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1) Boles Corporation requires to rise= $500,000 for 1 year to provide capital to new store. Boles purchases from its suppliers on terms of= 3/10, net 90, and it presently pays on Day 10 and takes discounts, but it could forgo discounts, pay on Day 90, and get required $500,000 in form of costly trade credit. On the other hand, Boles could borrow from its bank on 12% discount interest basis. Determine EAR of lower cost source?

2) ABC Company is expected to pay the dividend in year one of $1.65, a dividend in year two of $1.97, and a dividend in year three of $2.54. After year three, dividends are expected to rise at rate of 8% per year. Suitable needed return for stock is 11%. Compute that the stock should be worth today.

Basic Finance, Finance

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