B Both mutual funds
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 Preferred Stock
 Source of Capital Market Values Weight After tax
 4.79% 1.6% Preferred Stock $2.000.000
 $6.000.000 50% 13.24% 6.62%
00006885 2 4 5 Question 1. a) The process through which the company is capable of increasing earning capacity is known as profit maximization,on the other hand the ability of the company in increasing the value of stock is known as wealth maximization. Wealth maximization is a better operative criteria then profit maximization on following ground:
Sample is needed b) Both mutual funds and ETFs hold portfolios of stocks and/or bonds and occasionally something more exotic, such as precious metals or commodities. A key difference is that most ETFs are indextracking. Mutual funds can track indexes but most are actively managed. c) three main types of businesses organizations are followings: sole proprietorship, partnership and corporation. Corporation
Partnership
Sole proprietorship
d) 2019year Dividend Payout Ratio. Dividend Payout Ratio= (Dividends Paid)/ (Net Income) =$1,900,000/$7,660,000=0,25(for 2019) dividends paid for 2020. 0.25=Dividends paid/$19,280,000 Dividends paid=$4,820,000 Answer: Dividends paid is $4,820,000 Question 2.
2a 3b
Question 3.
NPV=∑Cash flowst/(1+r)^tIO r=required rate of return t=years Option A: Cash Flow= 150 000$, Initial investment=100 000$ , r=14% , inflation rate=3%, tax 20% NPV=(150 00$/(1+0.14)^1=131 578.95$100 000$=31578.95 Option B: Cash Flow= 270 000$, Initial investment=200 000$ , r=14%, inflation rate 3%, tax 20% NPV=(270 00$/(1+0.14)^1)= 36 842.11$
Option A: Cash Flow= 150 000$, Initial investment=100 000$ , r=14% inflation rate=3%, tax 20% PI=31 578.95$/100 000$= 0.3158 or 38.58% Option B: Cash Flow= 270 000$, Initial investment=200 000$ , r=14%, inflation rate=3%, tax=20% PI=36 842.11$/200 000$=0.1842 or 18.42%
NPV= 131 578.95$100 000$=31578.95$ 100 000$=150 000/(1+IRR)^1 IRR+1=1.5 IRR=50% Option B: Cash Flow= 270 000$, Initial investment=200 000$ , r=14%, inflation rate=3%, tax=20% 200 000=270 000/(1+IRR)^1 IRR=35%
If there is capital ratio constrains we should choose according to PI.
Companies use IRR to calculate the feasibility of a project by finding the rate of the return the project has to earn to break even. If the IRR is higher than the required rate of return, then that means that the project will create value. An IRR lower than the required rate of return decreases value. IRR has no discount rate or risk assumptions. According to reinvestment assumption, we should use IRR. Because, NPV does not have a reinvestment rate assumption, while IRR does. For IRR, the reinvestment rate assumption may change the outcome of the IRR. Question 4.
Face Value = $1,000 Market Price = $1,020 C = 6% 20 yrs Float. = 4% Tax = 34% Net price after float. = 1,020(10.04) = 979.2 979.2 = 60×(PVIFA_{20,7%}) + 1,000×(PVIF_{20,7%}) 979.2 = 894.04 K_{d} = 0.07 + (20.8/105.96) = 7.27% After tax k_{d} = 7.27×(10.34) = 4.79% Preferred Stock D = $2.5
P = $35 float. = $3 k_{ps = }Dividend/Net price = 2.5/353 = 7.81%
D = $4
g = 4% P =$50
float. = $5 k_{cs} = D_{1}/NP + g = 4×1.04/ 505 + 0.04 = 13.24%
k_{wacc }=9.52% Question 5. Question 6. Question 7. Question 8. Question 9. Question 10.
where: i= Nominal interest rate n=Number of periods i=10%
n=2 Effective Annual Interest Rate= ( 1+ 0,10/2)^{2}1 Effective Annual Interest Rate= (1+0.05)^{2}1 Effective Annual Interest Rate= 1,10251 Effective Annual Interest Rate= 0,1025 or 10,25% Answer: 0,1025 or 10,25%
15% of the loan balance is minimum demand deposit. Let us assume that the added funds must be borrowed and left idle in the firm’s accounts. The amount borrowed is more than $20,000 constitutes only 85% of the total borrowed funds. So, it can be written as follows: 0,85B=20,000 B=20,000/0,85
So, the interest will be paid on $23,529,411 Interest paid can be calculated as follow: Interest= Borrowed amount*Interest Rate*Number of months/12 Interest=$23,529,411*0,10*6/12
Effective Annual Cost of Credit: APR= $1,176,470/20,000*365/180 APR= 0,0588 *1/0,5 APR=0,1176 or 11,76% ( Cost of the loan)
Amount required = $20,000 Interest rate= 10% Calculation: Interest can be calculated as follow: Interest= 20,000*0,10*6/12 Interest= $1,000 Loan amount can be calculated os follow: Loan amount= $20,000$1,000 Loan amount= $19,000 EAR=(1+0,10/2)^{2 }1 EAR= 1,10251 EAR= 0,1025 or 10,25% Answer: annualized rate of interest on the loan now is 10,25% Download 32.66 Kb. Do'stlaringiz bilan baham: 
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