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1 year ago

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How much would an investor be willing to pay for an investment which promises to pay $200 per year in perpetuity if the investor

requires a 14 percent return on the investment? Round to the nearest cent. Do not include any unit (If your answer is $111.11, then type 111.11 without $ sign.)

1 answer:

ch4aika [34]1 year ago

7 0

Answer:

1428.57

Explanation:

A perpetuity assumes a constant cash flow streams over an infinite period. The Present Value or the value of a perpetuity can be calculated if the periodic/annual payment that a perpetuity pays and the interest rate or required rate of return is known.

In this question the present value that an investor, requiring 14% return, will attach to a perpetuity paying 200 annually can be calculated as follows,

PV or P = Cash flow/ Interest or Required rate of Return

PV/P = 200/0.14 => 1428.57 rounded off to nearest cent

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Answer:

The answer is autonomy (Option D)

Explanation:

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A manager or superior like Margie (in the question) who gives employees autonomy simply gives minimal instruction on what needs to be achieved but allows the employees to go about the job in ways that best suit them.

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1 year ago

A 180-day $3 million CD has a 4.25 percent annual rate quote. If you buy the CD, how much will you collect in 180 days?

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Answer:

$3,063,750

Explanation:

A 180 day $3,000,000 CD

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Collection in 180 days = ?

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Total amount to collect after 180 days = $3,000,000 + $63,750

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1 year ago

Masterson, Inc., has 4.1 million shares of common stock outstanding. The current share price is $84, and the book value per shar

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Answer:

The answer is "8.37%".

Explanation:

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$=1000 \times 70000 \times 0.98 \\\\=68600000$

$\text{MV of Bond2}=\text{Par value} \times \text{bonds outstanding} \times \text{age of percentage}$

$=1000 \times 50000 \times 1.08 \\\\=54000000$

$\text{MV of firm} = \text{MV of Equity} + \text{MV of Bond1}+ \text{MV of Bond 2}$

$=344400000+68600000+54000000\\\\=467000000$

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$= \frac{344400000}{467000000}\\\\=0.7375$

$\text{Weight of debt W(D)}= \frac{\text{MV of Bond}}{\text{MV of firm}}$

$= \frac{122600000}{467000000}\\\\=0.2625$

Equity charges

By DDM.

$\text{Price = new dividend} \times \frac{(1 + \text{rate of growth})}{( \text{Equity expense-rate of growth)}}$

$84 = 3.95 \times \frac{(1+0.05)}{(\text{Cost of equity}- 0.05)}\\\\84 = 3.95 \times \frac{(1.05)}{(\text{Cost of equity} - 0.05)}\\\\84 = \frac{4.1475}{ (\text{Cost of equity} - 0.05)}\\\\\text{Cost of equity} -0.05 = \frac{4.1475}{84}\\\\\text{Cost of equity} -0.05 = 0.049375\\\\\text{Cost of equity} = 0.049375 + 0.05\\\\\text{Cost of equity} = 0.099375 \\\\\text{Cost of equity} \% = 9.9375 \% \ \ \ or \ \ \ 9.94 \% \\\\$

Debt expenses

Bond1

$K = N \times 2 \\\\$

$Bond \ Price = \sum [ \frac{\text{(Semi Annual Coupon)}}{(1 + \frac{YTM}{2})^k}] + \frac{Par\ value}{(1 + \frac{YTM}{2})^{N \times 2}}$

$k=1\\\\K =20 \times 2\\\\980 = \sum [ \frac {(5.1 \times \frac{1000}{200})}{(1 + \frac{YTM}{200})^k}] + \frac{1000}{(1 + \frac{YTM}{200})}^{20 \times 2}\\\\k=1\\\\\ YTM1 = 5.2628923903\\\\Bond2\\$

$K = N \times 2$

$Bond \ Price = \sum [ \frac{\text{(Semi Annual Coupon)}}{(1 + \frac{YTM}{2})^k}] + \frac{Par\ value}{(1 + \frac{YTM}{2})^{N \times 2}}$

$k=1\\\\K =12 \times 2\\\\$

$1080 =\sum [\frac{(5.6 \times \frac{1000}{200})}{(1 + \frac{YTM}{200})^k}] +\frac{1000}{(1 +\frac{YTM}{200})^{12 \times 2}} \\\\k=1\\\\YTM2 = 4.72\\\\$

$\text{Company debt costs} = YTM1 times \frac{(MV \ bond1)}{(MV \ bond1+MV \ bond2)}+YTM2 \times \frac{(MV \ bond2)}{(MV \ bond2)}\\\\$

The cost of the debt for the company:

$= 5.2628923903 \times \frac{(68600000)}{(68600000+54000000)}+4.72 \times \frac{(68600000)}{(68600000+54000000)}\\\\$

Business debt cost= $5.02 \% \\\\$

after taxation cost of debt:

$= \text{cost of debt} \times (1- tax \ rate)\\\\= 5.02 \times (1-0.21)\\\\= 3.9658\\\\$

$WACC= \text{after debt charges} \times W(D)+equity cost \times W(E) \\\\$

$=3.97 \times 0.2625+9.94 \times 0.7375 \\\\ =8.37 \% \\\\$

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1 year ago

Slotnick Chemical received $230,000 from customers as deposits on returnable containers during 2018. Ten percent of the containe

sesenic [268]

Answer:

$20,909.09

Explanation:

We have been given that Slotnick Chemical received $230,000 from customers as deposits on returnable containers during 2018. 10% of the containers were not returned. The deposits are based on the container cost marked up 10%.

The price after mark-up would be $100\%+10\%=110\%$

To find the profit on the forfeited deposits, we will divide $230,000 times 10% by 110% as:

$\text{Profit on the forfeited deposits}=\frac{\$230,000\times 10\%}{110\%}$

$\text{Profit on the forfeited deposits}=\frac{\$230,000}{11}$

$\text{Profit on the forfeited deposits}=\$20,909.0909$

$\text{Profit on the forfeited deposits}\approx \$20,909.09$

Therefore, Slotnick realize a profit of $20,909.09 on the forfeited deposits.

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