Accounting Chp 12 Hw

Chapter 12 Homework

A) Millage for a $265,000 house in Bedford Township?

Principle Residence 24.2887 / $1,000 = .0242887 * $265,000 = $ 6,436.51

NonHomestead 42.2887 / $1,000 = .0422887 * $265,000 = $11,206.51

Total Millage Industrial Personal (IPP) 18.2887

Total Millage Commercial Personal (CPP) 30.2887

B) 12-2:

a. $ 120.00 = Face Value of $1,000 * 12% Coupon Rate

b. $1,342.38 = $120 * ((1-1/1.08ˆ15)/.08) + $1,000 * (1/1.08ˆ15)

c. $1,345.84 = $60 * ((1-1/1.04ˆ30)/.04) + $1,000 * (1/1.04ˆ30)

12-12:

Rate of return = 17.33% (Cash Dividend of $2/share divided by Common Stock Price $15/share, plus expected growth rate of .04)

12-14:

Value of bond with 12% required rate of return = $891.86 ($1,000 * 9%) * (1-1/(1.12)ˆ5/.12) + $1,000 * (1/1.12ˆ5)

12-25:

a. $19,000,000 ($38,400,000, less Current Liabilities $13,400,000, less Bonds Payable $6,000,000.

b. $38/share ($19,000,000 Net Worth divided 500,000 outstanding shares)

c. $11.22/share ($5,610,000 2012 Net Income divided 500,000 outstanding shares)

d. $67.32 stock price ($11.22 EPS multiplied by 6 Estimated Industry P/E Ratio)

e. Being that the stock price of $67.32 is greater than the book value of $38.00, the firm likely has going-concern value.

f. $60/share ($50,000,000 market value of total assets less $20,000,000 market value of total liabilities divided by 500,000 outstanding shares)

C) My preferred method for valuating a business is the Market Approach. It compares the value of a business to the value of other similar businesses. This method is effective in determining the fair market monetary value.