EBK AUDITING & ASSURANCE SERVICES: A SY
11th Edition
ISBN: 9781260687668
Author: Jr
Publisher: MCGRAW-HILL LEARNING SOLN.(CC)
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Question
Chapter 12, Problem 12.11RQ
To determine
Concept Introduction:An analytical procedure is a part of
To discuss: Two substantive analytical procedures that used to provide audit evidence related to the payroll expenses and payroll-related liability
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Problem Three (15 marks)
You are an analyst in charge of valuing common stocks. You have been asked to value two stocks. The first stock NEWER Inc. just paid a dividend of $6.00. The dividend is expected to increase by 60%, 45%, 30% and 15% per year, respectively, in the next four years. Thereafter, the dividend will increase by 4% per year in perpetuity.
Calculate NEWER’s expected dividend for t = 1, 2, 3, 4 and 5.
The required rate of return for NEWER stock is 14% compounded annually.
What is NEWER’s stock price?
The second stock is OLDER Inc. OLDER Inc. will pay its first dividend of $10.00 three (3) years from today. The dividend will increase by 30% per year for the following four (4) years after its first dividend payment. Thereafter, the dividend will increase by 3% per year in perpetuity.
Calculate OLDER’s expected dividend for t = 1, 2, 3, 4, 5, 6, 7 and 8.
The required rate of return for OLDER stock is 16% compounded annually.
What is OLDER’s stock price?
Now…
You are considering a 10-year, $1,000 par value bond. Its coupon rate is 11%, and interest is paid semiannually.
Bond valuation
Years to maturity
10
Par value of bond
$1,000.00
Coupon rate
11.00%
Frequency interest paid per year
2
Effective annual rate
8.78%
Calculation of periodic rate:
Formulas
Nominal annual rate
#N/A
Periodic rate
#N/A
Calculation of bond price:
Formulas
Number of periods
#N/A
Interest rate per period
0.00%
Coupon payment per period
#N/A
Par value of bond
$1,000.00
Price of bond
#N/A
How much do investor psychology and market sentiment play into stock price movements? Do these emotional reactions having a bigger impact on short-term swings, or do they also shape long-term trends in a meaningful way?
Chapter 12 Solutions
EBK AUDITING & ASSURANCE SERVICES: A SY
Ch. 12 - Prob. 12.1RQCh. 12 - Prob. 12.2RQCh. 12 - Prob. 12.3RQCh. 12 - Prob. 12.4RQCh. 12 - Prob. 12.5RQCh. 12 - Prob. 12.6RQCh. 12 - Prob. 12.7RQCh. 12 - Prob. 12.8RQCh. 12 - Prob. 12.9RQCh. 12 - Prob. 12.10RQ
Ch. 12 - Prob. 12.11RQCh. 12 - Prob. 12.12RQCh. 12 - Prob. 12.13RQCh. 12 - Prob. 12.14MCQCh. 12 - Prob. 12.15MCQCh. 12 - Prob. 12.16MCQCh. 12 - Prob. 12.17MCQCh. 12 - Prob. 12.18MCQCh. 12 - Prob. 12.19MCQCh. 12 - Prob. 12.20MCQCh. 12 - Prob. 12.21MCQCh. 12 - Prob. 12.22MCQCh. 12 - Prob. 12.23MCQCh. 12 - Prob. 12.24PCh. 12 - Prob. 12.26PCh. 12 - Prob. 12.27P
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