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12-1. Calculating Cost of Equity
Cost of equity = (Dividends per share) / (Current market value of stock) +Growth rate of dividends
Dividends per share= $1.90
Current market value of stock= $38
Growth rate of dividends= 0.06
Cost of equity = 1.9/38 +0.06
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Corporate Finance : Liquidity Ratio, Collection Period, Inventory Turnover, Leverage Ratios, Du Pont Identity, Payables and Market Value
5 Calculating Leverage Ratios. Myrtle Golf, Inc., has a total debt ratio of 45. What
is its debt-equity ratio? What is its equity multiplier?
6. Calculating Market Value Ratios.
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Calculating ratios: capitalization
of shareholders=3,946 million
Average market price of stock last reported=($13.08+$9.71)/2=$11.395
Now,
Market value of equity=3,964*$11.395=$4,5169
Book value of liability=$174,243
Therefore,
Market value of equity to book value of liability=$4,5169
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Calculation of Market Value and Book Value
Market value assets = $2,600,000 + $6,500,000 = $9,100,000
The attached MS Excel spreadsheet contains detailed illustrations and instructions for calculating the book and market value of assets for Klingon Widgets, Incorporated.
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Weighted Average Cost of Capital
The problem with book-value weights is that the book values are historical, not current, values
The market recalculates the values of each type of capital on a continuous basis.
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Calculate WACC (Weighted average cost of capital) for Company B
I have used the market value of Equity in both Book and Market Value estimates.
1) Removed the current maturity piece
2) Calculated the present value of the debt using the yields and principal values given
3) Added equity to the schedule, including
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Calculations - measuring your firm's cost of capital.
WITH CALCULATING NUMBERS
aggregate value for the firm
Year Forecast cash flows Discount factor 10% Present value of CF
1994 74,000 .90909 67272.66
1995 65.000 .82654 53725.10
1996 56,000 .75131 42073.36
1997 47000 .68301 32101.47
1998 38000 .62092
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1-Calculate the lower bound price of a European put with an
the expiration date at a suitable risk-free rate
p = the current price or market value of the European put
s = the current market value of the underlying stock
formula source: investopedia
1. 40*(1.04^-3/12)-36 = $3.61
2. 2.35+(40*1.032^-3
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Dupont, Liquidity Ratios, Financial Ratios, Leverage Ratios
Second is market price approach.ie., finding the market value of the stock.