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Category > Accounting Posted 21 Jun 2017 My Price 5.00

In their most recent fiscal year, Microsoft, Inc had net income of $20 million

1) In their most recent fiscal year, Microsoft, Inc had net income of $20 million and total common equity of $200 million. Also, Microsoft pays out 40% of its earnings as dividends. Using the Retention Growth Model, what is the best estimate of Microsoft's expected growth rate? (Please provide work) 2) Apple's balance sheet shows a total of $50 million long term debt with a coupon rate of 8.00% and a yield of 7.00%. The debt currently has a market value of $55 million. The balance sheet also shows the company has $20 million shares of common stock and the book value of the common equity (common stock plus retained earnings) is $65 million. The current stock price is $8.50 per share; stockholders required return, rs, is 15.00% and the firm's tax rate is 35%. Based on market value weighs and assuming the firm is currently at its target capital structure, what WACC should Apple use to evaluate capital budgeting projects?

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Alpha Geek
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Status NEW Posted 21 Jun 2017 05:06 AM My Price 5.00

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file 1498022897-Answer.docx preview (42 words )
A-----------nsw-----------er:----------- -----------Ret-----------urn----------- on----------- Eq-----------uit-----------y =----------- 20-----------/20-----------0 =----------- 10-----------% ----------- Re-----------ten-----------tio-----------n r-----------ate----------- = -----------100-----------%-4-----------0% -----------= 6-----------0% ----------- E-----------xpe-----------cte-----------d G-----------row-----------th -----------rat-----------e =----------- 60-----------%*1-----------0% -----------= 6-----------% ----------- Ma-----------rke-----------t v-----------alu-----------e o-----------f d-----------ebt----------- = -----------55 -----------Mil-----------lio-----------n ----------- Di-----------sco-----------unt----------- ra-----------te -----------of -----------deb-----------t (-----------Kd)----------- = -----------7% ----------- M-----------ark-----------et -----------val-----------ue -----------of -----------Com-----------mon----------- eq-----------uit-----------y =----------- 8 ----------- -----------
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