Airjet Best Parts Inc Part 1
Kim Witten
Course Project Part I
Task 1
1.
National First (Prime rate is 3.25%) +6.75% = 10% Semiannually
EAR = (1+.10/2) ^2 – 1 which is 10.25
Regions Best Rate is 13.17% Monthly
EAR = (1+.1317/12) ^12 – 1 which is 13.99
2.
I think that between National First and Regions Best that National first offers the lower rate after computing the EAR. National first is also only compounded semiannually making it lower then Regions Best. The only thing I worry about it the prime rate changing because if it rises a lot then it could possibly become a higher interest rate them Regions best. At the time being if Air jets Best Inc. takes the National First option then that is 3.74 percent less they would be paying if they had gone with Regions Best. This would be the better option because you will pay less interest over time for the loan amount.
3.
Loan Amount = $6,950,000
APR = 8.6%
Monthly Interest Rate = 8.6%/12 = 0.7167 = 0.72%
Term = 5 years
Number of monthly Payments = 60
Monthly Payment = $142,926.43
I agree with going with the decision because if you compare it to national First interest rate of 10% even though it is compounded semiannually you still will pay less with Regions First who compounds monthly. The less you can pay in interest over time will be less out of your pocket and the best decision to make in the long run.
Task 2
1.
Raytheon
Dividend: 1.71
Yield 3.90%
Stock Price: 44.18
(Dividend per Share/Stock Price)+Growth
(1.71/44.18)+5 = 8.87%
Boeing
Dividend: 1.68
Yield: 2.60%
Stock Price: 65.8
(1.68/65.8)+5 = 7.55%
Lockheed Martin
Dividend: 4
Yield: 5.40%
Stock Price: 76.52
(4/76.52)+5 = 10.23%
Northrop Grumman Corporation
Dividend: 2
Yield: 3.50
Stock Price: 57.18
(2/57.18)+5 = 8.50%
2.
Required rate of return (Raytheon) = 8.87%
Growth = 1%
Dividend per share = 1.71
D1= D0 x (1-growth rate) = 1.71 x (1-1%) = 1.73
Current share price = 1.73/ (8.87-1%) = $21.98
3.
Common Stock = $21.98
Course Project Part I
Task 1
1.
National First (Prime rate is 3.25%) +6.75% = 10% Semiannually
EAR = (1+.10/2) ^2 – 1 which is 10.25
Regions Best Rate is 13.17% Monthly
EAR = (1+.1317/12) ^12 – 1 which is 13.99
2.
I think that between National First and Regions Best that National first offers the lower rate after computing the EAR. National first is also only compounded semiannually making it lower then Regions Best. The only thing I worry about it the prime rate changing because if it rises a lot then it could possibly become a higher interest rate them Regions best. At the time being if Air jets Best Inc. takes the National First option then that is 3.74 percent less they would be paying if they had gone with Regions Best. This would be the better option because you will pay less interest over time for the loan amount.
3.
Loan Amount = $6,950,000
APR = 8.6%
Monthly Interest Rate = 8.6%/12 = 0.7167 = 0.72%
Term = 5 years
Number of monthly Payments = 60
Monthly Payment = $142,926.43
I agree with going with the decision because if you compare it to national First interest rate of 10% even though it is compounded semiannually you still will pay less with Regions First who compounds monthly. The less you can pay in interest over time will be less out of your pocket and the best decision to make in the long run.
Task 2
1.
Raytheon
Dividend: 1.71
Yield 3.90%
Stock Price: 44.18
(Dividend per Share/Stock Price)+Growth
(1.71/44.18)+5 = 8.87%
Boeing
Dividend: 1.68
Yield: 2.60%
Stock Price: 65.8
(1.68/65.8)+5 = 7.55%
Lockheed Martin
Dividend: 4
Yield: 5.40%
Stock Price: 76.52
(4/76.52)+5 = 10.23%
Northrop Grumman Corporation
Dividend: 2
Yield: 3.50
Stock Price: 57.18
(2/57.18)+5 = 8.50%
2.
Required rate of return (Raytheon) = 8.87%
Growth = 1%
Dividend per share = 1.71
D1= D0 x (1-growth rate) = 1.71 x (1-1%) = 1.73
Current share price = 1.73/ (8.87-1%) = $21.98
3.
Common Stock = $21.98