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Hi John,
Kindly assist please. I am getting it wrong and didn’t know how the answers were arrived at.(1) A company has sales of $200M per annum. Currently customers take on average 40 days to pay. The company is considering offering a discount of 1% for payment within 15 days and expect that 60% of the customers will take advantage of the discount. What is the effective annual cost of offering the discount.
GIVEN ANSWER IS 15.80%(2) Beta is about to pay a dividend of $0.40 per share. Dividends are growing at the rate of 5% p.a. The shareholders required rate of return is 20% p.a. The rate of corporation tax is 25%. What is the current market value per share.
GIVEN ANSWER IS $3.20if you want John Moffat to answer then ask it in ask F9 tutor section anyway
first question , effective annual discount (1+ 1/99.9)^365/25 -1second question Ko= 0.4(1+0.05)/0.2-0.05= $2.8 since beta plc is *about* to pay dividend meaning it did not yet do so ,you need to find cum div price so add 0.4 and you will get $3.2
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