1)A firm has total assets of $13,200, fixed assets of $8,500, current liabilitie
ID: 2632146 • Letter: 1
Question
1)A firm has total assets of $13,200, fixed assets of $8,500, current liabilities of
$2,700, and long-term liabilities of $5,200. What is the total debt ratio? 2)You want to receive $5,000 per month in retirement. If you can earn 0.75% per
month and you expect to need the income for 25 years, how much do you need
to have in your account at retirement? 3)What is the value of a stock that is expected to pay a constant dividend of $5 per
year if the required return is 10%? 4)Based on the information from question 3 what the value of the stock if the
company starts increasing dividends by 5% per year, beginning with the next
dividend?
Explanation / Answer
1)
total debt = total debt/ total assets
= 2700+ 5200 / 13200
= 59.85%
2)
PV = 5000 * [1-(1+0.0075)^-300]/0.0075
= 595808.11
3)
value of stock = 5/0.1 = 50
4)
value of stock = 5 * 1.05/10%-5% = 105
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