Answer:
b. a gain on redemption.
Explanation:
Given that
The face value of the bond is $10 million
The bond should be redeemed at 101% of par
Also it is issued for a premium and its carrying value is $10,200,000
Since the carrying value is more than the face value that means the income statement represent the gain on redemption of the bonds
Therefore the option b is correct
Dake Corporation's relevant range of activity is 3,200 units to 8,000 units. When it produces and sells 5,600 units, its average costs per unit are as follows:
Average Cost per Unit
Direct materials $ 6.55
Direct labor $ 3.50
Variable manufacturing overhead $ 1.30
Fixed manufacturing overhead $ 3.00
Fixed selling expense $ 0.90
Fixed administrative expense $ 0.60
Sales commissions $ 0.70
Variable administrative expense $ 0.60
If 4,600 units are produced, the total amount of direct manufacturing cost incurred is closest to:____.
A) $63,560.
B) $16,800.
C) $87,640.
D) $80,360.
Answer:
the direct manufacturing cost is $46,230
Explanation:
The computation of the direct manufacturing cost is given below;
= (direct material per unit + direct labor per unit) × number of units produced
= ($6.55 + $3.50) × 4,600 units
= $46,230
hence, the direct manufacturing cost is $46,230
This is the answer but the same is not provided in the given options
The same should be considered
Vera PLC uses exponential smoothing with trend to forecast monthly sales. At the end of September, Small Industries PLC hopes to forecast sales for October. The trend through August has been 500 additional unit sales per month (Tt-1). Average sales have been 1800 units per month (St-1). The demand for September was 1780 units (AL). Vera PLC uses alpha (a) - 0.2 and Beta (B)-0.3. Note: This Forecasting Question relates to Questions 65-67. Following the first stage of the trend-adjusted exponential smoothing method, smooth the level of the series and calculate St for Vera PLC. (retain your answer and calculation for:________
a) 1985
b) 2563
c) 2196
d) 2144
e) 2373
Answer:
Option c (2196) is the right solution.
Explanation:
Given:
[tex]\alpha = 0.2[/tex]
[tex]\beta=0.3[/tex]
[tex]A_t=1780[/tex]
By using the formula, we get
⇒ [tex]S_t=\alpha\times A_t+(1-\alpha)\times (S_{t-1}+T_{t-1})[/tex]
By substituting the values, we get
[tex]=0.2\times 1780 + (1 - 0.2)\times (1800+500)[/tex]
[tex]=356+0.8\times 2300[/tex]
[tex]=356+1840[/tex]
[tex]=2196[/tex]
If the market index subsequently rises by 8% and Ford’s stock price rises by 7%, what is the abnormal change in Ford’s stock price? (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 1 decimal place.)
Answer:
-1.9%.
Explanation:
The computation of the abnormal change in the stock price of ford should be given below:
Given that
The return on the market is 8%.
So, the forecast monthly return for Ford is
= 0.10% + (1.1 × 8%)
= 8.9%.
And, the Ford’s actual return was 7%,
So,
the abnormal return be
= 7% - 8.9%
= -1.9%.
Russell Company has acquired a building with a loan that requires payments of $22,500 every six months for 4 years. The annual interest rate on the loan is 10%. What is the present value of the building? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
Answer:
$145,422
Explanation:
n = 4 * 2 = 8 periods
i = 10% / 2 = 5%
Present value of the building = $22,500 * PVAF(8%, 5%)
Present value of the building = $22,500 * 6.4632
Present value of the building = $145,422
Management uses a voucher system to help control and monitor cash payments. Identify the key documents that are part of a voucher system of control.
a. Invoice
b. Outstanding check
c. Purchase order
d. Voucher
Answer:
a. Invoice
c. Purchase order
d. Voucher
Explanation:
Voucher system can be regareded s method used in authorization of the the disbursement of cash. In this system, A voucher will be filled out, this filled voucher will give amount to
be paid for as well as account number to be charged. After the approval of the voucher , there will be authorization of the disbursement system so that payment can be issued.
It should be noted that the Management uses a voucher system to help control and monitor cash payments. the key documents that are part of a voucher system of control are;
✓Invoice
✓ Purchase order
✓Voucher
Waterway Industries was organized on January 1, 2021. During its first year, the corporation issued 2,400 shares of $50 par value preferred stock and 150,000 shares of $10 par value common stock. At December 31, the company declared the following cash dividends: 2021, $5,800; 2022, $13,100; and 2023, $28,800.
Required:
Show the allocation of dividends to each class of stock, assuming the preferred stock dividend is 5% and noncumulative.
Answer:
Preferred dividend is noncumulative which means that it will not accrue if company was unable to pay in any period.
Dividends in 2021
Preferred dividends:
= Number of preferred shares * par value * dividend percentage
= 2,400 * 50 * 5%
= $6,000
Dividends of $5,800 were declared which is not enough to cover even preferred shares so preferred shares will take all the dividends.
Preferred share dividends = $5,800
Common share dividends = $0
Dividends in 2022:
Preferred dividends = $6,000
Common dividends:
= Declared dividends - Preferred dividends
= 13,100 - 6,000
= $7,100
Dividends in 2023:
Preferred dividends = $6,000
Common dividends:
= Declared dividends - Preferred dividends
= 28,800 - 6,000
= $22,800
Demand for a specific design of dinning sets has been fairly large in the past several years and Statewide Furnishings, Inc. usually orders new dinning sets 10 times a year. It is estimated that the ordering cost is $400 per order. The carrying cost is $50 per unit per year. Furthermore, State Wide Furnishings, Inc. has estimated that the stock out cost is $120 per unit per year. Based on forecast, the annual demand is 600 units. State Wide Furnishings, Inc. has 350 working days in a year and its lead time is 14 working days.
Assume shortage is allowed and the store manager is sure that shortages will not become lost sales, determine the annual ordering cost.
a. 592.82
b. 1472.01
c. 2051.28
d. 4116.11
e. None of the above
Answer:
e. None of the above
Explanation:
Annual demand, D = 600 units
Ordering cost, S = $400
Holding cost, H = $50
Economic order quantity without stock-out = SQRT(2*D*S/H)
Economic order quantity without stock-out = SQRT(2*600*400/50)
Economic order quantity without stock-out = 98
Total annual ordering cost = (D/Q)*S + (Q/2)*H
Total annual ordering cost = (600/98)*$400 + (98/2)*$50
Total annual ordering cost = $2,448.97 + $2,450
Total annual ordering cost = $4,898.97
To assign overhead costs to each product, the company:_____.
a. multiplies the activity-based overhead rates per cost driver by the number of cost drivers expected to be used per product.
b. assigns the cost of each activity cost pool in total to one product line.
c. multiplies the overhead rate by the number of direct labor hours used on each product.
d. multiplies the rate of cost drivers per estimated cost for the cost pool by the estimated cost for each cost pool.
Answer:
a. multiplies the activity-based overhead rates per cost driver by the number of cost drivers expected to be used per product.
Explanation:
Costing is the measurement of the cost of production of goods and services by assessing the fixed costs and variable costs associated with each step of production.
Generally, an activity-based costing uses multiple cost pools such as manufacturing cost or customer services and multiple cost drivers such as direct labor hours worked, number of changes used in engineering department, etc.
Cost pool is simply the amount of money spent by a firm on a particular activity.
Hence, to assign overhead costs to each product, the company multiplies the activity-based overhead rates per cost driver by the number of cost drivers expected to be used per product.
In activity-based costing, the activity rate for an activity cost pool is calculated by using the following formula;
Activity rate = total overhead cost/activity for the activity cost pool.
Suppose a stock had an initial price of $72 per share, paid a dividend of $2.60 per share during the year, and had an ending share price of $59. Compute the percentage total return. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) What was the dividend yield and the capital gains yield
Answer:
a. −14.44%
b.Dividend yield 3.61%
Capital gains yield −18.06%
Explanation:
a.Computation for the percentage total return
R = ($59 - 72 + 2.60) / $72
R = −.1444*100
R= −14.44%
Therefore the percentage total return is −14.44%
b. Calculation to determine the dividend yield and the capital gains yield
Dividend yield = $2.60 / $72
Dividend yield = .0361*100
Dividend yield =3.61%
Capital gains yield = ($59 - 72) / $72
Capital gains yield = −.1806*100
Capital gains yield =−18.06%
Therefore the dividend yield and the capital gains yield are :
Dividend yield 3.61%
Capital gains yield −18.06%
ctivity-Based Costing (ABC) is useful in: Select one: A. Breakdown COGS into DL, DM, and FOH B. Breaking down FOH more accurately into cost drivers C. Breaking down FOH into one overhead rate D. Breaking down DL and DM by product
Answer:
B. Breaking down FOH more accurately into cost drivers
Explanation:
In the case of activity based costing, the activity of the fixed cost should be breakdown based on the number of activity pools while the fixed cost should be breakdown as per the cost drivers. Also, there is more than one overhead rate existed. In addition to this, it is the method for distribution of the overhead with those firms who is able to used it
Therefore the option b is correct
A call option on Barry Enterprises stock has a market price of $12. The stock sells for $23 a share, and the option has an exercise price of $17.50. What is the exercise value of the option
Answer:
the exercise value of the option is $5.50
Explanation:
The computation of the exercise value of the option is given below:
= Sale value of the stock - exercise price of the option
= $23 - $17.50
= $5.50
Hence, the exercise value of the option is $5.50
Simply we deduct the exercise price of the option from the sale value of the option
And, the same should be considered
The following standards for variable manufacturing overhead have been established for a company that makes only one product: The following data pertain to operations for the last month: What was the variable overhead efficiency/quantity variance for the month? Group of answer choices
Answer:
$17,871 U
Explanation:
Note The missing word have been attached as picture below
Variable overhead efficiency variance = (Standard hour - Actual hour) * Standard rate
Variable overhead efficiency variance = (1,480 hours - 2,775 hours) * $13.80
Variable overhead efficiency variance = 1,295 hours * $13.80
Variable overhead efficiency variance = $17,871 U
Jefferson uses the percent of sales method of estimating uncollectible receivables. Based on past history, 2% of credit sales are expected to be uncollectible. Sales for the current year are $5,550,000. Which of the following is correct?
a. Allowance for Doubtful Accounts will be credited.
b. Cash will be debited.
c. Accounts Receivable will be debited.
d. Bad Debt Expense will be credited.
Answer:
a. Allowance for Doubtful Accounts will be credited.
Explanation:
Since 2% of credit sales are expected to be UNCOLLECTIBLE in which the Sales amount for the current year are $5,550,000 which therefore means that $111,000 calculated as (.02 x $5,550,000) will be Allowance for Doubtful Accounts amount that will be credited.
Therefore ALLOWANCE FOR DOUBTFUL ACCOUNTS can be defined as the amount that tend to reduce Accout Receivable amount shown on a company or organization balance sheet.
Our home construction company still buys nails in 15-pound boxes but now we use an average of 3495 boxes a year. Preparing an order and receiving a shipment of nails involves a cost of $1.45 per order. Annual carrying costs are $0.7 per bag. What will be their total cost of ordering and carrying the nails
Answer:
Home Construction Company
Their total cost of ordering and carrying the nails is:
= $2,488.55.
Explanation:
a) Data and Calculations:
Cost of ordering and receiving a shipment of nails = $1.45 per order
Annual carrying costs per bag = $0.7
Annual average boxes = 3,495
EOQ = square root of (2 * 3,495 * $1.45)/$0.7
= square root of 120
Number of orders = 29 (3,495/120)
Ordering costs = $42.05 ($1.45 * 29)
Carrying costs = $2,446.50 ($0.7 * 3,495)
Total cost of ordering and carrying the nails = $2,488.55 ($42.05 + $2,446.50)
You plan to purchase a $100,000 house using a 30-year mortgage obtained from your local credit union. The mortgage rate offered to you is 7.25 percent. You will make a down payment of 20 percent of the purchase price. Calculate your monthly payments on this mortgage.
Answer:
$545.74
Explanation:
The actual mortgage is the purchase price minus the down payment, based on the mortgage amount, the monthly payment can be determined using a financial calculator as shown below:
N=360(number of monthly payments in 30 years=30*12=360)
I/Y=7.25/12(monthly interest rate without the "%" sign)
PV=-80000($100,000-20%*$100,000=$80000)
FV=0(after all required payments , the balance of the mortgage balance would be zero)
CPT
PMT=$545.74
A person can choose to work any amount from 0 to 52 weeks per year at a wage of $1000 per week.The government implements a welfare program in which the welfare system pays $5000 per year to people with no labor market earnings, but benefits are reduced by $0.50 for each $1 in labor market earnings that a person receives.
a. True
b. False
Answer:
False
Explanation:
Altoon Manufacturing's records were partially destroyed in a flood. The company does not know what sales have been for the year, but it does know all sales were on account. Also, the beginning accounts receivable balance was $19,000, and its accounts receivable balance at the time of the flood was $25,000. From the beginning of the year until the flood, cash collections from credit customers were $158,000. Given this information, what are Altoon Manufacturing's sales for the year until the flood?
a. $164,000
b. $114,000
c. $202,000
d. $209,000
e. $189,000
Answer:
a. $164,000
Explanation:
The computation of the Altoon Manufacturing's sales for the year until the flood is given below:
= Cash collections + ending receivables - opening receivables
= $158,000 + $25,000 - $19,000
= $164,000
hence, the Altoon Manufacturing's sales for the year until the flood is $164,000
Therefore the first option is correct
The four main tools of monetary policy are Group of answer choices changes in government expenditures, the reserve ratio, the federal funds rate, and the discount rate tax-rate changes, changes in government expenditures, open-market operations, and interest on excess reserves the discount rate, the reserve ratio, interest on excess reserves, and open-market operations. tax-rate changes, the discount rate, open-market operations, and the federal funds rate
Answer:
the discount rate, the reserve ratio, interest on excess reserves, and open-market operations
Explanation:
Central banks applied the monetary policy in order to manage the money supply for the economy of the country. In this the central bank increase or decrease the value of the currency and the credit made in circulation by keeping an effort on an inflation, growth & employment
The four main tools with respective to the monetary policy are represented above
Gomez argues that we need to increase the nation's output. Chang contends that our top priority should be a more equal distribution of income and output. It can be correctly stated that these two goals are:
A. essentially unrelated.
B. complementary because the realization of one will promote fulfillment of the other.
C. at least partially competing because the redistribution of income might impair incentives to work and produce.
D. complementary because a more equal distribution of income always promotes economic growth.
Answer:
I can't understand the question
The following information is available for Lock-Tite Company, which produces special-order security products and uses a job order costing system. April 30 May 31 Inventories Raw materials $ 33,000 $ 32,000 Work in process 9,400 20,800 Finished goods 50,000 34,600 Activities and information for May Raw materials purchases (paid with cash) 171,000 Factory payroll (paid with cash) 250,000 Factory overhead Indirect materials 12,000 Indirect labor 57,500 Other overhead costs 110,000 Sales (received in cash) 1,700,000 Predetermined overhead rate based on direct labor cost 55 % Exercise 19-7 Cost flows in a job order costing system LO P1, P2, P3, P4 Compute the following amounts for the month of May using T-accounts. Cost of direct materials used. Cost of direct labor used. Cost of goods manufactured. Cost of goods sold\.\* Gross profit. Overapplied or underapplied overhead. *Do not consider any underapplied or overapplied overhead.
Answer:
Lock-Tite Company
Cost of direct materials used = $160,000
Cost of direct labor used = $192,500 ($250,000 - $57,500)
Cost of goods manufactured = $446,975
Cost of goods sold = $462,375
* Gross profit = $1,237,625
Overapplied or underapplied overhead = $73,625
*Do not consider any underapplied or overapplied overhead.
Explanation:
a) Data and Calculations:
Inventories April 30 May 31
Raw materials $ 33,000 $ 32,000
Work in process 9,400 20,800
Finished goods 50,000 34,600
Activities and information for May:
Raw materials purchases (paid with cash) 171,000
Factory payroll (paid with cash) 250,000
Factory overhead:
Indirect materials 12,000
Indirect labor 57,500
Other overhead costs 110,000
Sales (received in cash) 1,700,000
Predetermined overhead rate based on direct labor cost 55 %
T-accounts:
Raw materials
Date Account Titles Debit Credit
April 30 Inventory balance $ 33,000
May Cash 171,000
May Factory overhead $12,000
May Work in process 160,000
May 31 Inventory balance $ 32,000
Work in process
Date Account Titles Debit Credit
April 30 Inventory balance $ 9,400
May Raw materials 160,000
Factory payroll 192,500
Factory overhead 105,875
Finished goods $446,975
May 31 Inventory balance $ 20,800
Finished goods
Date Account Titles Debit Credit
April 30 Inventory balance $ 50,000
May Work in process 446,975
May Cost of goods sold $462,375
May 31 Inventory balance $ 34,600
Factory overhead
Date Account Titles Debit Credit
May Raw materials 12,000
Payroll 57,500
Other expenses 110,000
May Work in process $105,875
May Underapplied overhead 73,625
Sales revenue = $1,700,000
Cost of goods sold (462,375)
Gross profit $1,237,625
Inacio Corporation uses the weighted-average method in its process costing system. Data concerning the first processing department for the most recent month are listed below: Beginning work in process inventory: Units in beginning work in process inventory 2,300 Materials costs $ 14,400 Conversion costs $ 6,500 Percent complete with respect to materials 75% Percent complete with respect to conversion 20% Units started into production during the month 11,000 Units transferred to the next department during the month 9,900 Materials costs added during the month $ 173,500 Conversion costs added during the month $ 243,500 Ending work in process inventory: Units in ending work in process inventory 3,400 Percent complete with respect to materials 90% Percent complete with respect to conversion 30% The cost per equivalent unit for materials for the month in the first processing department is closest to: Multiple Choice $12.21 $13.15 $11.90 $14.50
Answer:
Inacio Corporation
The cost per equivalent unit for materials for the month in the first processing department is closest to:
= $14.50
Explanation:
a) Data and Calculations:
Units Materials Conversion
Beginning work in process 2,300 $14,400 $6,500
Percentage of completion 75% 20%
Units started during the month 11,000
Total units available 13,300
Units transferred to the next 9,900 100% 100%
Ending work in process 3,400 90% 30%
Costs added during the month $173,500 $243,500
Equivalent units of production:
Units Materials Conversion
Units transferred to the next 9,900 9,900 (100%) 9,900 (100%)
Ending work in process 3,400 3,060 (90%) 1,020 (30%)
Equivalent units of production 12,960 10,920
Costs of production: Materials Conversion
Beginning work in process $14,400 $6,500
Costs added during the month 173,500 243,500
Total costs of production $187,900 $250,000
Cost per equivalent unit: Materials Conversion
Total costs of production $187,900 $250,000
Equivalent units of production 12,960 10,920
Cost per equivalent unit $14.50 $22.89
As long as a market is contestable, then even if it has only a few sellers, the Group of answer choices threat of new entrants will prevent the prices from rising above the competitive level. producers will be able to charge prices that are high enough to produce long-run economic profits. producers will not face new competition because the barriers to entry are high. market will never be expected to come close to the competitive result.
Answer: threat of new entrants will prevent the prices from rising above the competitive level.
Explanation:
A contestable market has competition such that sellers cannot unilaterally decide to sell at a certain price. They have to sell at a competitive price that is set by the market to ensure that goods are allocated efficiently.
If the prices attempt to rise above this competitive level, new sellers will enter the market so as to make a profit which would have the effect of driving the price back down to where it was and even lower if even more sellers come in. The price is therefore maintained to ensure that this does not happen.
An investment advisor has a client base composed of high net worth individuals. In her personal portfolio, the advisor has an investment in Torex, a company that has developed software to speed up internet browsing. She has thoroughly researched Torex and believes the company is financially strong yet currently significantly undervalued. According to the GARP Code of Conduct, the investment advisor may:
Answer: c. recommend Torex, but she must disclose her investment in Torex to the client.
Explanation:
The investment advisor is allowed to recommend Torex to her clients as she believes that it is financially sound and undervalued which means that there is a chance for her clients to earn a good enough return.
She must however disclose to them that she has an investment in the company so that they can decide on their own if this may have biased her decision towards the company as a viable investment option.
As CFO, one of your responsibilities is to maximize the profits obtained from your organization. How can the strategy review, evaluation and control practices used within your organization be used to assure this outcome
Answer:
The chief financial officer of an organization has the main objectives of maximizing the profits obtained from the organization. This is a task of great responsibility, and one that requires the joint efforts of the entire organizational system.
It is therefore necessary that there is constant management of the strategy, including review, evaluation and control, to monitor how the planned short and long-term action plans are being effective to achieve the financial objectives of a company.
A CFO's functions are to achieve total quality, through the improvement of organizational processes in the micro and macro environment of the company, aligning the company's strategy to achieve better results. Some essential actions of a CFO are to increase sales, reduce operating costs, achieve economies of scale, improve marketing, etc.
he manufacturing overhead budget at Franklyn Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 3,600 direct labor-hours will be required in January. The variable overhead rate is $4 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $43,200 per month, which includes depreciation of $3,560. All other fixed manufacturing overhead costs represent current cash flows. The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be: Multiple Choice $54,040 $39,640 $14,400 $57,600
Answer:
$54,040
Explanation:
Calculation to determine what The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:
Using this formula
Cash disbursements for manufacturing overhead= Variable + Fixed
Let plug in the formula
Cash disbursements for manufacturing overhead= (3600*4) + (43,200 - 3,560)
Cash disbursements for manufacturing overhead= $14,400 + $39,640
Cash disbursements for manufacturing overhead= $54,040
Therefore The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:$54,040
The ROI on sustainability efforts can be difficult to quantify because a. the payback period is on the same time frame. b. the payback period is on a different time frame. c. benefits from such projects are tangible. d. an excess of necessary data for accurate calculation is readily available.
Answer:
B)the payback period is on a different time frame.
Explanation:
Return on sustainability investment can be regarded as performance measure that is been utilized in evaluation of the gains which is produced due to result of corporate sustainability initiatives as regards amount of money that is invested in those initiatives.
Sustainable return on investment can be regarded as methodology used in identification as well as quantifying of environmental and societal, impacts of investment as regards a projects and initiatives.
It should be noted that The ROI on sustainability efforts can be difficult to quantify because the payback period is on a different time frame.
As the operations manager, you prefer to keep a constant workforce and production level, absorbing variations in demand through inventory excesses and shortages. Demand not met is carried over to the following month. Assuming you currently have 23 workers, what is the shortage cost for May
Answer:
Shortage cost for May is $71,000
Explanation:
The expected demand for the month of May is 5000 units.
Shortages for month are carried to next month.
Shortage cost is $10 per month.
(Working days per month x hrs/day x # of workers)
20 days * 8 hours * 23 workers = 3680
Jan : 3680 - 3500 = +180
Feb : 3680 + 180 - 4500 = -640
Mar : 3680 - 640 -6000 = -2980
Apr : 3680 - 2980 -6500 = 5780
May : 3680 - 5780 -5000 = 7100
The following data relate to the direct materials cost for the production of 2,200 automobile tires:
Actual: 55,500 lbs. at $1.7 per lb.
Standard: 56,600 lbs. at $1.65 per lb.
Required:
Determine the direct materials price variance, direct materials quantity variance, and total direct materials cost variance.
Answer and Explanation:
The computation is given below:
Direct Material price variance is
= ($1.70 per lb - $1.65 per lb) × 55,500 lbs.
= $2,775 Unfavorable
Direct Material quantity variance is
= (55,500 lbs. - 56,600 lbs.) × $1.65 per lb
= $-1,815 Favorable
Total Direct Materials Cost Varianceis
= Actual Materials Cost - Standard Materials Cost
= (55,500 lbs. × $1.70 per lb) - (56,600 lbs. × $1.65 per lb)
= $94,350 - $93,390
= $960 Unfavorable
If contribution margin is $220000, sales is $400000, and net income is $180000, then variable and fixed expenses are:________
Answer:
Total variable cost= $180,000
Fixed costs= $40,000
Explanation:
Giving the following information:
Contribution margin= $220,000
Sales= $400,000
Net income= $180,000
The contribution margin formula is as follow:
Total Contribution margin= sales - total variable cost
Therefore, we need to isolate the total variable cost and replace the variable with the data:
Total variable cost= sales - total contribution margin
Total variable cost= 400,000 - 220,000
Total variable cost= $180,000
Finally, the fixed costs:
Fixed costs= total contribution margin - net income
Fixed costs= 220,000 - 180,000
Fixed costs= $40,000
World-Tour Co. has just now paid a dividend of $2.83 per share (Div0); its dividends are expected to grow at a constant rate of 6 percent per year forever. If the required rate of return on the stock is 16 percent, what is the current value of the stock, after paying the dividend
Answer:
the current value of the stock is $30
Explanation:
The computation of the current value of the stock is given below:
Price of stock today is
= Dividend per share × (1 + growth rate) ÷ (required rate of return - growth rate)
= $2.83 × (1 + 0.06) ÷ (0.16 - 0.06)
= $2.9998 ÷ 0.10
= $29.9980
= $30
Hence, the current value of the stock is $30
