Answer:
4.62%
Explanation:
price of a share of preferred stock can be gotten by the ratio of dividend and required return. But some preferred stock do have their dividend fixed with zero growth rate.
Preferred stock=Dividend/required return(R )
Making R subject of the formula
required return(R )= Dividend/Preferred stock
$3.75 dividend/$81 per share
R= 0.0462
R= 4.62%
Hence, the required return is 4.62%
A firm has a capital structure with $100 million in equity and $100 million of debt. The cost of equity capital is 15% and the pretax cost of debt is 7%. If the marginal tax rate of the firm is 25%, compute the weighted average cost of capital of the firm. Group of answer choices
Answer:
The weighted average cost of capital of the firm is 10.125%
Explanation:
The computation of the weighted average cost of capital is shown below:
= Cost of equity × weight of equity + cost of debt × (1 - tax rate) × weight of debt
= 15% × $100 ÷ ($100 + $100) + 7% × (1 - 0.25) × $100 ÷ ($100 + $100)
= 15% × 0.5 + 7% × 0.75 × 0.5
= 7.5% + 2.625%
= 10.125%
Hence, the weighted average cost of capital of the firm is 10.125%
We simply applied the above formula
Recently the governor of Massachusetts proposed that cigarette taxes in Massachusetts should be increased substantially, from 55 cents a pack to 76 cents a pack. He estimates that Massachusetts can raise $40 million in revenue from this tax hike. He also pointed out that the neighboring state of Connecticut was considering an increase in cigarette taxes. How can it be that an increase in cigarette taxes will increase tax revenue, because, after all, a higher tax will increase cigarette prices and thereby decrease the quantity demanded
Answer:
When a price increase does not result in proportionally lower quantity demanded it means that the price elasticity of demand is inelastic or ≤ |1| in absolute terms.
Nicotine is a drug, and drugs are addictive. That means that cigarette users are probably addicted to nicotine, and any increase in price will not affect the quantity sold, or its effect will be very low.
The most common example of inelastic goods are gasoline, electricity, and other utilities which have very low price elasticities. A price increase barely affects the quantity demanded.
An individual wants to retire in 15 years when he turns 65. He wants to have enough money to maintain his current income, which is $55,000 per year. It is assumed that a 6% annual investment rate of return and a 4% inflation rate per year. He expects that he will live to be 90 years old. He expects his raises to equal the inflation rate, approximately how much does he need at retirement to fulfill his retirement goals
Answer:
Value at retirement= $1,187,719.21
Explanation:
If his salary increases at the same rate as inflation, the purchasing power remains constant. The growth rate and inflation rate should not be taken into account. They are irrelevant.
First, we need to calculate the value of the account at the time of retirement. To do this, we determine the future value, then the present value.
FV= {A*[(1+i)^n-1]}/i
A= annual payment
FV= {55,000*[(1.06^35) - 1]} / 0.06
FV= $6,128,912.90
PV= FV/(1+i)^n
PV= 6,128,912.90 / (1.06^35)
PV= $1,187,719.21
Why is it important to fact-check the information we read online?
Answer:
Because we can't really sure about the credibility of the information.
Explanation:
In online news era, everyone can write 'news' with some basic knowledge in blogging and search engine optimization. As long as they can bring their piece up high in search engine results, many people will believe that the news is coming from someone with credibility's.
This is why, it is extremely important for us to fact-check every information we read online.
One way to do it is by checking the news from different news-source. If there vast majority of credible news-sources confirm the content of the news, than we can be sure that the news is factual.
Factors that contributed to the current level of the earnings gap in the U.S. labor market between black and white workers include:
Answer:
the options are missing:
A. the combination of changes in law and changes in social attitudes B. changes in production techniques made white workers unproductive C. a large decline in the average education levels for white workers D. a vast increase in the number of well-educated black workersThe answer is:
A. the combination of changes in law and changes in social attitudes
Around the mid 1900s, the earning gap between white males and black males fell, specially in the 1960s and 1970s, but since the 1980s it has remained stable. The Civil Rights Act of 1964 prohibited discrimination at work and a series of other regulations helped to narrow the earnings gap. The same applies to other minorities.
Sadly though, the earnings gap has remained stable for the last 40 years, and that hurts most minorities and women also. The earnings gap between women and men has decreased more since the 1980s, but in most industries women are still behind men even those who belong to minority groups.
Currently the earnings gap between white and black males is 26.5% on average, but on certain industries it is over 34%. Personally, I think that this is a type of hidden discrimination, because there is no reason why an employee should earn more or less based solely on his/her race, gender or culture.
Rusty Co. sells two products, X and Y. Last year, Rusty sold 5,000 units of X and 35,000 units of Y. Related data are as follows: Unit Selling Unit Variable Unit Contribution Product Price Cost Margin X $110 $70 $40 Y 70 50 20 Assuming that last year's fixed costs totaled $675,000, what was Rusty Co.'s break-even point in units
Answer:
Break-even point (units)= 30,000
Explanation:
Giving the following information:
Contribution Product:
Product X= $40
Product Y= $20
First, we need to calculate the sales proportion:
Product X= 5,000/40,000= 0.125
Product Y= 35,000/40,000= 0.875
To calculate the break-even point in units, we need to use the following formula:
Break-even point (units)= Total fixed costs / Weighted average contribution margin
Break-even point (units)= 675,000 / (0.125*40 + 0.875*20)
Break-even point (units)= 30,000
Bob bought some land costing $15,690. Today, that same land is valued at $45,417. How long has Bob owned this land if the price of land has been increasing at 5 percent per year
Answer:
t = 21.78436854 rounded off to 21.78 years
Explanation:
We are given the future value and the present value of land. To calculate the number of years of ownership of the land whose price has been increasing at 5% per year, we can use either use the formula for Future Value or Present value.
Here we are solving it using the future value formula which is,
FV = PV * (1 + r)^t
Where,
FV is Future Value
PV is Present value
r is the annual rate of increase
t is time period in years
Plugging in the values for FV, PV and r, we can calculate the value of t,
45417 = 15690 * (1 + 0.05)^t
45417 / 15690 = (1+0.05)^t
2.894646272 = (1.05)^t
Taking log on both sides.
Ln(2.894646272) / Ln(1.05) = t
t = 21.78436854 rounded off to 21.78 years
Amara believes that her manager violated the terms of the negotiated labor-management agreement when he required her to report to work on a holiday. She has discussed her concerns with her shop steward and he agrees with her. It is likely the steward will encourage Amara to:_____.
a) start looking for another job in a right-to-work state.b) contact the local chapter of the ACLU.c) send a letter of protest to the president of the union.d) pursue a grievance over the interpretation of the labor contract.
Answer: d.) pursue a grievance over the interpretation of the labor contract.
Explanation:
The labor contract is a contact that states the working conditions and benefits that an employee is expected to get while working for a particular company and it should be noted that this contract is enforceable by law.
Normally, employees shouldn't come to their workplace on holidays. Therefore, based on the scenario in the question, the steward will encourage Amara to pursue a grievance over the interpretation of the labor contract.
Placing an ad around your neighborhood offering to pay $150 to anyone who finds your missing Yorkipoo is an example of _________.
Answer: unilateral contract
Explanation:
Unilateral contract is an agreement whereby an economic entity which could be a individual, firm or the government agrees and promises to pay a certain amount of money once an act has been done.
In this case, the person offers to pay $150 to anyone who finds the missing Yorkipoo. This is a unilateral contract.
When sales units go up by 25% (assuming the unit selling price and unit variable expense are constant): A. Variable expenses go up by 25%. B. Net income will go up by 25%. C. Fixed expenses will go up by 75%. D. Contribution margin will go up by 75%.
Answer: A. Variable expenses go up by 25%.
Explanation:
Total variable expenses are calculated on the basis of the entire units to be sold which means that if sales units were to increase by 25%, the total variable expenses will increase by 25% as well.
For instance, If selling price per unit is $4 and variables, $3 and the number of units to be sold is 20, sales will be $80 and variable costs will be $60.
Assuming units went up by 25% to 25 units, variable costs would be; $75 which is an increase of;
= (75 - 60) / 60
= 25%
You wear either shorts or sweatpants every day. You notice that shorts have gone on sale, so your demand for:________
a. sweatpants will increase.
b. sweatpants will decrease.
c. shorts will increase.
d. shorts will decrease.
Answer:
D. shorts will decrease.
Explanation:
You wear either shorts or sweatpants every day. You notice that shorts have gone on sale, so your demand for:________
d. shorts will decrease.
An investor who writes standard call options against stock held in his or her portfolio is said to be selling what type of options? A. Put B. Out-of-the-money C. Covered D. In-the-money E. Naked
Answer:
C. Covered
Explanation:
The covered call is the financial market transaction where the seller of the call options owned the respective amount for the instrument i.e. underlying i.e. shares, other types of securities
Therefore in the given case the option C is relevant and the same is to be considered
hence, all the other options are incorrect
What is the present value of a perpetuity that pays annual, end-of-year payments of $1,000 every year? Use a nominal rate of 8.00%.
Answer:
The present value of the perpetuity is $12,500.
Explanation:
A perpetuity can be described as periodic payments that receivable indefinitely or forever.
The formula for calculating the the present value of a perpetuity is as follows:
PV of perpetuity = C / i .......................... (1)
PV of perpetuity = Present value of perpetuity = ?
C = Cash flow or annual payments = $1,000
i = Nominal rate = 8.00%, or 0.08
Substituting the values into equation (1), we have:
PV of perpetuity = $1,000 / 0.08
PV of perpetuity = $12,500
Therefore, the present value of the perpetuity is $12,500.
The Roscoe Company's March 31 bank statement balance was $79,500. As of March 31, outstanding checks total $25,800 and deposits in transit total $16,900. Assuming there are no other reconciling items, what was the March 31 cash balance on Roscoe's books?
a. $70,600
b. $79,500
c. $122,200
d. $88,400
Answer:
a. $70,600
Explanation:
Calculation for the cash balance on Roscoe's books
Using this formula
Cash balance = Bank balance - Outstanding checks + Deposits in transit
Let plug in the formula
Cash balance = $79,500 -$25,800 + $16,900
Cash balance= $70,600
Therefore the cash balance on Roscoe's books will be $70,600
Juanita Domingo's parents want to establish a college trust for her. They want to make 16 quarterly withdrawals of $2000, with the first withdrawal 3 months from now. If money is worth 7.5%, compounded quarterly, how much must be deposited now to provide for this trust
Answer:
Initial investment= 26,921.47
Explanation:
Giving the following information:
Withdrawls= 16 of $2,000
Interest rate= 0.075/4= 0.01875
To calculate the initial investment, first, we need to calculate the future value of the investment:
FV= {A*[(1+i)^n-1]}/i
A= quarterly payment
FV= {2,000*[(1.01875^16) - 1]} / 0.01875
FV= $36,918.86
Now, the present value:
PV= FV/(1+i)^n
PV= 36,918.86/1.01875^17
PV= $26,921.47
Initial investment= 26,921.47
Campbell County uses the consumption method to record all inventories and prepayments. The County has a 9/30 fiscal year-end. On April 1, 2018, the County purchased a two-year insurance policy at a total cost of $400,000, paying for the policy out of the General Fund. In the fund financial statements, the amount of insurance expenditures for the fiscal year ended 9/30/18 would be
Answer:
the amount is $100,000
Explanation:
The computation of the amount of the insurance expenditure for the fiscal year is shown below:
= Total cost of two year insurance policy × given percentage
= $400,000 × 6 ÷ 24
= $100,000
The six months are calculated from April 1 to Sep 30
The same is to be considered
hence, the amount is $100,000
By making many burgers before customers ask for them, a fast-food restaurant is sacrificing the dimension of ______ and improving the dimension of ______ in the customers' utility function.
a. fit, timing
b. fit, price
c. fit, timing
d. timing, fit
Answer:
a. fit, timing
Explanation:
A utility function can be defined as a measure of the benefits or satisfaction derived by the consumer of finished goods such as snacks, perfume, shoes, clothes, electronic gadgets etc.
Basically, a customer’s utility function typically refers to the welfare, enjoyment, benefit, usefulness or satisfaction a particular customer derives from a product or goods.
The dimension of timing and fit plays a very significant role in the process of adding value, benefits or satisfaction to a customer's experience.
By making many burgers before customers ask for them, a fast-food restaurant is sacrificing the dimension of fit and improving the dimension of timing in the customers' utility function.
Calculate the following if this country buys rice from other countries at the world price of $5 4. Quantity produced domestically
Answer:
If the country buys rice form another country at a price of $5 then its local market will be affected.
Explanation:
The countries import goods from other countries which are scarce in their local market. If the rice is imported from other country then its local rice market will be ruined. The local rice producers will be demotivated as their sales will decline. The local rice producers will have impact on their production and the prices of imported rice will be high.
Why does Larry Kurlander say U.S. firms are at a disadvantage versus European firms in the international competition for government contracts and concessions
Answer:
This question refers to a litigation between Newmont (US firm) and BRGM (a French firm). They disputed rights over a gold mine in Peru, the largest in the world at that time (mid 1990s). Both sides accused each other of bribing Peruvian officials and judges. Finally, the French company won and everyone assumed that they had paid a higher bribe.
Since bribing by US firms is illegal due to the Foreign Corrupt Practices Act, Newmont has repeatedly denied bribing anyone and so has the other party. But in reality no one believes them since Mr. Kurlander was taped when he was negotiating with former Peru's former chief of intelligence Vladimiro Montesinos who is now in prison for committing every single crime that you can imagine.
When interviewed by the New York Times, Kurlander stated that European corporations were not forbidden by law to bribe, so American companies were at a disadvantage. I'm not sure, but I believe that this has changed since the 1990s.
Dream Threads Company sells hand-sewn shirts for $40 each and has a contribution margin ratio of 50%. It incurs $7,000 per month of fixed costs. What is its monthly breakeven point in shirts
Answer:
350 shirts
Explanation:
Break even point = Fixed costs / Contribution margin
Given that;
Fixed costs = $7,000
Contribution margin = 50%
Break even point = $7,000 / 50%
= $14,000
Therefore, to determine the Break even point in shirts, you'll divide $14,000 by the sales price per unit
BEP = $14,000 / $40
BEP = 350 shirts
Hence, monthly break even point in shirt is 350 shirts
Assume that Shavonne's marginal tax rate is 37 percent and her tax rate on dividends is 20 percent. If a corporate bond pays 8.8 percent interest, what dividend yield would a dividend-paying stock (with no growth potential) have to offer for Shavonne to be indifferent between the two investments from a cash-flow perspective?
Answer:
Interests received from corporate bonds is taxed as ordinary income = 8.8% x (1 - 37%) = 5.544% after tax yield
Non-qualified dividends are also taxed as ordinary income, therefore, the after tax yield of a non-qualified dividend that yields 8.8% = 5.544%
Qualified dividend pay a lower tax rate, since they are taxed as long term capital gains. If the after tax yield will be the same, then:
5.544% = dividend yield x (1 - 20%)
5.544% / 0.8 = dividend yield
6.93% = dividend yield
Like all entrepreneurs, Jennifer Hyman and Jennifer Fleiss recognized an opportunity they could exploit through technology, but they needed resources, such as capital and knowledge, to enter the market. How did they acquire these resources?
Answer: By securing funding from investors and hiring people with complementary skills
Explanation:
Entrepreneurs can acquire capital from other people who will then become investors and and give them funding. With this funding they will initiate the business they had in mind and provide returns for the investors.
Entrepreneurs do not always have to have all the skills required to run their business because they can simply employ people who do. These people with complimentary skills will ensure that the company has the knowledge required to do well.
A monopolist:_____
a. can raise its price without losing any sales because it is the only supplier in the market.
b. can earn a greater than normal rate of return in the long run.
c. always charges a price that is higher than marginal revenue.
d. both a and b e. both b and c
Answer:
d. both a and b
Explanation:
A monopolist is a producer that is the only supplier of a certain commodity in a market. Thus because of little or no competitors, he has the control of the supply and price of his commodity so as to increase his earnings at the expense of consumers. Thus a monopolist has the capacity to increase the price and still have an increase in demand for his goods.
You want to have $60,000 in your savings account 12 years from now, and you’re prepared to make equal annual deposits into the account at the end of each year. If the account pays 6.4 percent interest, what amount must you deposit each year?
Answer:
$3,474.39
Explanation:
The amount that you need to deposit each year (PMT) is calculated as follows:
FV = $60,000
N = 12
P/yr = 1
i = 6.4 %
PV = $0
PMT = ?
Using a Financial Calculator to input the values as shown, the deposit each year would be $3,474.39
Firm X is considering the replacement of an old machine with one that has a purchase price of $90,000. The current market value of the old machine is $24,000 but the book value is $34,000. The firm's combined tax rate is 26%. What is the net cash outflow for the new machine after considering the sale of the old machine
Answer:
Net cash outflow for new machine = $63,400
Explanation:
The computation of the net cash outflow for the new machine is shown below:
Sale proceeds from old machine = $24,000
Add Tax Savings occured from loss on sale ($34,000 - $24,000) × 0.26 = $2,600
Net benefit arise from the sale of old machine = $26,600
Less:
Cost of new machine = $90,000
So,
Net cash outflow for new machine = $63,400
Which term describes the process that firms use to study and understand the many different layers and aspects of their competitive environment?
Answer:
Strategic analysis.
Explanation:
Strategic analysis is a term which describes the process that firms use to study and understand the many different layers and aspects of their competitive environment.
Basically, strategic analysis is a technique used for analyzing the critical external contingencies facing an organization in terms of economic conditions, competitors, and customers. It is a management strategy that focuses on systematically acquiring informations about occasions, trends, events or patterns through surveys and analysis of these information in an organisation's external and internal environment. The informations acquired through strategic analysis is then used by the executive management in strategically planning the organisation's future and exploitation of available opportunities for the success of the organization.
The internal information offers an organization strength and weakness while the external information provides information about opportunities and threats.
The tools used in strategic analysis includes SWOT analysis, Porter's five forces of competition, value-chain model etc.
Which of the following is not part of M1? A. Time deposits. B. Transaction accounts C. Traveler's checks. D. Checking accounts.
Answer:
A
Explanation:
M1 is a measure of money supply. it is the most liquid component of money supply. It includes currency, coins, travellers check and checking accounts
Time deposit is a part of M3
When computing economic growth, changes in nominal gross domestic product (GDP) must be adjusted to reflect population growth because:
Answer:
if real GDP remains the same, an increase in the population actually means a lower average standard of living
Explanation:
Economic Growth is a increase in productive capabilities of an economy over a given period of time, usually a year. the economy is able to satisfy more of it's consumers wants and need.
GDP is said to be is total value of all finale goods and services produced within an economy in a given period of time, usually a year.nominal or price GDP is a GDP with no adjustment for price.
Sqeekers Co. issued 11-year bonds a year ago at a coupon rate of 7.7 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 6 percent, what is the current bond price
Answer:
yo boy hacer tú chica aneudy Tati el memolandio.
Grant Film Productions wishes to expand and has borrowed $100,000. As a condition for making this loan, the bank requires that the business maintain a current ratio of at least 1.50. Business has been good but not great. Expansion costs have brought the current ratio down to 1.40 on December 15. Rita Grant, the owner of the business, is considering what might happen if she reports a current ratio of 1.40 to the bank. One course of action for Grant is to record in December $10,000 of revenue that the business will earn in January of next year. The contract for this job has been signed. Requirements Journalize the revenue transaction, and indicate how recording this revenue in December would affect the current ratio. Discuss whether it is ethical to record the revenue transaction in December. Identify the accounting principle relevant to this situation, and give the reasons underlying your conclusion.
Answer:
The journal entry to record this "earned revenue" is:
Dr Accounts receivable 10,000
Cr Service revenue 10,000
This will increase current assets, which in turn will increase the company's current ratio.
This is not ethical and goes against the accrual principal, conservatism principle and revenue recognition principle.
The accrual principle states that transactions should be recorded when thy actually occur. Conservatism principle states that costs must be recorded as soon as a company can quantify and identify them, but revenues should only be recorded when the earning process takes place. The revenue recognition principle states that revenues must be only recorded when the earning process is complete or has been substantially completed.
