If the price exceeds the average variable cost but is less than the average total cost, a firm Group of answer choices should further differentiate its product. is making some profit but less than maximum profit. should stay in business for a while longer until its fixed costs expire. should shut down
Answer:
should stay in business for a while longer until its fixed costs expire.
Explanation:
price exceeds the average variable cost, the firm should continue to operate in the short run
If price is less than the average total cost in the long run, the firm should exit in the long run
To meet projected annual sales, Bluegill Manufacturers, Inc. needs to produce 75,000 machines for the year. The estimated January 1 inventory is 7,000 units, and the desired December 31 inventory is 12,000 units. What are projected sales units for the year? fill in the blank 1 units
Answer: 70,000 units
Explanation:
You can use the formula for the ending inventory to get this:
Ending inventory = Opening inventory + Production for the year - Projected sales
12,000 = 7,000 + 75,000 - Projected sales
12,000 + Projected sales = 82,000
Projected sales = 82,000 - 12,000
Projected sales = 70,000 units
Outstanding Stock Lars Corporation shows the following information in the stockholders' equity section of its balance sheet: The par value of common stock is $5, and the total balance in the Common Stock account is $225,000. There are 13,000 shares of treasury stock. Required: What is the number of shares outstanding? fill in the blank 1 shares
Answer:
32,000 shares
Explanation:
Note that the value of the treasury stock is usually deducted from the total stockholders' equity which means that in a bid to ascertain the number of shares outstanding we need to deduct the number of shares held in treasury stock.
The number of shares without treasury stock=common stock account balance/par value per share
The number of shares without treasury stock=$225,000/$5
The number of shares without treasury stock=45,000 shares
The number of shares considering treasury stock=45,000-13,000
The number of shares considering treasury stock=32,000
Interim financial statements: Multiple Choice Are required by the Congress. Are necessary to achieve full disclosure about a business's operations. Are statements prepared for periods of less than one year. Require the use of the perpetual method for inventories. Cannot be prepared if the company follows the conservatism principle.
Answer:
Are statements prepared for periods of less than one year.
Explanation:
Interim Financial Statements
This is simply known as a financial statements prepared for a timeframe (period) that is part of the entity's annual fiscal period. discontinued operations and extraordinary items that occur at midyear initially are often reported in net income and open up in the notes to interim financial statements.The fundamental principle guarding interim reporting is that
interim reports must be considered as a part of the integral of the annual reporting period.
An interim statement as a financial report timeframe is often less than one year. It often shows an organisation's performance before the end of normal full-year financial reporting cycles and often, this statements do not need to be audited.
Estimated inventory (units), March 1 17,000 Desired inventory (units), March 31 19,700 Expected sales volume (units): Area M 6,500 Area L 8,900 Area O 7,800 Unit sales price $15 The number of units expected to be manufactured in March is a.23,200 b.59,900 c.25,900 d.42,900
Answer:
c.25,900
Explanation:
The computation of the no of units expected to be manufactured is given below:
No of units manufactured is
= No. of units sold + Closing units - Opening units
= (6,500 + 8,900 + 7,800) + 19,700 - 17,000
= 25,900
Hence, the no of units expected to be manufactured is 25,900
Therefore the option c is correct
Flagstaff Company has budgeted production units of 8,000 for July and 8,200 for August. The direct materials requirement per unit is 3 ounces (oz.). The company has determined that it wants to have safety stock of direct materials on hand at the end of each month to complete 25% of the units budgeted in the following month. There was 6,000 ounces of direct material in inventory at the start of July. The total cost of direct materials purchases for the July direct materials budget, assuming the materials cost $1.20 per ounce, is:____________
A) $28,800.
B) $28,980.
C) $21,600.
D) $28,620.
E) $36,180.
Answer:B) $28,980.
Explanation:
Beginning inventory is 6,000 ounces
Closing inventory = 8,200 × 3 ounces × 25% = 6,150ounces
Budgeted production = 8,000 × 3 ounces=24,000
Direct material to be purchased = Closing inventory + Budgeted production - Beginning inventory= 29,400 ounces
Direct material to be purchased = 6,150ounces +24,000- 6,000 ounces
= 24,150 ounces
Now,For $1.20 per pounce, it would be
= 24,150 ounces × $1.20
= $28,980.
Blue Spruce University sells 4,500 season basketball tickets at $140 each for its 12-game home schedule. Give the entry to record (a) the sale of the season tickets and (b) the revenue recognized after playing the first home game.
Answer:
a. Total revenue received:
= 4,500 * 140
= $630,000
Date Account Title Debit Credit
XX-XX-XXXX Cash $630,000
Unearned revenue $630,000
Revenue is unearned because the games have not been played yet therefore Blue Spruce University has not provided the service for which it was paid and has not earned the revenue.
b. The revenue per game is:
= 630,000 / 12 games
= $52,500
Date Account Title Debit Credit
XX-XX-XXXX Unearned Revenue $52,500
Revenue - Ticket Sales $52,500
The following information pertains to Nova Co.'s cost-volume-profit relationships:
Breakeven point in units sold ………………………….. 2,000
Variable expenses per unit ……………………………… 500
Total fixed expenses …………………………………… $150,000
How much will be contributed to net operating income by the 2,001st unit sold?
A. $ 65
B. $ 75
C. $150
D. $ 0
Answer: $150
Explanation:
Breakeven point in units sold = 2,000
Variable expenses per unit = 500
Total fixed expenses = $150,000
The break even in units is calculated as:
= Fixed Cost / Contribution per Unit
Therefore,
1000 = 150000/ Contribution per unit
Contribution per Unit will now be:
= 150000 / 1000
= 150
It should be noted that after the break even point, every unit sold will lead to an increase in the contribution per unit to the net operating income. Therefore, the amount that'll be contributed to net operating income by the 2,001st unit sold is $150.
Budgeted Actual Overhead cost $909,000 $884,000 Machine hours 55,000 46,000 Direct labor hours 101,000 98,000 Overhead is applied on the basis of direct labor hours. (a) Compute the predetermined overhead rate. (Round answer to 2 decimal places, e.g. 12.25.)
Answer:
Missing word "(b) Determine the amount of overhead applied for the year?"
1. Predetermined overhead rate = Budgeted overhead / Budgeted direct labor hours
Predetermined overhead rate = $909,000 / 101,000
Predetermined overhead rate = $9 per DLH
2. Overhead applied = Actual hours * Overhead rate
Overhead applied = 98,000 * $9 per DLH
Overhead applied = $882,000
State for each account whether it is likely to have (a) debit entries only, (b) credit entries only, or (c) both debit and credit entries when recording business transactions during the month. Also, indicate the normal balance of each account. 1. Fees Earned , normal balance 2. Utilities Expense , normal balance 3. Accounts Payable , normal balance 4. Supplies , normal balance 5. Cash , normal balance 6. Accounts Receivable , normal balance
Answer:
No. Account Type Likely account entries
1. Fees Earned , normal balance is credit (b) Credit entries only
2. Utilities Expense , normal balance is debit (a) Debit entries only
3. Accounts Payable , normal balance is credit (c) both debit and credit entries
4. Supplies , normal balance is debit (c) both debit and credit entries
5. Cash , normal balance is debit (c) both debit and credit entries
6. Accounts Receivable , normal balance is debit (c) both debit and credit entries
Explanation:
Accounts that normally have debit entries include assets (both long-term and current), expenses, and losses. Accounts that normally have credit entries are liabilities, equity, revenue, income or gains. Most accounts have debit and credit entries before their normal balances are indicated. The accounts with debit entries are mainly expenses and losses, while revenues and income have mainly credit entries.
In the short run, open-market purchases a. increase investment and real GDP, and decrease interest rates. b. increase real GDP and interest rates, and decrease investment. c. increase investment and interest rates, and decrease real GDP. d. decrease investment, interest rates, and real GDP.
Answer: a. increase investment and real GDP, and decrease interest rates.
Explanation:
During an Open Market Purchase, the central bank of the country would be buying back securities from the public which means that it would be infusing money into the economic system.
With an increased amount of money in the economy, people will be able to save more which means that interests rate will drop because there are now more loanable funds. This drop in interest rates will encourage more companies and people to borrow cash for investment which will then lead to a higher GDP.
In the short run, in the open-market purchase, there has been an increase in investment and real GDP and decreased interest rates. Thus option A is correct.
The interest rate has been the amount of interest lent onto the principal sum. The GDP has been the gross domestic product that has been the market value of the final products.
In the open-market purchase, there has been an increase in the amount of money in the market. The government has been buying the securities and results in the market flow of money. The market flow will eventually result in an increase in the GDP with the decreased interest rates.
Thus in the short run, in the open-market purchase, there has been an increase in investment and real GDP and decreased interest rates. Thus option A is correct.
For more information about the open market purchase, refer to the link:
https://brainly.com/question/3437168
An owner lists her home at a 7% commission rate and wants to net $45,000 after paying the mortgage balance of $68,000 and the broker's commission. To the nearest dollar, what should the selling price be to net her $45,000
Answer: $121505
Explanation:
Let the selling price be represented by x.
Then the broker's commission will be:
= 7% of x = 0.07 × x = 0.07x
Based on the information given,
Selling price - (Mortgage balance + Broker's commission) = $45000
Therefore, x - ($68000 + 0.07x) = $45000
x - $68000 - 0.07x = $45000
x - 0.07x = $45000 + $68000
0.93x = $113000
x = $113000/0.93
x = $121505
Therefore, the selling price is $121505
The total manufacturing cost variance is a.the difference between total actual costs and total standard costs for the units produced b.the difference between planned costs and standard costs for the units produced c.the flexible budget variance plus the time variance d.none of the above
Answer:
a.the difference between total actual costs and total standard costs for the units produced
Explanation:
The total manufacturing cost variance shows the difference between the total actual cost i.e. incurred and the standard cost incurred for the units that are produced or generated
In mathematically, it should be
Total manufacturing cost variance = standard cost - actual cost
hence, the first option is correct
During Year 1, Hardy Merchandising Company purchased $20,000 of inventory on account. Hardy sold inventory on account that cost $15,000 for $22,500. Cash payments on accounts payable were $12,500. There was $20,000 cash collected from accounts receivable. Hardy also paid $4,000 cash for operating expenses. Assume that Hardy started the accounting period with $18,000 in both cash and common stock.
Required:
a. Record the events in a horizontal statement model.
b. What is the balance of accounts recelvable at the end of 2018?
c. What is the balance of accounts payable at the end of 2018?
d. What are the amounts of gross margin and net income for 2018?
Answer:
[b] = $ 2500
[c] = $ 7500
[d] = Gross margin = 22500 – 15000 = $ 7500
Net Income = 7500 – 4000 = $ 3500
[e] = $ 3500
Explanation:
Here the solution is given as follows,
Dennis Rodman has a $5,000 debt balance on his Visa card that charges 10. 7 percent compounded monthly. Dennis's current minimum monthly payment is 5 perent of his debt balance, which is $250.
How many months (round up) will it take Dennis to pay off his credit card if he pays the current minimum payment of $250 at the end of each month?
How many months will it take Dennis to pay off his credit card?
Answer: 22.13 months
Explanation:
The number of months that it will take Dennis to pay off his credit card will be calculated thus:
Balance amount = $5000
Monthly payment = $250
Interest rate = 10.7%/12 = 0.89%
The number of months will be:
= NPER(0.89, -250, 5000, 0).
= 22.13 months
An approach to managing inventories and production operations such that units of materials and products are obtained and provided only as they are needed is called: Customer orientation. Continuous improvement. Total quality management. Just-in-time manufacturing. Theory of constraints.
Answer:
Just-in-time manufacturing
Explanation:
just-in-time manufacturing can be regarded as Lean manufacturing
a production method that helps in
reduction of times within the production system and reduction in
response times from suppliers as well to to customers. It should be noted that the approach to managing inventories and production operations such that units of materials and products are obtained and provided only as they are needed is called Just-in-time manufacturing.
MC Qu. 138 Fortune Company's direct materials... Fortune Company's direct materials budget shows the following cost of materials to be purchased for the coming three months:JanuaryFebruaryMarch Material purchases$ 13,18015,29012,110 Payments for purchases are expected to be made 50% in the month of purchase and 50% in the month following purchase. The December Accounts Payable balance is $7,900. The expected January 31 Accounts Payable balance is:
Answer:
The answer is "$6,590".
Explanation:
If 50% of the purchase amount would be paid in the next month, the account payable in January will thus amount to 50% of the item purchased in January. In January, all accounts payable at the start of Dec will therefore not be added to the trade payables for January.
[tex]=\$ 13,180 \times 50\%\\\\=\$ 13,180 \times \frac{50}{100}\\\\=\frac{\$ 659000}{100}\\\\=\$ 6,590\\\\[/tex]
Dehner Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on direct labor-hours. The company based its predetermined overhead rate for the current year on the following data:
Total direct labor-hours 85,000
Total fixed manufacturing overhead cost $306,000
Variable manufacturing overhead per direct
labor-hour $ .00
Recently, Job P951 was completed with the following characteristics:
Number of units in the job $5
Total direct labor-hours $100
Direct materials $700
Direct labor cost $8,500
The total job cost for Job P951 is closest to:_____.
a. $9.200.
b. $1,660.
c. $9,460.
d. $10,160.
Answer:
Total cost= $10,160
Explanation:
First, we need to calculate the predetermined overhead rate:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate= (306,000/85,000) + 6
Predetermined manufacturing overhead rate= $9.6
Now, we can allocate overhead to Job P951, and calculate the total cost:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH= 9.6*100
Allocated MOH=$960
Total cost= 700 + 8,500 + 960
Total cost= $10,160
Dickinson Company has $11,880,000 million in assets. Currently half of these assets are financed with long-term debt at 9.4 percent and half with common stock having a par value of $8. Ms. Smith, Vice-President of Finance, wishes to analyze two refinancing plans, one with more debt (D) and one with more equity (E). The company earns a return on assets before interest and taxes of 9.4 percent. The tax rate is 40 percent. Tax loss carryover provisions apply, so negative tax amounts are permissable.
Under Plan D, a $2,970,000 million long-term bond would be sold at an interest rate of 11.4 percent and 371,250 shares of stock would be purchased in the market at $8 per share and retired.
Under Plan E, 371,250 shares of stock would be sold at $8 per share and the $2,970,000 in proceedswould be used to reduce long-term debt.
a. How would each of these plans affect earnings per share? Consider the current plan and the two new plans. (Round your answers to 2 decimal places.)
Current Plan Plan D Plan E
Earnings per share $ $ $
b-1. Compute the earnings per share if return on assets fell to 4.70 percent. (Leave no cells blank - be certain to enter "0" wherever required. Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.)
Current Plan Plan D Plan E
Earnings per share $ $ $
b-2. Which plan would be most favorable if return on assets fell to 4.70 percent? Consider the current plan and the two new plans.
Current Plan
Plan E
Plan D
b-3. Compute the earnings per share if return on assets increased to 14.4 percent. (Round your answers to 2 decimal places.)
Current Plan Plan D Plan E
Earnings per share $ $ $
b-4. Which plan would be most favorable if return on assets increased to 14.4 percent? Consider the current plan and the two new plans.
Current Plan
Plan E
Plan D
c-1. If the market price for common stock rose to $12 before the restructuring, compute the earnings per share. Continue to assume that $2,970,000 million in debt will be used to retire stock in Plan D and $2,970,000 million of new equity will be sold to retire debt in Plan E. Also assume that return on assets is 9.4 percent. (Round your answers to 2 decimal places.)
Current Plan Plan D Plan E
Earnings per share $ $ $
c-2. If the market price for common stock rose to $12 before the restructuring, which plan would then be most attractive?
Current Plan
Plan D
Plan E
Answer:
Dickinson Company
a) Effect of each plan on earnings per share:
Current Plan Plan D Plan E
Earnings per share $0.45 $0.36 $0.45
b-1) Earnings per share $0 $0 $0.14
b-2. Plan E would be most favorable if return on assets fell to 4.70%.
b-3 Earnings per share $0.93 $0.70 $0.76
b-4 Current Plan would be most favorable if return on assets increased to 14.4%.
c-1 Earnings per share $0.45 $0.36 $0.45
c-2 If the market price for common stock rose to $12 before the restructuring, Plan E would then be most attractive to the company as it would get additional paid-in capital of $1,485,000 ($4 * 371,250).
Explanation:
a) Data and Calculations:
Return on assets before interest and taxes = 9.4%
Tax rate = 40%
Current Plan Plan D Plan E
Assets $11,880,000 $11,880,000 $11,800,000
Long-term debt 5,940,000 5,940,000 2,970,000
New debt 2,970,000
Total debt 8,910,000
Common stock 5,940,000 5,940,000 8,910,000
Less repurchased shares (2,970,000)
New common stock 2,970,000
Interest rate of old debt 9.4% 9.4% 9.4%
Interest rate for new debt 11.4%
Stock par value $8 $8 $8
Return on assets before
interest and taxes $1,116,720 $1,116,720 $1,116,720
Interest expense 558,360 896,940 298,180
Return before taxes $558,360 $219,780 $837,540
Tax rate = 40% 223,344 87,912 335,016
Return after taxes $335,016 $131,868 $502,524
Shares outstanding 742,500 371,250 1,113,750
Earnings per share $0.45 $0.36 $0.45
Return on assets falling to 4.70%
Return on assets before
interest and taxes $558,360 $558,360 $558,360
Interest expense 558,360 896,940 298,180
Return before taxes $0 -$338,580 $260,180
Tax rate = 40% 0 0 104,072
Return after taxes $0 $0 $156,108
Shares outstanding 742,500 371,250 1,113,750
Earnings per share $0 $0 $0.14
Return on assets increasing to 14.4%:
Return on assets before
interest and taxes $1,710,720 $1,710,720 $1,710,720
Interest expense 558,360 896,940 298,180
Return before taxes $1,152,360 $431,380 $1,412,540
Tax rate = 40% 460,944 172,552 565,016
Return after taxes $691,416 $258,828 $847,524
Shares outstanding 742,500 371,250 1,113,750
Earnings per share $0.93 $0.70 $0.76
Market price for common stock rose to $12 before restructuring:
Return on assets before
interest and taxes $1,116,720 $1,116,720 $1,116,720
Interest expense 558,360 896,940 298,180
Return before taxes $558,360 $219,780 $837,540
Tax rate = 40% 223,344 87,912 335,016
Return after taxes $335,016 $131,868 $502,524
Shares outstanding 742,500 371,250 1,113,750
Earnings per share $0.45 $0.36 $0.45
What are the advantages and disadvantages of keeping the strategic-planning process secret vs. placing the firm’s strategic plan on the corporate website and discussing strategies and planning publically? (2 main advantages and 2 main disadvantages)
Answer:
Answers are given below.
Explanation:
Advantages of keeping the strategic-planning process of a firm secret
1. The flaws or challenges of the firm will not be known to the general public or the firm's competitors.
2. The great ideas in the strategic plan will be known only to members of this firm. No other firm will be able to 'steal and quickly implement' these great ideas.
NOTE: The opposites of these statements are same as the disadvantages of making the strategic-planning process public.
Disadvantages of keeping the strategic-planning process of a firm secret
1. Placing the firm's strategic plan on the corporate website will improve the confidence of clients or customers in them. Clients and customers will view the firm as transparent and will also feel informed about the firm's activities.
2. Discussing strategies and planning publically will fetch the firm some good ideas from the public, and also some new customers or clients.
NOTE: These statements are same as the advantages of making the strategic-planning process public.
In The General Theory of Employment, Interest, and Money, Keynes rejected the idea that international trade always helps to achieve economic stability. the ultimate breakdown of the capitalist system is inevitable. budget deficits necessarily cause recessions and inflation. a capitalist economy always gravitates toward high levels of employment.
Answer:
A capitalist economy always gravitates toward high levels of employment.
Explanation:
John Maynard Keynes
This is a man commonly known as an English economist. He was known to be the one wrote a book called "The General Theory of Employment, Interest, and Money" in 1883-1946. It is said that he was most famous for The General Theory of Employment, Interest and Money in 1936. He was known to argued that the best way to deal with prolonged recessions was deficit spending. It was documented that He believed in free market and he is known as the father of modern economics.
The General Theory of Employment, Interest and Money by John Maynard Keynes (1936)
This is said to explains Keynes' theory which was that government deficit spending will help distribute or circulate money, create jobs and promote demand for products.
Presented below are definitions of certain terms. Select the appropriate term from the dropdown list. Definitions 1. Quantity of input required if a production process is 100% efficient. 2. Managing by focusing on large differences from standard costs. 3. Record that accumulates standard cost information. 4. Preset cost for delivering a product or service under normal conditions. a. Standard cost card b. Management by exception c. Standard cost d. Ideal standard
Answer:
1. Ideal standard
2. Management by exception
3. Standard cost card
4. Standard cost
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.
In Financial accounting, a direct cost can be defined as any expense which can easily be connected to a specific cost object such as a department, project or product. Some examples of direct costs are cost of raw materials, machineries or equipments.
On the other hand, any cost associated with the running, operations and maintenance of a company refers to indirect costs. Some examples of indirect costs are utility bill, office accessories, diesel etc.
1. Ideal standard: quantity of input required if a production process is 100% efficient.
2. Management by exception: Managing by focusing on large differences from standard costs.
3. Standard cost card: record that accumulates standard cost information.
4. Standard cost: preset cost for delivering a product or service under normal conditions.
AMD has bonds outstanding with a face value of $1,000, 13 years to maturity, and a coupon rate of 6.5 percent, paid annually. What is the company's pretax cost of debt if the bonds currently sell for $1,056
Answer: 5.90%
Explanation:
The pre-tax cost of debt refers to the yield on the bonds.
The Yield is calculated by the formula:
= (Annual coupon + (Face value - Present value) / Periods till maturity) ÷ ((Face value + Present value)/2)
Annual coupon = 6.5% * 1,000 = $65
Yield is:
= (65 + (1,000 - 1,056) / 13) ÷ ((1,000 + 1,056) / 2)
= 5.90%
Stephen is a graduate student at West University. He works part-time at the campus coffee shop earning $5,000 this year. Stephen also receives a $25,000 scholarship that pays for his tuition, fees, and books. What amount does Stephen include in his gross income
Answer:
5,000
Explanation:
Stephen is a graduate student at a university
He works part time at a shop where he earns 5,000 this is als like compensation
He receives $25,000 for scholarships
The amount Stephen includes in id groas income is 5,000
United States exports soybean oil to China. However, to protect the Chinese soybean oil market, Chinese government has high tariff in place for U.S. soybean oil exports. Explain how United States can make plant location decisions to avoid paying high tariffs and still sell soybean oil in China.
Answer:
United States can set up plants in China to avoid high tariffs
Gamma Inc. manufactures Product X using a single raw material. The standard quantity of input for the month of February was 3,000 units of raw material for 1,000 units of Product X. The actual output for the month of February was 1,300 units. Compute the standard quantity of raw material for actual output (SQ) of Product X.
Answer: 3900 units
Explanation:
The standard quantity of raw material for actual output (SQ) of Product X will be calculated thus:
Standard quantity of raw material per unit will be calculated as the standard quantity of input for February divided by the standard units that was produced in February. This will be;
= 3000/1000
= 3 per unit
Then, the standard quantity of raw material for actual output will be:
= Actual output x Standard quantity of raw material per unit
= 1300 units x 3 per unit
= 3900 units
A list of financial statement items for Oriole Company includes the following: accounts receivable $17,500; prepaid insurance $3,250; cash $13,000; supplies $4,750; and debt investments (short-term) $10,250.
Required:
Prepare the current assets section of the balance sheet listing the items in the proper sequence.
Answer:
$48,750
Explanation:
Preparation of the current assets section of the balance sheet listing the items in the proper sequence
ORIOLE COMPANY Partial Balance Sheet Current assets
Cash $13,000
Debt investments $10,250
Accounts receivable $17,500
Supplies $4,750
Prepaid insurance $3,250
Total current assets $48,750
Therefore the current assets section of the balance sheet listing the items in the proper sequence is $48,750
Galaxy Air, previously a no-growth firm, has two million shares outstanding. Until now, it consistently earned $20 million per year on its assets. (It has no debt and pays out all earnings as dividends. Its cost of capital is 10 percent.) Due to its newly appointed CEO, Galaxy Air is now able to squeeze out 1 percent annual growth by plowing back 5 percent of earnings. Calculate its stock price per share
Answer: $106.61
Explanation:
The following can be deduced from the information given:
Net Income = $20
Weighted Average no. of shares = 2
Earning per share (EPS) = $20/2 = $10
DPS =(100% - 5%) of EPS
= 95% × $10 = $9.5
Growth Rate (g) = 1%
Cost of equity (Ke) = 10%
DPS1 = [9.5 × (1+0.01)] = 9.595
Price of Stock will now be
= Po = DPS1/(Ke-g)
= 9.595/(0.10-0.01)
= 106.61
Suppose an industrial building can be purchased for $2,500,000 today and is expected to yield cash flows of $180,000 each of the next five years. (Note: assume cash flows are received at end of year.) If the building is expected to be sold at the end of the fifth year for $2,800,000, calculate the IRR for this investment over the five year holding period
Answer: 9.20%
Explanation:
Use Excel to find out the IRR.
Ensure that you write the purchase price in negatives as shown in the attached picture.
The cashflow for the last year will be the sum of the selling price and the cash flow.
= 2,800,000 + 180,000
= $2,980,000
IRR = 9.20%
A buyer’s agent represents the buyer, and the seller’s agent represents the broker true or false?
Answer: False
Explanation:
seller is not represent broker
