Q2) Determine the present value of an 8 year annuity that pays $11,000 at the en
ID: 2534275 • Letter: Q
Question
Q2)
Determine the present value of an 8 year annuity that pays $11,000 at the end of each year discounted at a rate of 6%.
Select one:
A. $69,015
B. $66,000
C. $88,000
D. $68,308
Q3)
George forecasts a $1.00 dividend for 2017, $1.10 dividend for 2018 and a $1.20 dividend for 2019 for Mikayla Corporation. For all years after 2019, George forecasts that Mikayla Corporation will pay a $1.30 dividend.
Using the dividend discount valuation model, determine the intrinsic value of Mikayla Corporation, assuming the company’s cost of equity capital is 8%.
Select one:
A. $18.33
B. $15.72
C. $16.25
D. $14.57
Q4)
The following data pertains to Radek Corp., a manufacturer of office supplies. Dollar amounts in thousands.
Total assets
$8,731
Interest-bearing debt
$4,239
Average borrowing rate for debt
10.0%
Common equity:
Book value
$3,130
Market value
$16,284
Marginal income tax rate
35%
Market equity beta
1.33
Assuming that the risk-free rate is 5.3% and the market risk premium is 7.3%, calculate Radek's cost of equity capital, using the capital asset pricing model.
Select one:
A. 14.35%
B. 15.01%
C. 9.71%
D. 7.05%
Q5)
The following data pertains to Radek Corp., a manufacturer of office supplies. Dollar amounts in thousands.
Total assets
$8,731
Interest-bearing debt
$4,239
Average borrowing rate for debt
10.0%
Common equity:
Book value
$3,130
Market value
$16,284
Marginal income tax rate
35%
Market equity beta
1.33
Calculate Radek's cost of debt capital.
Select one:
A. 10.00%
B. 6.50%
C. 3.50%
D. 13.30%
Total assets
$8,731
Interest-bearing debt
$4,239
Average borrowing rate for debt
10.0%
Common equity:
Book value
$3,130
Market value
$16,284
Marginal income tax rate
35%
Market equity beta
1.33
Explanation / Answer
Q2.
Present value = Cost * present value of annuity for 8 years at 6%
Present value = $11,000*6.20979
Present value = $68,308
Answer is D. $68,308
Please note that Only one question can be answered at a time
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