Answer:
The correct answer is unwillingness of borrowers to obtain loans from banks to invest in factories or expansion of the firm.
Explanation:
Solution
Given that:
Leakage problem occurs or happens within an economy when the money goes out of the economy, which leads to a loss in the economic value of goods and services, and also leads to loss in profits making.
This would lead to an unwillingness of borrower's to obtain loans from banks in the expansion of the firm or to invest in factories.
Assume Ava Co. has the following purchases of inventory during the first month of operations Number of Units Cost per unit First Purchase 338 2.1 Second Purchase 188 4.1 Assuming Ava Co sells 253 units at $10 each, what is the ending balance in the inventory account if they use LIFO?
Answer:
$573.30
Explanation:
The computation of the ending inventory using the LIFO is shown below:
Given that
First purchase units = 338 units at $2.1
The Second purchased units = 188 units at $4.1
Sells units = 253 units at $10 each
Based on the above information, the ending inventory is
= (First purchased units + second purchased units - sells units) × cost per unit
= (338 units + 188 units - 253 units) × $2.1
= $573.30
All sales are made on credit. Based on past experience, the company estimates 2.5% of ending account receivable to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?
Answer:
Debit Bad Debts Expense $12,475
Credit Allowance for Doubtful Accounts $12,475
Explanation:
Calculation for estimated bad debts expense:
Explanation
Accounts receivable * Sales uncollectible
$445,000×0.025
=11,125
Hence:
11,125 +Allowance for Doubtful Accounts 1,350
=$12,475
Therefore the estimated bad debt will be:
Debit Bad Debts Expense $12,475
Credit Allowance for Doubtful Accounts $12,475
Assuming you are risk neutral, first answer the following two questions about your preferences: Scenario A: You are given $5,000 and offered a choice between receiving an extra $2,500 with certainty or flipping a coin and getting $5,000 if heads or $0 if tails. Which option do you prefer? A. Both options have identical payoffs, so I am indifferent between the two options. B. The possibility of the $5,000 payoff is more valuable to me than the certain $2,500, I choose to flip a coin. C. The certain $2,500 is more valuable than the uncertain $5,000, I would choose the $2,500.
Answer:
B. The possibility of the $5,000 payoff is more valuable to me than the certain $2,500, I choose to flip a coin.
Explanation:
A risk neutral person is a person that is indifferent to risk. She doesn't consider risk when making an investment risk.
Because the possibility of earning $5000 is greater than earning $2500, a risk averse person would choose to toss a coin.
A risk neutral person contrasts with a risk averse person who avoids risk. A risk averse person would choose the $2500 because there's no risk .
I hope my answer helps you
Martinez Company has three cost pools and two doggie products (leashes and collars). The activity cost pool of ordering has the cost driver of purchase orders. The activity cost pool of assembly has a cost driver of parts. The activity cost pool of supervising has the cost driver of labor hours. The accumulated data relative to those cost drivers is as follows: Cost Drivers Total Expected Estimated Leashes Collars Cost Drivers Overhead Purchase Orders 130,000 orders $260,000 70,000 60,000 Parts 800,000 parts 400,000 300,000 500,000 Labor Hours 25,000 hours 300,000 15,000 10,000 $960,000The costs assigned to leashes for supervising are:_______.a. $90.000b. $180.000c. $120.000d. $60.000
Answer:
The cost assigned to leashes for supervising is $180,000
Explanation:
Estimated Overhead Cost Drivers Overhead Rates
$ 260,000.00 130,000 $ 2.00 Per Order
$ 400,000.00 800,000 $ 0.50 per Part
$ 300,000.00 25,000 $ 12.00 Per Hour
Labor hours for the leashes is 15,000 hours
Cost assigned to leashes for supervising = 15,000 x 12 = $180,000
2. Beachcomer, a coin dealer, sues to rescind a purchase by Boskett, who paid $50 for a dime both parties thought was minted in San Francisco. In fact, it was a very valuable dime minted in Denver. Beachcomer asserts a mutual mistake of fact regarding the genuineness of the coin as San Francisco-minted. Boskett contends that the mistake was as to value only. Explain who should win.
Answer and Explanation:
Beachcomer will withdraw its complaint (university of technology Legal Proceedings) to eliminate the deal, as Boskett acknowledges the poor interest. In actuality, Beachcomer claims that there is a consensual error in trying to measure the dime significance. Sue to revoke was the method used mostly by Beachcomer could assert the quality of Dime.As well as, if Beachcomer brings the suit back but rather resolves the deal with each other, all of them seem to be in a win-win situation. When Beachcomer decides to withdraw and Boskett can pay for its true worth, therefore Boskett will win, because the deal has indeed actually occurred.So that the above seems to be the right answer.
Adams Corp., a merchandising company, has 30,000 units in its inventory on December 31. Just before closing for the day, the company ships 2,000 units to a customer. The company also receives a notice from its supplier that an order of 10,000 units has been shipped. The terms for the sale and the purchase were f.o.b. shipping point. How many units of merchandise should be included in Adam's ending inventory
Answer:
28,000 Units
Explanation:
The inventory that we actually have possession or the point at which the risk and reward associated with the inventory are shifted towards the company then it must recognize it. So this means, the inventory that is ordered and yet not received on board and hence must not be included in the inventory.
Closing Inventory = Opening Inventory + Inventory Received - Inventory Despatched
Here
Inventory Received is Zero Units
Inventory Despatched is 2,000 Units
Opening Inventory 30,000 Units
By putting the values, we have:
Closing Inventory = 30,000 Units + 0 Units - 2,000 Units
Closing Inventory = 28,000 Units
At December 31, 2018, you obtained the following data relating to supplies. Unadjusted balance in Supplies on December 31, 2018 $ 1,813 Unadjusted balance in Supplies Expense on December 31, 2018 7,271 Supplies on hand, counted on December 31, 2018 310 What amount should be reported on the 2018 income statement as Supplies Expense?
Answer:
The supplies expense to be reported on Income Statement for 2018 is $8774
Explanation:
To calculate the supplies expense, we first need to adjust the balance in the supplies account by deducting the supplies expense that has not been deducted yet. This can be calculated by taking the difference between the supplies balance in supplies account and the supplies on hand balance at 31 December 2018.
Supplies expense yet to be adjusted = 1813 - 310 = $1503
This expense will be recorded to the supplies account and will increase the balance of supplies expense account to:
Supplies expense adjusted = 7271 + 1503 = $8774
Texas Instruments builds a large plant to produce a great quantity of products, hoping that as prices decline, sales volume increases and thus costs decline. This market-penetration pricing is dependent upon three conditions existing in the marketplace. Which one of the following is NOT one of these conditions?
a. Low price discourages competition from entering the market.
b. Production and distribution costs actually fall with increases in production.
c. Low prices does not increase consumer demand but increases retailer competition.
d. The market is stimulated by lower prices.e. The market is highly price sensitive.
Answer:
c. Low prices does not increase consumer demand but increases retailer competition.
Explanation:
Penetration pricing is a marketing strategy employed for a new product. The price of the new product is initially set relatively low in order to attract customers to the new product.
The goal of penetration pricing is to attract customers through the low prices. If penetration fails to achieve this goal, the firm would most likely incur losses.
Also, if a price war erupts among retailers, it would lead to losses and the goal of penetration pricing would not be achieved.
I hope my answer helps you
For the strategy that Texas Instruments wants to embark on to work, it is not ideal that c. Low prices does not increase consumer demand but increases retailer competition.
For the strategy to work:
More people have to buy the product when the price drops Less competitors should come into the market because they would be worried about low profits Costs reduce with higher productionIf a situation arises where people don't buy regardless of the small prices and more competitors enter thereby reducing market share, Texas Instruments will make a loss.
In conclusion, it is best that there is little competition and increased demand for this strategy to work.
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Salad Express exchanged land it had been holding for future plant expansion for a more suitable parcel of land along distribution routes. Salad Express reported the old land on the previously issued balance sheet at its original cost of $79,000. According to an independent appraisal, the old land currently is worth $150,000. Salad Express paid $23,500 in cash to complete the transaction.
Required
1. What is the fair value of the new parcel of land received by Salad Express?
2. Record the exchange.
Answer:
1. $173,500
2. $ 71,000
Explanation:
Requirement 1: Solution
We can calculate the fair value of new parcel of land just by adding the current market price with additional cash paid to complete the transaction
Fair Value = Current market price + cash paid additionally
Fair Value = $150,000+$23,500
Fair value = $173,500
Requirement 2: Solution
We need to calculate Gain/loss on exchange first in order to record them on books. This can be done by just subtracting the land's book value from the current market price of land
Gain/loss on exchange = Current market price - book value
Gain/loss on exchange = $150,000 - $79,000
Gain/loss on exchange = $71,000
Entries: Debit Credit
New land $173,500
Old land $79000
Cash $23,500
Gain $71,000
Horizontal analysis evaluates a series of financial statement data over a period of time:
A. that has been arranged from the highest number to the lowest number.
B. to determine which items are in error.
C. to determine the amount and/or percentage increase or decrease.
D. that has taken place that has been arranged from the lowest number to the highest number.
Answer:
C. to determine the amount and/or percentage increase or decrease.
Explanation:
Horizontal analysis is a method used in financial statement analysis to compare financial ratios, or line items, over a number of accounting periods.
Financial information can be compared with a benchmark.
By making this comparison, one can determine if financial information been compared have increased or deceased.
I hope my answer helps you
The Porter Beverage Factory owns a building for its operations. Porter uses only half of th ebuilding and is considering two options for the unused space. The Popcorn Store would like to purchase the half of the building that is not being used for $390,000. A 9% commission would have to be paid at the time of purchase. Salty Snacks would like to lease the half of the building for the next 5 years at $103,000 each year. Stewart would have to continue paying $38,600 of property taxes each year and $7,400 of yearly insurance on the property, according to the proposed lease agreement.
Determine the differential income or loss from the lease alternative.
Enter a loss as a negative number.
Answer:
The differential loss from the lease alternative would be -$69,900
Explanation:
In order to calculate the differential income or loss from the lease alternative we would have to make the following calculations:
Alternative I ( Sale) Alternative II ( Lease)
Sale proceeds net of commission $354,900
Total lease rentals $515,000
Property taxes and insurance ($230,000)
Net proceeds $354,900 $285,000
Difference loss from the lease alternative would be - $69,900
The differential loss from the lease alternative would be -$69,900
The Cheyenne Hotel in Big Sky, Montana, has accumulated records of the total electrical costs of the hotel and the number of occupancy-days over the last year. An occupancy-day represents a room rented out for one day. The hotel's business is highly seasonal, with peaks occurring during the ski season and in the summer.
Month Occupancy- Days Electrical Costs
January 3,250 $9,660
February 3,470 $10,185
March 3,660 $10,360
April 1,760 $6,160
May 1,350 $4,725
June 4,350 $11,575
July 3,280 $9,765
August 1,610 $5,635
September 700 $2,450
October 1,300 $4,550
November 1,640 $5,740
December 2,220 $7,770
Required:
1. Using the high-low method, estimate the fixed cost of electricity per month and the variable cost of electricity per occupancy-day.
2. What other factors other than occupacy-days are likely to affect the variation in electrical costs from month to month?
Answer:
1) Variable cost = $2.5
Fixed cost per month = $700
2) Factors like location, weather conditions, nature of clients, number of equipments used are other factors other than occupacy-days that are likely to affect the variation in electrical costs from month to month.
Explanation:
1) Find the fixed cost and variable cost using high-low method.
For the occupancy days electric cost, let's check for the high & low activity level, i.e months with the highest and lowest costs.
High activity level = June 4,350 $11,575
Low activity level = September 700 $2,450
Change = high - low
= 3650 (4350 - 700), $9125 ($11,575 - $2450)
Change = 3650, $9125
It means that Change in cost = $9125
Also, Change in activity = 3650
For variable cost, we'll use the formula:
Variable cost = change in cost / change in activity
= $9125 / 3650
= $2.5
Variable cost = $2.5
For fixed cost:
Fixed cost = Total cost - variable cost element
= 11575 - (2.5 * 4350)
= 11575 - 10875
= $700
Fixed cost per month = $700
2) Factors like location, weather conditions, nature of clients, number of equipments used are other factors other than occupacy-days that are likely to affect the variation in electrical costs from month to month.
Camrim Inc., experienced the following events in 2018, its first year of operation: Performed counseling services for $21,700 on account. On May 1, 2018, paid $5,600 cash to rent office space for the next 12 months.. Adjusted the accounts to reflect the amount of rent used during the year. Based on these three events, net income is
Answer:
Net income is $ 17,966.67
Explanation:
The net income for the year is the revenue for counselling services of $21,700 minus the eight-month rent expense which is from May 2018 to December 2018, even though rent was paid for 12 months, only eight months relate to the current year.
Net income=$21,700-($5,600*8/12)=$21,700-$3,733.33 =$ 17,966.67
The net income after deducting rent expense related to the current year from the counselling revenue is $ 17,966.67
Question I - Debbie Debtor borrowed $1,000.00 from First Big Bank. Debbie Debtor agreed to repay the $1,000.00 over eight months plus interest. Debbie Debtor loses her job and stops making payments to First Big Bank after two months. What is the source of law that governs the subsequent remedies that may be available to First Big Bank? Question II - Eddie Embezzler has worked for Betty Boss for many years as an accountant. During his employment, Eddie has taken thousands of dollars from Betty’s business. As a result, Betty has suffered. Did Eddie violate a criminal law, a civil law, or both? Explain.
Answer:
(1). Check Explanation.
(2). Under both laws.
Explanation:
(1). Many times, things do not go as one wishes as this is the case of Debbie Debtor in the question above. Debbie Debtor is unable to repay her debt and no matter what the First Big Bank must collect their money back. The ways in which First Big Bank will collect their money back is governed by the Fair Debt Collection Practices Act (FDCPA).
The money can be collected ( if the loan is secured) from the the guarantors or if the bank has taken a mortgage on the loan, the property can be collected by the bank.
(II). Eddie violated both the criminal law and the civil law because embezzlement( a statutory offence) is different from theft(so, we can't really say that it is a criminal case or it violates the criminal law).
Embezzlement is about converting another's person properties into your own. The judgement depends on the kind of property or the situation in which the fund or the properties are embezzled.
For a certain good we have LaTeX: q=f\left(p\right)=200e^{-0.4p}q = f ( p ) = 200 e − 0.4 p. a) Find the elasticity of demand at price p = $50. b) At p = $50, is the demand elastic, inelastic, or does it have unit elasticity? Explain what this means for this product. c) Find the elasticity of demand at price p = $20. d) At p = $20, is the demand elastic, inelastic, o
Answer:
a) 20
b) elastic
c) 8
d) elastic
Explanation:
Given that q = f ( p ) = [tex]200e^{-0.4p}[/tex]
[tex]\frac{dq}{dp} = -80e^{-0.4p}[/tex]
a) The elasticity of demand is given as:
Elasticity of demand = [tex]\frac{dq}{dp}*\frac{p}{q}[/tex]
At p =$50, [tex]\frac{dq}{dp} = -80e^{-0.4p}=-80e^{-0.4*50}=-1.65*10^{-7}[/tex]
q = f ( p ) = [tex]200e^{-0.4p}[/tex] = [tex]200e^{-0.4*50}=-4.12*10^{-7}[/tex]
Elasticity of demand = [tex]\frac{dq}{dp}*\frac{p}{q}[/tex] = [tex]-1.65*10^{-7}*\frac{50}{-4.12*10^{-7}}=20[/tex]
b) At p = $50, it is elastic Since Elasticity of demand is greater than 1 it is elastic. That is the price have a big effect on the quantity
c) The elasticity of demand is given as:
Elasticity of demand = [tex]\frac{dq}{dp}*\frac{p}{q}[/tex]
At p =$20, [tex]\frac{dq}{dp} = -80e^{-0.4p}=-80e^{-0.4*20}=-0.027}[/tex]
q = f ( p ) = [tex]200e^{-0.4p}[/tex] = [tex]200e^{-0.4*20}=-0.067[/tex]
Elasticity of demand = [tex]\frac{dq}{dp}*\frac{p}{q}[/tex] = [tex]-0.027*\frac{20}{-0.067}=8.0[/tex]
d) At p = $20, it is elastic Since Elasticity of demand is greater than 1 it is elastic
Caneer Corporation produces and sells a single product. Data concerning that product appear below:
Selling price per unit $ 240.00
Variable expenses per unit $ 81.60
Fixed expense per month $ 997,920
The unit sales to attain the company's monthly target profit of $44,000 is closest to: (Round your intermediate calculations to 2 decimal places.)
a. 12,769
b. 6,578
c. 4,341
d. 7,896
Answer:
Break-even point in units= 6,578 units
Explanation:
Giving the following information:
Selling price per unit $ 240.00
Variable expenses per unit $ 81.60
Fixed expense per month $ 997,920
Desired profit= $44,000
To calculate the number of units to be sold, we need to use the following formula:
Break-even point in units= (fixed costs + desired profit) / contribution margin per unit
Break-even point in units= (997,920 + 44,000) / (240 - 81.6)
Break-even point in units= 6,578 units
Andrew Industries purchased $172,000 of raw materials on account during the month of March. The beginning Raw Materials Inventory balance was $23,400, and the materials used to complete jobs during the month were $147,300 of direct materials and $13,700 of indirect materials. What is the ending Raw Materials Inventory balance for March?
Answer:
ending inventory= $34,400
Explanation:
Giving the following information:
Purchase= $172,000
Beginning Raw Materials= $23,400
Materials used= $147,300 of direct materials and $13,700 of indirect materials. (161,000)
To calculate the raw materials ending inventory, we need to use the following formula:
Direct material used= beginning inventory + purchases - ending inventory
161,000= 23,400 + 172,000 - ending inventory
ending inventory= 23,400 + 172,000 - 161,000
ending inventory= $34,400
On January 1, 2021, White Water issues $600,000 of 7% bonds, due in 10 years, with interest payable semiannually on June 30 and December 31 each year.
Required:
Assuming the market interest rate on the issue date is 7%, the bonds will issue at $600,000. Record the bond issue on January 1, 2021, and the first two semiannual interest payments on June 30, 2021, and December 31, 2021. (If no entry is required for a particular transaction/event, select "No Journal entry required" in the first account field.)
Answer and Explanation:
The Journal entries are shown below:-
1. Cash Dr, $600,000
To Bonds Payable $600,000
(Being Bonds issued is recorded)
Here we debited the cash as increased the assets and we credited the bonds payable as it also increased the liabilities
2. Interest Expense Dr, $21,000 ($600000 × 7% × 6 ÷ 12)
To Cash $21,000
(Being first semi annual interest paid is recorded)
Here we debited the interest expenses as it increased the expenses and we credited the cash as it decreased the assets
3. Interest Expense Dr, $21,000 ($600,000 × 7% × 6 ÷ 12)
To Cash $21,000
(Being second semi annual interest paid is recorded)
Here we debited the interest expenses as it increased the expenses and we credited the cash as it decreased the assets
Here, we are going to prepare the entry for the bond in the question.
Date Accounts title and explanation Debit Credit
01-Jan-21 Cash $600,000
Bonds Payable $600,000
(Bonds issued)
30-Jun-21 Interest Expense $21,000
[600000 x 7% x 6/12]
Cash $21,000
(First semi annual interest paid)
31-Dec-21 Interest Expense $21,000
[600000 x 7% x 6/12]
Cash $21,000
(Second semi annual interest paid)
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Culver Corporation purchased machinery on January 1, 2022, at a cost of $288,000. The estimated useful life of the machinery is 4 years, with an estimated salvage value at the end of that period of $33,800. The company is considering different depreciation methods that could be used for financial reporting purposes.
Required:
Prepare separate depreciation schedules for the machinery using the straight-line method, and the declining-balance method using double the straight-line rate.
Answer:
Instructions are below.
Explanation:
Giving the following information:
Purchasing price= $288,000
Useful life= 4 years
Salvage value= $33,800
First, we will calculate the depreciation expense using the straight-line method:
Annual depreciation= (original cost - salvage value)/estimated life (years)
Annual depreciation= (288,000 - 33,800)/4
Annual depreciation= $63,550
Now, using the double-declining balance:
Annual depreciation= 2*[(book value)/estimated life (years)]
Year 1= 2*63,550= 127,100
Year 2= [(254,200 - 127,100)/4]*2= $63,550
Year 3= [(127,100 - 63,550)/4]*2= $31,775
Year 4= [(63,550 - 31,775)/]*2= $15,887.5
The following data are available relating to the performance of Sooner Stock Fund and the market portfolio: Sooner Market Portfolio Average return 20 % 11 % Standard reviations of returns 44 % 19 % Beta 1.8 1.0 Residual standard deviation 2.0 % 0.0 % The risk-free return during the sample period was 3%. Calculate the Jensen measure of performance evaluation for Sooner Stock Fund. Multiple Choice 4.00% 2.6% 8.67% 31.43% 37.14%
Answer:
The Jensen measure of performance evaluation for Sooner Stock Fund is 2.6%
Explanation:
In order to calculate the the Jensen measure of performance evaluation for Sooner Stock Fund we would have to calculate Jensen's Alpha as follows:
Jensen's Alpha = R(i) - [R(f) + {B x (R(m) - R(f))}]
Jensen's Alpha= 20% - [3% + {1.8 x (11% - 3%)}]
Jensen's Alpha= 20% - [3% + 14.4%] = 20% - 17.4%
Jensen's Alpha= 2.6%
The Jensen measure of performance evaluation for Sooner Stock Fund is 2.6%
Clinton Corporation has two decentralized divisions, Alpha and Beta. Alpha always has purchased certain units from Beta at $95 per unit. Beta plans to raise the price to $133 per unit, the price it receives from outside customers. As a result, Alpha is considering buying these units from outside suppliers for $95 per unit. Beta’s costs follow: Variable costs per unit $ 88 Annual fixed costs $ 140,000 Annual production of these units sold to Alpha 10,000 units Required: a. If Alpha buys from an outside supplier, the facilities that Beta uses to manufacture these units will remain idle. What will be the result if Clinton enforces a transfer price of $133 per unit between Alpha and Beta?
Answer:
a. As a result of this policy the Clinton corporation will loss the contribution margin
Contribution Margin = (Selling price – variable cost) * Number of units
= (95 – 88) * 10,000
= $77,000
b.The cost incurred by Clinton corporation by following this policy is Opportunity cost which is cost of forgone opportunity.
Opportunity cost = (Outside selling price – variable cost ) Number of units
=(133 – 88) * 10,000
= $450,000.
A one-month European call option on Bitcoin is with the strike price of $8,505, $8,705, and $8,905 are trading at $600, $500, and $415, respectively. An investor implements a butterfly spread (i.e., she buys one call with the strike price of $8,505, sells two calls with the strike price of $8,705, and buys one call with the strike price of $8,905. If at the maturity, the Bitcoin price is $8,605, what is the investor's profit
Answer:
The investor profit will be $85
Explanation:
Kindly check attached picture for detailed calculation
A company allocates overhead at a rate of 160% of direct labor cost. Actual overhead cost for the current period is $1,020,000, and direct labor cost is $525,000.
a. Determine whether there is over- or underapplied overhead using the T-account.
b. Prepare the entry to close over- or underapplied overhead to cost of goods sold.
Answer:
(A) $180,000 (B) A journal entry was prepared for over- or under applied overhead to cost of goods sold.
Explanation:
Solution
Now,
Let us recall from the statement from the example as follows:
A company gives an overhead at =1 60% rate
The actual overhead cost for the present period is =1020,000
Direct cost of labor = $525,000
Then,
(a) For the under applied overhead using T account we have the following:
The direct labor cost overhead = 525,000 * 160% (allocated overhead)
=$ 840,000
Thus
The Under applied overhead becomes,
Under applied overhead =The actual overhead - applied overhead
In other words we deduct the actual overhead for applied overhead
=$1020,000 - $840,000 = $180,000
(B) A Journal entry is carried out for the close over or under applied overhead.
Date Particulars Debit Credit
Cost of goods sold A/c $180,000
Manufacturing overheads $180,000
At an activity level of 3,000 units, North Corporation's total variable cost is $15,000 and its total fixed cost is $20,000. For the activity level of 3,500 units, compute the variable cost per unit.
Answer:
$5 per unit.
Explanation:
At an activity level of 3,000 units, we have:
Variable cost per unit = Total variable cost / Units produced = $15,000 / 3,000 = $5
Since the variable cost per unit must be equal at both lowest and highest level of activities, theerefore, the variable cost per unit at 3,500 is also $5 per unit.
The variable cost per unit is $5 per unit.
The calculation is as follows:At an activity level of 3,000 units, we have:
Variable cost per unit = Total variable cost ÷ Units produced
= $15,000 ÷ 3,000
= $5
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Moody Farms just paid a dividend of $3.05 on its stock. The growth rate in dividends is expected to be a constant 5 percent per year indefinitely. Investors require a return of 12 percent for the first three years, a return of 10 percent for the next three years, and a return of 8 percent thereafter. What is the current share price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Answer:
The price of the stock today is $96.06
Explanation:
The price of a stock whose earnings are expected to grow at a constant rate forever can be calculated using the dividend discount model which bases the price of a stock on the present value of the expected future dividends from the stock.
As the required rate of return is changing, we will calculate the price in three stages.
The formula for price today under this model is in the given situation is,
P0 = D1 / (1+r1) + D2 / (1+r1)^2 + D3 / (1+r1)^3 + D4 / (1+r2)^4 + D5 / (1+r2)^5 +
D6 / (1+r2)^6 + [ D7 / (r3 - g) ] / (1+r2)^6
Where,
D1, D2, ... D7 represents the dividend in year 1,2, ... 7 (till Year 7)r represents the required rate of returnr1 is 12%r2 is 10%r3 is 8%So, price of the stock today is,
P0 = 3.05 * (1+0.05) / (1+0.12) + 3.05 * (1+0.05)^2 / (1+0.12)^2 +
3.05 * (1+0.05)^3 / (1+0.12)^3 + 3.05 * (1+0.05)^4 / (1+0.10)^4 +
3.05 * (1+0.05)^5 / (1+0.10)^5 + 3.05 * (1+0.05)^6 / (1+0.10)^6 +
[3.05 * (1+0.05)^7 / (0.08 - 0.05)] / (1+0.10)^6
P0 = $96.06
Shirley Paul's 2-stock portfolio has a total value of $100,000. $37,500 is invested in Stock A with a beta of 0.75 and the remainder is invested in Stock B with a beta of 1.42. What is her portfolio's beta
Answer:
Beta= 1.17
Explanation:
Giving the following information:
Shirley Paul's 2-stock portfolio has a total value of $100,000. $37,500 is invested in Stock A with a beta of 0.75 and the remainder is invested in Stock B with a beta of 1.42.
To calculate the Beta of the portfolio, we need to use the following formula:
Beta= (proportion of investment A*beta A) + (proportion of investment B*beta B)
Beta= (37,500/100,000)*0.75 + (62,500/100,000)*1.42
Beta= 1.17
Esposito, Inc. uses a just-in-time costing system. During the month, Esposito incurred $700,000 as direct labor and $8000 as overhead. Wages were not paid. Which of the following is the correct journal entry to record the conversion costs?A.Conversion Costs 708,000 Wages Payable 708,000B.Manufacturing Overhead 708,000 Conversion Costs 708,000C.Conversion Costs 708,000 Wages Payable, Accumulated Depreciation, etc. 708,000D.Conversion Costs 708,000 Accounts Payable 708,000
Answer:
C.Conversion Costs 708,000 Wages Payable, Accumulated Depreciation, etc. 708,000
Explanation:
The Journal entry is shown below:-
Conversion Costs Dr, 708,000
To Wages Payable, Accumulated Depreciation, etc. $708,000
(Being conversion costs is recorded)
Here to record the conversion costs we simply debited the conversion costs as it increased the expenses and we credited the Wages Payable, Accumulated Depreciation, etc. as it increased the liabilities and decreased the assets
what are the "marketable" characteristics of snails?
ANSWER: The major marketable characteristics of snail is it's nutritional value to our body. And the lesson we learn from them, when we feel depressed and anxious.
EXPLANATION: The snail is a very nutritious meat that contains protein, fat and oil, minerals, and vitamins. It protein content is more higher than that of birds egg. The slime from snail helps to treat dehydration, dry skin, stretch marks, damage tissues in the body, and many more. The snail has much value in markets, as it has become a boast to our daily nutritional content.
Some people buy snail, to help them meditate daily or during depression. This helps them to calm down their emotions as they watch the snail, because snail teaches a lesson of patience (in it's movement) and articulation ( in the fast way it responds by retreating into it's shell, when it sense strange signal).
Grear Tire Company has produced a new tire with an estimated mean lifetime mileage of 36,500 miles. Management also believes that the standard deviation is 5,000 miles and that tire mileage is normally distributed. To promote the new tire, Grear has offered to refund some money if the tire fails to reach 30,000 miles before the tire needs to be replaced. Specifically, for tires with a lifetime below 30,000 miles, Grear will refund a customer $1 per 100 miles short of 30,000.
Required:
a. For each tire sold, what is the expected cost of the promotion?
b. What is the probability that Grear will refund more than $50 for a tire?
Answer:
1. The expected cost of production for each tire sold is $0.013 per tire.
2. Probability that Grear will refund more than $50 for a tire is 0.0107
Explanation;
1. Mileage is 36,500 miles
Standard deviation is 5,000 miles
Observed miles is 30,000 miles
100 miles failed at $1
Therefore;
(36,500 - 30,000) /5,000 = 1.3
To get the cost of production,
Since 100 miles equals $1 if fail
1.3 × 1 / 100
= $0.013 per tire.
2. P(Z<25,000 - 36,500/5,000)
= P(Z<-11,500/5,000)
=Z<2.3
Therefore,
1-0.9893
=0.0107
The probability that Grear will refund more than $50 for a tire is 0.0107
Congratulations! You have just won the State Lottery. The lottery prize was advertised as an annuitized $80 million paid out in 20 equal annual payments beginning immediately. The annual payment is determined by dividing the advertised prize by the number of payments. You now have up to 60 days to determine whether to take the cash prize or the annuity A. If you were to choose the annuitized prize, how much would you receive each year? B. The cash prize is the present valuc of the annuity payments. If the interest rate used to calculate the cash prize is 70%, how much will you receive if you choose the cash prize option? C. Now suppose that, as many lotteries do, the annuitized cash flows will grow by 3% per year to keep up. with inflation, but they still add up to $80 million. If you took the annuitized cash prize instead, how much would you receive (before taxes)?
Answer:
(a) $4,000,000 (b) $45,342,380.97 (c) 2,977,256.60
Explanation:
Solution:
(A) The annual payment is determined by dividing the advertised prize by the number of payments which is stated as follows:
Amount of annuitized prize = $80,000,000/20 = $4,000,000
(B) Since, cash prize is present value of annuity payments discounted at an interest rate of 7%,
Amount of cash prize can be calculated using the formula:
P * [(1-((1+r)^(-n))/r] * (1+r)
= $4000000 * [(1-((1+7%)^(-20))/7%] * (1+7%) = $45,342,380.97
Amount of cash prize = $45,342,380.97
(C) Now, let make an assumption that the amount received at time 0 is x
The Amount received at time 1 = (1+3%) * x = 1.03 x
Amount received at time 2 = (1+3%)2 * x = 1.032 x
So, on till amount received at time 19 = (1+3%)19 * x = 1.0319 x
Then
The Sum of this series can be find using the formula is shown below:
A(1-rn)/(1-r)
A is the first term i.e. A = x
r is the common ration i.e. r = 1.03
n is number of terms i.e. n = 20
Hence, sum of the payments = x * (1-1.0320)/(1-1.03) = 26.8703745*x
Since sum of series of payments is $80,000,000
Therefore, 26.8703745*x = 80,000,000
x = 80,000,000/26.8703745
x = 2,977,256.60
Therefore as a graduated annuity payment, first amount received is $2,977,256.60
