 0.5 Bonds are…
A: Target debt-equity ratio = 0.5Current yield (YTM) = 12%Growth rate = 5%Dividend paid (D0) = $2Stock…
Q: After learning the course, you divide your portfolio into three equal parts (i. e.. equal market…
A: Solution:-Beta of portfolio means the sensitivity of return of portfolio with change in return of…
Q: How does the annual rate of return differ from other methods? It has more complex calculations. It…
A: The annual rate of return (ARR) is a financial metric used to evaluate the profitability of an…
Q: JDAR Enterprises needs someone to supply it with 156000 cartons of machine screws per year to…
A: Npv is also known as Net present Value. It is a capital budgeting techniques which helps in decision…
Q: Vcast Inc., is expected to grow at a constant rate of 6 percent will pay a dividend of $2.75 next…
A: The current stock worth can be derived as the discounted value of future cash flows from the stock.…
Q: You inherited $300,750 and invested it at 6.25% per year. How much could you withdraw at the…
A: Withdrawal used to involve in the removing of the funds from the investment plans, savings plan,…
Q: Suppose a financial manager is quoted as saying, “Our firm uses the stand-alone principle. Because…
A: Concept of stand alone principle:Under this concept, each project is treated as a standalone…
Q: Problem 19-8 Forecasting Payments (LO2) Paymore Products places orders for goods equal to 75% of its…
A: Given:
Q: Company D Redeemable bonds Number of bonds issued Market value per bond Coupon rate Number of years…
A: Bonds are source of the investment and finance and bonds are paid annual coupon payments and par…
Q: 8 Brampton Truck Parts needs $652,000 to take a cash discount of 2.50/10, net 70. A banker will loan…
A: 1. Loan Amount Needed: $652,0002. Cash Discount: 2.50%3. Discount Period: 10 days4. Credit Terms:…
Q: The following table lists prices of Amazon options in January 2018 when Amazon stock was selling for…
A: Options are categorized into two major types as calls and puts where call provides a buying right to…
Q: Corporations report which of the following in a separate section of the income statement? O Other…
A: The income statement is one of the three major statements reported by corporations that reveal the…
Q: Mini Inc. is contemplating a capital project costing $49,631. The project will provide annual cost…
A: Net Present Value (NPV) is a vital financial metric employed to gauge the profitability of an…
Q: S Corp. is expected to pay a $2.55 dividend at year end, the dividend is expected to grow at a…
A: Cost of Equity(Ke) = (D1 / P0 ) + gwhereD1 = Expected dividend = $2.55P0 = Current share price =…
Q: Dog River Company has an operating profit of $259.000 Interest expense for the year was $21.600…
A: Operating profit = $259,000Interest expenses = $21,600Tax = $45,750Preferred dividend paid =…
Q: Why do people trade stocks? Your answer should relate to company’s stock value.
A: Stock is a capital market instrument that gives the holder an ownership interest in the company with…
Q: Average account receivables-60 days, Inventories-85 days, Average account payable-55 days Company…
A: Cash conversion cycle is the period required to recover cash money from business and it shows the…
Q: Questions about Costs of Capital. Which of the following is true: 1. Cost of Equity is lower than…
A: Cost of equity is lower than cost of debt because equity holders face higher risk than debt…
Q: 6. An insurance company is offering a new policy to its customers. Typically, the policy is bought…
A: First birthday$800Second birthday$800Third birthday$800Fourth birthday$1,000Fifth…
Q: A bank is paying 7.5 % APR on a CD. (Note: The convention when there are no periodic payments is to…
A: Future value refers to the estimated value of an investment or cash flow at a specified point in the…
Q: 8. A $40,000 car is financed with $5,000 down and a loan at 3.5% interest compounded monthly for 5…
A: Note: As per guidelines we should attempt only first three subparts in case of question with…
Q: Consider a 2-year bond whose par value is $1,000 and coupon rate is 4% per year, pay semi-annually.…
A: Duration of bond shows the weighted period required to receive all cash flow from bond and that…
Q: Apex Holdings is considering a 5-year capital investment project which involves a purchase an…
A: Net Present Value (NPV) is a financial metric used to evaluate the profitability of an investment or…
Q: please answer both. If a stock's fair return increases, what will happen to the stock's value? A.…
A: Two critical concepts in this realm are a stock's fair return and the market risk premium.…
Q: Best Buy Co., Inc. (BBY) NYSE - NYSE Delayed Price. Currency in USD 100.60 -2.43 (-2.36%) At close:…
A:
Q: Liability Driven Investing (LDI) Strategies (Continued) Example: Market value of assets is $160…
A: “Since you have posted a question with multiple sub-parts, we will provide the solution only to the…
Q: a. A new operating system for an existing machine is expected to cost $837,000 and have a useful…
A: Required A:Incremental after-tax income = $245,000Salvage value = $105,000Number of years = 6 years…
Q: What is the Macaulay duration of a bond with a coupon of 7.2 percent, five years to maturity, and a…
A: Macaulay duration refers to the time period that is consumed to receive the amount of cash flows of…
Q: A currency swap without the exchange of notional amount is most likely to be used in what situation?…
A: A currency swap without the exchange of notional amounts is most likely to be used by a company…
Q: Mexican investors are benehting from covered interest arbitrage due to high interest rates on the…
A: Covered interest arbitrage is a strategy where investors capitalize on the interest rate…
Q: What is a fair price for a $1000 face value bond that pays a 3% semiannual coupon that matures in 6…
A: Face value = $1,000Coupon rate (semiannually compounded) = 3%YTM = 5.5%Years to maturity = 6 years
Q: Staley Inc. reported the following data: Net income Depreciation expense Loss on disposal of…
A: Cash from operating activities refers to the cash received from regular business activities such as…
Q: The Government just issued a 2-year coupon bond with a face value of $1,000 and annual coupons of…
A: - Face value of bond (FV): $1,000- Annual coupon payment (C): $75- 1-year spot rate: 6.5%- 2-year…
Q: Which of the following is not an advantage of a corporation? O Double taxation Continuous life…
A: Double taxation means income tax paid twice on company's income.So, it is not an advantage for…
Q: Ellen Quarles recently opened a savings account. If Ellen deposits $1000 and the amount compounded…
A: The amount deposited today will be more worth in future dates due to the amount of interest received…
Cost of Debt, Cost of Preferred Stock
This article deals with the estimation of the value of capital and its components. we'll find out how to estimate the value of debt, the value of preferred shares , and therefore the cost of common shares . we will also determine the way to compute the load of every cost of the capital component then they're going to estimate the general cost of capital. The cost of capital refers to the return rate that an organization gives to its investors. If an organization doesn’t provide enough return, economic process will decrease the costs of their stock and bonds to revive the balance. A firm’s long-run and short-run financial decisions are linked to every other by the assistance of the firm’s cost of capital.
Cost of Common Stock
Common stock is a type of security/instrument issued to Equity shareholders of the Company. These are commonly known as equity shares in India. It is also called ‘Common equity
Step by step
Solved in 3 steps with 2 images
- Your division is considering two investment projects, each of which requires an up-front expenditure of 25 million. You estimate that the cost of capital is 10% and that the investments will produce the following after-tax cash flows (in millions of dollars): a. What is the regular payback period for each of the projects? b. What is the discounted payback period for each of the projects? c. If the two projects are independent and the cost of capital is 10%, which project or projects should the firm undertake? d. If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake? e. If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake? f. What is the crossover rate? g. If the cost of capital is 10%, what is the modified IRR (MIRR) of each project?Firm A has 11 equally risky capital budgeting projects, each costing $29.608 million and each having an expected rate of return of 8.25%. Firm A’s retained earnings breakpoint is $296.08 million. The firm’s WACC using retained earnings is 8.0% but increases to 8.5% if new equity must be issued. The company invests in projects where the expected return exceeds the cost of capital. How much capital should Firm A raise and invest?Midwest Water Works estimates that its WACC is 10.45%. The company is considering the following capital budgeting projects. Assume that each of these projects is just as risky as the firm's existing assets and that the firm may accept all the projects or only some of them. Which set of projects should be асcсepted? Project Size Rate of Return А $1 million 12.0% -Select- В 2 million 11.5 -Select- 2 million 11.2 -Select- 2 million 11.0 -Select- E 1 million 10.7 -Select- F 1 million 10.3 -Select- 1 million 10.2 -Select-
- Midwest Water Works estimates that its WACC is 10.5%. The companyis considering the following capital budgeting projects:Project Size Rate of ReturnA $1 million 12.0%B 2 million 11.5C 2 million 11.2D 2 million 11.0E 1 million 10.7F 1 million 10.3G 1 million 10.2Assume that each of these projects is just as risky as the firm’s existing assets and thatthe firm may accept all the projects or only some of them. Which set of projects should beaccepted? Explain.A firm is considering a project that will generate perpetual after-tax cash flows of $16,500 per year beginning next year. The project has the same risk as the firm's overall operations and must be financed externally. Equity flotation costs 14 percent and debt issues cost 3 percent on an after-tax basis. The firm's D/E ratio is 0.5. What is the most the firm can pay for the project and still earn its required return? Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar. Maximum the firm can payA firm is considering a project that will generate perpetual after-tax cash flows of $16,500 per year beginning next year. The project has the same risk as the firm's overall operations and must be financed externally. Equity flotation costs 14 percent and debt issues cost 3 percent on an after - tax basis. The firm's D/E ratio is 0.5. What is the most the firm can pay for the project and still earn its required return?
- Suppose Hungry Whale Electronics is evaluating a proposed capital budgeting project (project Alpha) that will require an initial investment of $450,000. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 $350,000 Year 2 $450,000 Year 3 $400,000 Year 4 $475,000 Hungry Whale Electronics's weighted average cost of capital is 7%, and project Alpha has the same risk as the firm's average project. Based on the cash flows, what is project Alpha's net present value (NPV)? $959,045 $1,309,045 $1,409,045 $1,150,854A firm needs to raise $650 million for a project; external equity financing will be required. The firm faces flotation costs of 8.0% for equity and 2.0% for debt. If the debt to equity ratio is 0.75, the average flotation cost incurred by the firm will be ________ %Suppose Celestial Crane Cosmetics is evaluating a proposed capital budgeting project (project Alpha) that will require an initial investment of $450,000. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 $275,000 Year 2 400,000 Year 3 400,000 Year 4 450,000 Celestial Crane Cosmetics's weighted average cost of capital is 10%, and project Alpha has the same risk as the firm's average project. Based on the cash flows, what is project Alpha's net present value (NPV)? (Note: Do not round your intermediate calculations.) $849,229 $738,460 $886,152 $1,188,460 Making the accept or reject decision Celestial Crane Cosmetics's decision to accept or reject project Alpha is independent of its decisions on other projects. If the firm follows the NPV method, it should project Alpha.
- A company has created a strategic plan that requires new capital investment. The company has a 9.8% required rate of return and an 8.3% cost of capital. The company currently has a return of 10% on its other investments. The proposed new investments have equal annual cash inflows expected. Management used a screening procedure of calculating a payback period for potential investments and annual cash flows, and the IRR for the 7 possible investments are shown. Each investment has a 6-year expected useful life and no salvage value. Payback Period IRR Investment A 4.2 10.5 130000 B 5.9 5.1 67000 C 5.0 13.4 83000 D 4.8 7.4 61000 E 3.2 12.1 115000 F 4.0 9.9 65000 G 6.3 9.8 76000 Identify which project(s) is/are unacceptable and briefly state the conceptual justification as to why each of your choices is…Suppose Celestial Crane Cosmetics is evaluating a proposed capital budgeting project (project Beta) that will require an initial investment of $3,000,000. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 $375,000 Year 2 $450,000 Year 3 $425,000 Year 4 $475,000 Celestial Crane Cosmetics’s weighted average cost of capital is 10%, and project Beta has the same risk as the firm’s average project. Based on the cash flows, what is project Beta’s NPV? -$1,972,140 $1,356,550 -$1,643,450 -$4,643,450Investments Quick and Slow cost $1,000 each, are mutually exclusive, and have the following cash flows. The firm’s cost of capital is 10 percent (refer to image): a.) According to the net present value method of capital budgeting, whichinvestment(s) should the firm make? b.) According to the internal rate of return method of capital budgeting, which investment(s) should the firm make? c.) If Q is chosen, the $1,300 can be reinvested and earn 12 percent. Doesthis information alter your conclusions concerning investing in Q and S? To answer, assume that S’s cash flows can be reinvested at its internal rate of return. Would your answer be different if S’s cash flows were reinvested at the cost of capital (10 percent)?