Answer:
horizon value at year 5 = $94.3444
current intrinsic intrinsic value P₀ = $47.73
Assuming that the markets are in equilibrium, Goodwin's current expected dividend yield is and Goodwin's capital gains yield is <u>0(it pays no dividends)</u>.
Goodwin has been very successful, but it hasn't paid a dividend yet. It circulates a report to its key investors containing the following statement:
Goodwin's investment opportunities are poor.
Is this statement a possible explanation for why the firm hasn't paid a dividend yet?
<u>B. False</u>
Generally companies that are experiencing a rapid growth do not pay dividends, because they need all the cash that they can use to finance their expansion. Sometimes mature companies that have a steady growth rate will also choose not to pay dividends because they consider themselves as solid investments and not paying dividends allows them to grow more and should increase stockholders' wealth more.
Explanation:
D₃ = $5.50
D₄ = $7.073
D₅ = $9.096
D₆ = $9.642 (and a constant growth rate of 4.38%
Re = 14.60%
horizon value at year 5 = $9.642 / (14.6% - 4.38%) = $94.3444
intrinsic value P₀ = $94.3444 / 1.146⁵ = $47.73
Answer:
C. Bonus Depreciation only covers new equipment.
Explanation:
Bonus depreciation is the depreciation provided on additional capital investment. This is depreciation for tax base calculation, where any purchase of eligible asset is depreciated extra that means the purchase price is allowed as standard deduction in first year of it's purchase.
There is no such primary condition that the asset shall be new equipment only.
Therefore, incorrect statement is C
The type of financing that Pete has secured is VENTURE CAPITAL. Venture capital is a type of private equity, a form of financing that provides funds by private investors to new companies with high potentials or emerging companies that are deemed to have high potentials. In return for the money provided by the private investors, they become part owners in the company.
Answer:
The correct answer is Variable Cost.
Explanation:
According to the scenario, the rent and manager salary is fixed, so, it is under fixed cost.
Whereas, Cost of supplies ( i.e. napkins, bags and condiments) are variable according to the number of customer. As the number of customer increases, cost of supply also increases and as the number of customer decreases, cost of supply also decreases.
This type of cost is known as Variable cost,
Hence, The cost of supply is Variable cost in the given scenario.
Answer:
a. NOPAT = EBIT * (1-t)
NOPAT = $2,700 * (1-0.40)
NOPAT = $1,620
b. OCF = NOPAT + Depreciation
OCF = $1,620 + $1,600
OCF = $3,220
c. FCF = Net fixed asset investment - Net current asset investment
FCF = $3,320 - $1,400 - $1,400
FCF = $420
Note:
Net fixed asset investment = Change in net fixed assets + depreciation
= ($14,800- $ 15,000) + $1,600
= $1,400
Net current asset investment = Change in current assets - Change in accounts payable and accurals
= ($8,200 - $6,800) - {($1,600 + $200) - ($1,500 - $300)}
= $1,400
d. FCF is meaningful as it shows that OCF is able to cover Operating expenses as well as Investment in Fixed and Current Assets
