The relevant cash flows used to value a share of common stock Introduction: Common stock is a security in which the investor (shareholder) invests their money in the corporation as owner’s equity. The valuation of a share of common stock is very difficult to interpret. It is because; the common stock dividends are not easy to estimate while comparing with the principal payment on a bond of preferred stock and interest. As a result, the companies will pay off their common stock dividends inconsistently and sometimes would not pay dividends to their respective investors at all.

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Question 25 Jasmine bought a house for $225 000. She already knows that for the first $200 000, the land transfer tax will cost $1650. Calculate the total land transfer tax. (2 marks) Land Transfer Tax Table Value of Property Rate On the first $30 000 0% On the next $60 000 0.5% (i.e., $30 001 to $90 000) On the next $60 000 1.0% (i.e., $90 001 to $150 000) On the next $50 000 1.5% (i.e., $150 001 to $200 000) On amounts in excess of $200 000 2.0% 22 5000–200 000. 10 825000 2.5000.00 2 x 25000 =8500 2 ma

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Chapter 8.1, Problem 8.1ACQ

Summary Introduction

To discuss: The relevant cash flows used to value a share of common stock

Introduction:

Common stock is a security in which the investor (shareholder) invests their money in the corporation as owner’s equity. The valuation of a share of common stock is very difficult to interpret. It is because; the common stock dividends are not easy to estimate while comparing with the principal payment on a bond of preferred stock and interest.

As a result, the companies will pay off their common stock dividends inconsistently and sometimes would not pay dividends to their respective investors at all.

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Question 25 Jasmine bought a house for $225 000. She already knows that for the first $200 000, the land transfer tax will cost $1650. Calculate the total land transfer tax. (2 marks) Land Transfer Tax Table Value of Property Rate On the first $30 000 0% On the next $60 000 0.5% (i.e., $30 001 to $90 000) On the next $60 000 1.0% (i.e., $90 001 to $150 000) On the next $50 000 1.5% (i.e., $150 001 to $200 000) On amounts in excess of $200 000 2.0% 22 5000–200 000. 10 825000 2.5000.00 2 x 25000 =8500 2 ma

Question 25 Jasmine bought a house for $225 000. She already knows that for the first $200 000, the land transfer tax will cost $1650. Calculate the total land transfer tax. (2 marks) Land Transfer Tax Table Value of Property Rate On the first $30 000 0% On the next $60 000 0.5% (i.e., $30 001 to $90 000) On the next $60 000 1.0% (i.e., $90 001 to $150 000) On the next $50 000 1.5% (i.e., $150 001 to $200 000) On amounts in excess of $200 000 2.0% 225000–200 000 = 825000 25000.002 × 25000 1= 8500 16 50+ 500 2 marks

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