a) Firm’s current book value per share n =Book value of common stock/total no. of common stock =60‚000‚000/2‚500‚000 =$24 per share b) P/E ratio = price / earnings = 40/6.25 = 6.4 times c) 1) current required return = Rf + β (Rm – Rf ) = 6% +1.1(8.8 - 6) =9.08% Note: beta is assumed as there is no information of beta in the case study. 2) New required return = Rf + β (Rm - Rf ) = 6% + 1.1 (10-6.6) = 9.74% d) Ke =D1+ G Po 9.74 % = 4 x100+ 0 Po Po = $41.07 e) 1)Ke=D1+
Premium P/E ratio Fundamental analysis Time value of money
interest is added to an investment at the maturity date. Compound interest is added at regular time intervals and hence the interest added also earns interest. The second half of the unit applies these techniques to a range of financial transactions: - Housing loans Finding the instalment required to repay the loan in a certain time. Calculating the amount of loan outstanding at any point in time. Dividing each instalment into principal and interest. - Bonds and Debentures promise to pay regular
Premium Interest Time value of money Compound interest
normally takes about 2 years he will be in his early 30s. If he waits till he is 35 years old to get an MBA‚ it might be harder due to the fact that he has been out of school for so long he may have forgotten information. Looking at this from a time value point of view Ben’s age is the deciding factor if he should go continue his MBA or not. 2. What other‚ perhaps non-quantifiable factors‚ affect Ben’s decision to get an MBA? -Relationship of MBA performance as measured by grades with the expected
Premium Time value of money Present value Time
consumption consumption consumption consumption consumption consumption How to allocate your initial wealth and future income to consumption over time? Topic 1: Principles in Finance and Valuation M K Lai Page 3 What is Finance? the allocation of total wealth (initial wealth plus present value of future income‚ measured through cash flows) over time under uncertainty tradeoff between current consumption and future consumption borrowing (liabilities) vs. lending (assets) assets: investment‚ uses
Premium Compound interest Financial markets Rate of return
Life is something humans may or may not take for granted. We all have the ability to leave good and bad impressions on people before we die. We all experience pleasure‚ happiness‚ and sorrow. Some spend more time with certain emotions than others. Whether one decides to live a life that is pessimistic or optimistic‚ only oneself can decide how valuable their life is and can be. Through your good and bad actions‚ you ultimately decide how valuable your life is‚ and based on your decisions in life
Premium Happiness Personal life Life
Although the stock and bond accounts have different interest rates‚ we can draw one time line‚ but we need to remember to apply different interest rates. The time line is: 0 1 Stock Bond $800 $350 360 361 ... 660 … $800 $350 $800 $350 $800 $350 $800 $350 C C C We need to find the annuity payment in retirement. Our retirement savings ends at the same time the retirement withdrawals begin‚ so the PV of the retirement withdrawals will be the
Premium Time value of money Time Compound interest
individual is‚ the more time there is for the (hopefully) increased salary to offset the cost of the decision to return to school for a MBA. The cost includes both the explicit costs such as tuition‚ as well as the opportunity cost of the lost salary. 2. Perhaps the most important non quantifiable factors would be whether or not he is married and if he has any children. With a spouse and/or children‚ he may be less inclined to return for an MBA (especially full-time) since his family may
Premium Future Finance Present value
The Value of Life We may not ask ourselves what life means to us very often‚ but when death flashes before your eyes‚ that is when the true value of life because apparent to us. We are able to get a clearer image of life when we know or become more aware that we may not always have it. Life‚ is not about a mere calculation of everything you have ever earned or spend in your existence‚ but rather all the memories you made and experience you had that taught you about yourself. Everyone has a different
Premium Meaning of life Life Human
Pastie << self Blog * Pastie * New * Pastes * Help * About Theme: Report abuse Cost Accounting‚ 13e (Horngren et al.) Chapter 23 Performance Measurement‚ Compensation‚ and Multinational Considerations 40) A report that measures financial and nonfinancial performance measures for various organization units
Premium Investment Net present value Rate of return
Ødegaard 2006 LECTURES ON CORPORATE FINANCE - (Second Edition) © World Scientific Publishing Co. Pte. Ltd. http://www.worldscibooks.com/economics/6188.html Contents 1 Finance 2 Axioms of modern corporate finance 3 On Value Additivity 4 On the Efficient Markets Hypothesis 5 Present Value 6 Capital Budgeting 7 Valuation Under Uncertainty: The CAPM 8 Valuing Risky Cash Flows 9 Introduction to derivatives. 10 Pricing Derivatives 11 Pricing of Multiperiod‚ Risky Investments 12 Where To Get State Price Probabilities
Premium Net present value Bond Time value of money