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Finance & Accounting
Pages 6 (1506 words)
Task 1: Assessing loan options for AirJet Best Parts, Inc. 1. Prime rate is 3.25% Bank APR No. of times compounded National First 3.25%+6.75%=10% Semiannually Regions Best 13.17% Monthly For National Bank the effective annual rate would be: For Regions Best, the effective annual rate would be: 2.
The interest payments would be lower with National First. Hence, the loan should be taken from them. 3. The interest payment that AirJet Best Parts Inc. has to make is: Yes, I agree with the decision as the effective annual interest rate is lower than National First. The interest payment till the end of the term would be lower in comparison to the deal offered by National First. Task 2: Evaluating Competitor’s Stock 1. Rate of return is calculated for Raytheon Boeing and dividend stated is annualized. Price of Raytheon Boeing’s share is $65.38 and Dividend annualized is $1.68 which is given out quarterly as $0.42/share. 2. g=1% r=7.7% D=$1.5 3. Common stock will have a higher price than preferred stock because preferred stock pays a fixed dividend and tend to fluctuate in price far less than common shares. This means that preferred stock is comparatively less risky than common share therefore; the return offered on it will automatically be lower as compared to common shares. Common stock on the other hand, is entitled to high variance in price which means that it carries higher risk than preferred shares. Therefore, a common stock holder will demand a higher return to accept the given risk in the stock. Another reason of higher price for a common stock is the dividend growth. ...
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