Market Value Added is the difference between the capital contributed to the company by bondholders and shareholders and the final market value of the product. The formula used to find market value added is: Market Value Added = Market Value - Capital Invested if bondholders and shareholders have contributed $1,000,000 to form Company SASA and during its existence since inception and it is currently listed on the stock exchange with a stock market value of $2,000,000, calculate MVA value? What does the result of your calculations tell you about the performance of company SASA? WHY MVA MATTERS? If a stock is expected to pay a dividend of $40 for the current year, what is the approximate present value of this stock, given at discount rate of 5% and a dividend growth rate of 3%? For the following supply and demand curves, calculate equilibrium price and quantity QD = 500 - P; QS = 50 + P please explain part two in details

Market Value Added is the difference between the capital contributed to the company by bondholders and shareholders and the final market value of the product. The formula used to find market value added is: Market Value Added = Market Value - Capital Invested if bondholders and shareholders have contributed $1,000,000 to form Company SASA and during its existence since inception and it is currently listed on the stock exchange with a stock market value of $2,000,000, calculate MVA value? What does the result of your calculations tell you about the performance of company SASA? WHY MVA MATTERS? If a stock is expected to pay a dividend of $40 for the current year, what is the approximate present value of this stock, given at discount rate of 5% and a dividend growth rate of 3%? For the following supply and demand curves, calculate equilibrium price and quantity QD = 500 - P; QS = 50 + P please explain part two in details

Century 21 Accounting Multicolumn Journal

11th Edition

ISBN:9781337679503

Author:Gilbertson

Publisher:Gilbertson

Chapter17: Financial Statement Analysis

Section: Chapter Questions

Problem 4AP

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As a first step, we need to estimate what percentage of MMMs capital comes from debt, preferred stock, and common equity. This information can be found on the firms latest annual balance sheet. (As of year end 2014, MMM had no preferred stock.) Total debt includes all interest-bearing debt and is the sum of short-term debt and long-term debt. a. Recall that the weights used in the WACC are based on the companys target capital structure. If we assume that the company wants to maintain the same mix of capital that it currently has on its balance sheet, what weights should you use to estimate the WACC for MMM? b. Find MMMs market capitalization, which is the market value of its common equity. Using the sum of its short-term debt and long-term debt from the balance sheet (we assume that the market value of its debt equals its book value) and its market capitalization, recalculate the firms debt and common equity weights to be used in the WACC equation. These weights are approximations of market-value weights. Be sure not to include accruals in the debt calculation.
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When treasury stock is purchased for cash at more than its par value, what is the effect on total shareholders equity under each of the following methods?
The total amount of cash and other assets received by a corporation from the stockholders in exchange for the shares is ________. A. always equal to par value B. referred to as retained earnings C. always below its stated value D. referred to as paid-in capital
Webster Company has compiled the information shown in the following table: Source of Capital Book Value Market Value After-Tax Cost Long-Term Debt $4,000,000 $4,200,000 8% Preferred Stock $40,000 $56,000 13% Common Stock Equity $1,060,000 $4,282,000 18% Totals $5,100,000 $8,538,000 A. Calculate the weighted average cost of capital using book value weights. _____%?B. Caclulate the weighted average cost of capital using market value weights. _____%?C. Compare the answers obtained in parts a and b. Explain the differences.
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