answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Mice21 [21]
2 years ago
9

You are a finance intern at Chambers and Sons and they have asked you to help estimate the company's cost of common equity. You

obtained the following data: D1 = $1.25; P0 = $27.50; gL = 5.00% (constant); and F (flotation cost) = 6.00%. What is the cost of equity raised by selling new common stock?
Business
1 answer:
Nesterboy [21]2 years ago
8 0

Answer:

Cost of equity, re= 0.098356 or 9.84 %

Explanation:

D1 = $ 1.25

P0 = $ 27.50

gL = 5 % = 0.05

F = 6 % = 0.06

Cost of equity, re can be calculated using the formular below:

Cost of equity, re = D1/ {P0 x (1- F)} + gL

                             = $ 1.25 / {$ 27.50 x (1- 0.06)} + 0.05

                             = $ 1.25 / ($ 27.50 x 0.94) + 0.05

                             = $ 1.25 / 25.85 + 0.05

                           = 0.048356 + 0.05

Cost of equity, re= 0.098356 or 9.84 %

You might be interested in
A bookstore costs $90 a day to keep open, and spends $12 for each book it sells. The store charges $18 for each book it sells. I
vekshin1

Answer:

C

Explanation:

6 0
1 year ago
Read 2 more answers
Cesar claims he found a definite way to save money, "Buy direct from the manufacturer. Any time intermediaries get involved, you
Anni [7]

Answer:

Explanation:

Great question, intermediaries are sometimes necessary since they provide a service in which you might not be able to get the product if their service wasn't provided. That being said we can say that Caesar's claim is not valid in many cases. Intermediaries tend to add an additional cost to a certain product, but like mentioned above they are providing an essential value. In many cases the value they create more than offsets the costs they add. Therefore the validity of Caesar's claim is dependent on the intermediaries provided value.

I hope this answered your question. If you have any more questions feel free to ask away at Brainly.

3 0
2 years ago
TEME is a manufacturer of toy construction equipment. If it pays out all of its earnings as dividends, it will have earnings of
Virty [35]

Answer:

$8.078 million

Explanation:

we must use the same time periods, so instead of using an annual discount rate, we should use a quarterly rate:

effective quarterly interest = (1 + 0.16)¹/⁴ - 1 = 0.0378 = 3.78%

dividends per quarter = 0.3 million + 0.05 million = $0.35 million

terminal value of firm in quarter 4 = 0.35 / 0.0378 = $9.26 million

present value of terminal value = $9.26 / (1.0378)⁴ = $7.983 million

present value of 4 quarterly dividends = $0.3 x 3.64879 (PVIFA, 3.78%, 4 periods) = $1.095 million

NPV = -$1 + $1.095 + $7.983 = $8.078 million

4 0
1 year ago
Read 2 more answers
High noon sun, inc. has a 5%, semiannual coupon bond with a current market price of $988.52. the bond has a par value of $1,000
9966 [12]

The answer is 4.5 years

Given : semi annual bond

current market price : $988.52

par value : $1,000

maturity : 5.29%

PMT = 5% x $1000 / 2 = $25,

PV = $988.52,

FV = $1000, and

Int/half a year = 5.29%/2 = 2.645%.

Solving for N = 9 (semi annual periods).

9/2 = 4.5.

5 0
1 year ago
Weston Inc. wants to outsource its customer service operations. The top managers of the company are preparing a plan exclusively
malfutka [58]

Answer:

Strategic plan.

Explanation:

A strategic plan is a document that establishes the direction of an organization. It can be a single page or fill up a binder, depending on the size and complexity of the business and work. Most managers can benefit from having a strategic plan.

4 0
2 years ago
Other questions:
  • Online banking tools allow you to _____.
    14·2 answers
  • During which stages of the distribution channel do logistics functions take place?
    11·1 answer
  • Dietrick Corporation produces and sells two products. Data concerning those products for the most recent month appear below:
    9·1 answer
  • Dominic and Matherson, a finance management company, lends money to Ebok, a fast food chain, in order to help Ebok market its ne
    11·1 answer
  • Jennifer is leasing a car from a local auto retailer. The terms of the lease include a 9% interest rate for 36 months with a res
    8·1 answer
  • DRIP programs:
    15·1 answer
  • On the day his son was born, a father decided to establish a fund for his son's college education. The father wants the son to b
    12·1 answer
  • Jane purchased a piece of equipment for $250,000 for use in her business. She incurred freight charges of $3,500, installation c
    10·1 answer
  • Assume that the economy has three types of people. 20% are fad followers, 75% are passive investors and 5% are informed traders.
    13·1 answer
  • Which of the following statements is CORRECT? a. Commercial paper can be issued by virtually any firm so long as it is willing t
    15·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!