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2 years ago

Determining the Cost of Capital: Cost of Preferred Stock

Business

1 answer:

Marina86 [1]2 years ago

6 0

Answer:

4.48%

Explanation:

To find out the cost of Preferred Stock we simply divide annual dividend by price of share and multiply by 100. So no tax adjustment is made while calculating the cost of preferred stock because preferred stock dividends are not tax deductible as no tax savings are associated with preferred stock

Data provided

Annual dividend = $3.60

Price of share = $58

The computation of cost of preferred stock is shown below:-

Cost of Preferred stock = Annual Dividend ÷ Price of share × 100

= $3.60 ÷ $58 × 100

= 0.0448 × 100

= 4.48%

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Investments and loans base their interest calculations on one of two possible methods: the interest and the interest methods. Bo

IrinaK [193]

FV = PV Times (1 + r)^n
FV = PV + (PV Times r Times n)
False
False
True
Laura should invest in investment P

Investment = L FV = $66,485.49 Make this investment? No

Investment = M FV = $59,400 Make this investment? No

Investment = P FV = $77,318.37 Make this investment? Yes

Explanation:

Compound interest: FV = PV Times (1 + r)^n
Simple interest: FV = PV + (PV Times r Times n)
The process of earning compound interest allows a depositor or investor to earn interest on any interest earned in prior periods. False
After the end of the second year and all other factors remaining equal, a future value based on compound interest will never exceed the future value based on simple interest. False
All other factors being equal, both the simple interest and the compound interest methods will accrue the same amount of earned interest by the end of the first year. True

Investment = L

Interest rate and method = 5% compound interest

Expected Future Value, FV = PV (1 + r)^n

FV = 45000 (1 + 0.05)^8

FV = 45000 * (1.05)^8

FV = 45000 * 1.477455 = $66,485.49

Make this investment? Yes / No

Investment = M

Interest rate and method = 4% simple interest

Expected Future Value, FV = PV + (PV * r * n)

FV = 45000 + (45000 * 0.04 * 8)

FV = 45000 + 14400 = $59,400

Make this investment? Yes / No

Investment = P

Interest rate and method = 7% compound interest

Expected Future Value, FV = PV (1 + r)^n

FV = 45000 (1 + 0.07)^8

FV = 45000 * (1.07)^8

FV = 45000 * 1.718186 = $77,318.37

Make this investment? Yes / No

Since she can only make one investment during the eight-year investment period, Laura should invest in investment P

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2 years ago

Which Decision Support System is a "calendar-driven process and offers the basis for informed affordability assessment?"

creativ13 [48]

Answer: Planning, Programming, Budgeting and Execution system (PPBE).

Explanation:

The decision support system that is a "calendar-driven process and offers the basis for informed affordability assessment is the Planning, Programming, Budgeting and Execution system (PPBE).

The Planning, Programming, Budgeting, and Execution (PPBE) is simply used in the allocation of resources.

8 0

2 years ago

What is the value today of $4,400 per year, at a discount rate of 8.3 percent, of the first payment is received 6 years from tod

kodGreya [7K]

Answer:

Present Value = $290

Explanation:

The present value of a future payment

$PV = \frac{FV}{(1 + r)^n}$

Where r discount rate

t is the number of years until the payment will be received.

PV = Present Value = ?

FV = Payment = $4,400

r= 8.3% = 0.083

N = 20 - 6 = 14

PV = $4400 / (1 + 0.083)(20 - 6)

= $4400 / (1.083 * 14)

= $4400 / 15.162

= $290.1992

≅ $290

Present Value = $290

8 0

2 years ago

The most frequent reason that some corporations send their manufacturing operations outside of the united states is to find high

marishachu [46]

To find highly skilled workers who are specialized

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2 years ago

Barry Cuda currently has $35,000 in his Roth IRA which has been earning 7%. Barry is planning on depositing $5500 annually for t

ki77a [65]

Answer:

Total worth of worth of investment= $1,622,099.14

Explanation:

<em>The total amount available in his account would be determined as follows:</em>

<em>The value of the existing current amount in 40 years time</em>

FV = PV × (1+r)^ n

FV- future value

PV- current amount in account

r- interest rate

n- number of years

FV = 35,000 × (1.07)^(40=

FV= 524,106.02

The value of the new annual deposit of 5,500 in 40 years time

This represents an annuity. An annuity is series of constant but equal amount occurring for a certain number of years .

FV= A×( (1+r) -1)/r

FV - future value

R - interests rate

n- number of years

A- annual deposit

FV = 5,500 × ((1+0.07)^40 -1)/0.07

FV= 1,097,993.12

Total worth of worth of investment

= 524,106.02 + 1,097,993.12 = 1,622,099.14

Total worth of worth of investment= $1,622,099.14

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2 years ago