ABC Inc.’s first dividend of $2.60 per share is expected to be paid six years from today. From then on, dividends will grow by 10 percent per year for five years. After five years, the growth rate will slow to 5 percent per year in perpetuity. Assume that ABC's required rate of return is 13 percent. What is the price of a share of ABC Inc. today?
In: Finance
A $1,000 par value 16-year bond with m coupons per annum has a price of $910.63. If the write-up value in the book value of the bond in the first 8 years is $54 and the yield rate of the bond is 5.0945% effective per annum, find the redemption value of the bond.
Please show all work by hand, without using a finance calculator or Excel. Thank you.
In: Accounting
Company A announced that its current dividend is $10 per share (D0=$10). The dividend is expected to grow at a constant rate of 5 percent a year for the first 2 years and it will be 4 percent thereafter. The risk-free rate is 4 percent, the required rate of return on the market portfolio is 7 percent and the company's beta equals to 2. What is the expected price of the stock today (t=0)?
In: Finance
You plan to purchase a $200,000 house using a 30-year mortgage obtained from your local credit union. The mortgage rate offered to you is 6.50 percent. You will make a down payment of 20 percent of the purchase price. (LG 7-4) a. Calculate your monthly payments on this mortgage. b. Construct the amortization schedule for the first six payments.
please show in excel
In: Finance
On October 1, 2016 Macklin Corporation issued 10-year bonds with a face value of $40,000,000. Interest is paid annually on December 31. The company uses the effective interest method. Coupon rate is 2% and market rate is 4%
a) Find the issue price.
b) The entry to record the issuance of the bonds.
c) Prepare the journal entry to record the first interest payment on December 31.
In: Accounting
On January 1, a company issues bonds with a par value of $500,000. The bonds mature in 5 years. The contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The market rate is 12%. Calculate the sale price and record the journal entry for this sale. Using the straight-line method, calculate the amount of interest expense for the first semiannual interest period and record the journal entry.
In: Accounting
Amounts are in thousands of dollars (except number of shares and price per share):
| Kiwi Fruit Company Balance Sheet | ||
| Cash and equivalents | $ | 580 |
| Operating assets | 680 | |
| Property, plant, and equipment | 2,700 | |
| Other assets | 125 | |
| Total assets | $ | 4,085 |
| Current liabilities | $ | 920 |
| Long-term debt | 1,275 | |
| Other liabilities | 135 | |
| Total liabilities | $ | 2,330 |
| Paid in capital | $ | 355 |
| Retained earnings | 1,400 | |
| Total equity | $ | 1,755 |
| Total liabilities and equity | $ | 4,085 |
| Kiwi Fruit Company Income Statement | |||
| Net sales | $ | 9,500 | |
| Cost of goods sold | (7,500 | ) | |
| Gross profit | $ | 2,000 | |
| Operating expense | (800 | ) | |
| Operating income | $ | 1,200 | |
| Other income | 120 | ||
| Net interest expense | (200 | ) | |
| Pretax income | $ | 1,120 | |
| Income tax | (210 | ) | |
| Net income | $ | 910 | |
| Earnings per share | $ | 2.00 | |
| Shares outstanding | 455,000 | ||
| Recent price | $ | 27.00 | |
| Kiwi Fruit Company Cash Flow Statement | |||
| Net income | $ | 910 | |
| Depreciation and amortization | 225 | ||
| Increase in operating assets | (100 | ) | |
| Decrease in current liabilities | (126 | ) | |
| Operating cash flow | $ | 909 | |
| Net (purchase) sale of property | $ | 160 | |
| Increase in other assets | (83 | ) | |
| Investing cash flow | $ | 77 | |
| Net (redemption) issuance of LTD | $ | (184 | ) |
| Dividends paid | (164 | ) | |
| Financing cash flow | $ | (348 | ) |
| Net cash increase | $ | 638 | |
Calculate the price-book, price-earnings, and price-cash flow ratios for Kiwi Fruit
In: Finance
The market demand schedule for a commodity is as follows:
|
Price (dollars per case) |
Quantity Demanded (cases per week) |
|
$5.40 |
50,200 |
|
$6.40 |
45,200 |
|
$7.40 |
40,000 |
|
$8.40 |
35,000 |
|
$9.40 |
30,000 |
|
$10.40 |
24,800 |
|
$11.40 |
19,800 |
|
$12.40 |
14,800 |
The market is perfectly competitive and each firm shares similar production and technology and as a result has a cost structure as follows:
|
Output (cases per week) |
Marginal Cost (dollars per case) |
Average Variable Cost (dollars per case) |
Average Total Cost (dollars per case) |
|
150 |
$6.00 |
$8.80 |
$16.54 |
|
200 |
$6.40 |
$7.80 |
$13.60 |
|
250 |
$7.00 |
$7.00 |
$11.64 |
|
300 |
$7.65 |
$7.10 |
$10.97 |
|
350 |
$8.40 |
$7.20 |
$10.52 |
|
400 |
$10.00 |
$7.50 |
$10.40 |
|
450 |
$12.40 |
$8.00 |
$10.58 |
|
500 |
$12.70 |
$9.00 |
$11.32 |
Initially, there are 100 firms in the industry.
What is the market price in the short run?
What is the market output in the short run?
What is the output of each firm in the short run?
Calculate the profit for each firm at the current market price.
What is the shutdown price? Explain why a firm would operate at a loss in the short-run (use numbers from this problem to illustrate).
What is the long run price in the market?
How many firms will serve the market in the long run?
In: Economics
|
The net income of Novis Corporation is $84,000. The company has 25,000 outstanding shares and a 100 percent payout policy. The expected value of the firm one year from now is $1,750,000. The appropriate discount rate for the company is 12 percent, and the dividend tax rate is zero. |
| a. |
What is the current value of the firm assuming the current dividend has not yet been paid? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| Current value of the firm | $ |
| b. |
What is the ex-dividend price of the company’s stock if the board follows its current policy? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| Ex-dividend price | $ |
| c. |
At the dividend declaration meeting, several board members claimed that the dividend is too meager and is probably depressing the company’s price. They proposed that the company sell enough new shares to finance a $4.56 dividend. |
| c-1. |
Calculate the current value of the firm under the proposed policy. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| Current value of the firm | $ |
| c-2. |
If the proposal is adopted, at what price will the new shares sell? How many will be sold? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. The number of shares does not have to be integer.) |
| Current share price | $ |
| Shares sold | |
In: Finance
Assume that all firms are identical and operate in a market that is characterized by perfect competition. The market demand is given by Q D = 3000 − 50 P , the market supply is given by Q^S = 550 P, the firm’s total cost function is given by C ( q ) = 500 + (q^2)/100.
a. (5) Find the market equilibrium quantity, the market
equilibrium price, the output supplied by a single firm, the profit
of each firm, and the number of firms in the industry.
b. (5) Will there be entry into or exit from the industry in the
long run? Explain. How will the market equilibrium be affected by
entry and exit?
c. (5) What is the lowest price at which each firm would sell its
output in the long run? Is profit positive, negative, or zero at
this price? Explain.
d. (5) Suppose that all of the firm’s fixed costs are sunk, what is
the lowest price at which each firm would sell its output in the
short run? Is profit positive, negative, or zero at this price?
Explain.
e. (5) Suppose that a tax of $1 is assessed for every unit of
output and is imposed on only one firm in the industry. Find the
new profit maximizing output for the firm. Now suppose that the tax
of $1 is imposed on every firm in the industry. Find the new profit
maximizing output for the firm. Is the effect of the tax on the
firm’s output larger when the tax is imposed only on one firm or
when the tax is imposed on every firm? Explain.
In: Economics