Answer:
Cost of common equity is 16.49%
Explanation:
The WACC of weighted average cost of capital is the cost of a firm's capital structure. The capital structure of the firm can comprise of the following components namely debt, preferred stock and common stock.
For a firm which has only debt and equity, the WACC is calculated as follows,
WACC = wD * rD * (1 - tax rate) + wE * rE
Where,
- w represents the weight of each component
- r represents the cost of each component
- we multiply the cost of debt (rD) by (1 - tax rate) to calculate the after tax cost of debt
Plugging in the values of the available components, we can calculate the cost of common equity to be,
0.1370 = 0.3 * 0.12 * (1 - 0.4) + 0.7 * rE
0.1370 = 0.0216 + 0.7 * rE
0.1370 - 0.0216 = 0.7 * rE
0.1154 / 0.7 = rE
rE = 0.164857 or 16.4857% rounded off to 16.49%
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:
<u>FIFO</u>
Ending inventory: = 6745
Cost of goods sold: = 5120
<u>AVERAGE</u>
Ending inventory: 6215
Cost of goods sold: = 5650
Explanation:
The FIFO (First input, first output) method allows you to make an inventory valuation, taking into account that the first items that enter the stock are the first ones that come out.
In the method of valuation of weighted average cost inventory, a weighted average is used to determine the cost of goods sold and the value of the inventory. To do this, the cost of the goods available for sale is divided by the number of units available for sale.
<em>(See the attached form to see the calculations)</em>
