Answer:
Company needs to invest amount = $23000
Explanation:
Below is the calculation of the present value:
Given the future value, FV = $500000
Number of years, n = 40 years
Real interest rate = 10% - 2% = 8%
Present value = ?
Present value = FV (P/F, r, n)
Present value = $500000 (P/F, 8%, 40)
Present value = $500000 (0.046)
Present value = $23000
Company needs to invest amount = $23000
Assume that as their leader, you wanted to influence minimum wage earners in a plastic bottle recycling center to work faster. Which one or two influence tactics are likely to be effective
Answer:
An effective leader is one who is able to influence his team through his communication and interpersonal skills.
In order to achieve greater speed and productivity at work, some influencing tactics that can be effective in a recycling center where workers earn a minimum wage may be associated with the leader's ability to empathize with the team, recognizing the difficulties and challenges of the work, but acting in a comprehensive, ethical way and helping them in their demands, exercising practical leadership, where the leader is the first to set a positive example of what he wants to achieve.
On June 10, Pais Company purchased $9,000 of merchandise from MacGyver Company, on account, terms 3/10, n/30. Pais pays the freight costs of $400 on June 11. Goods totaling $600 are returned to MacGyver for credit on June 12. On June 19, Pais Company pays McGiver Company in full, less the purchase discount. Both companies use a perpetual inventory system. Journalize perpetual inventory entries. Instructions a. Prepare separate entries for each transaction on the books of Pais Company. b. Prepare separate entries for each transaction for MacGyver Company. The merchandise purchased by Pais on June 10 cost MacGyver $5,000, and the goods returned cost McGiver $310.
Solution :
Pais Company
June 10 Inventory 9000
Accounts payable 9000
June 11 Inventory 400
Cash 400
No entry 0
June 12 Accounts payable 600
Inventory 600
June 19 Accounts payable 8400
Inventory 252 = 8400 x 3%
Cash 8148
McGiver Company
June 10 Accounts Receivable 9000
Sales revenue 9000
Cost of goods sold 5000
Inventory 5000
June 12 Sales return and allowances 600
Accounts receivable 600
Inventory 310
Cost of goods 310
June 19 Cash 8148
Sales discount 252 =8400 x 3%
Account receivable 8400
Question 3 4 Marks Mi Tierra Driving School charges $680 per student to prepare and administer written and driving tests. Variable costs of $408 per student include trainers’ wages, study materials, and gasoline. Annual fixed costs of $63,920 include the training facility and fleet of cars. Requirements 1. For each of the following independent situations, calculate the contribution margin per unit and the breakeven point in units by first referring to the original data provided: a. Breakeven point with no change in information. b. Decrease sales price to $544 per student. c. Decrease variable costs to $340 per student. d. Decrease fixed costs to $53,040.
Answer:
Results are below.
Explanation:
Giving the following information:
Selling price= $680
Unitary variable cost= $408
Fixed cost= $63,920
To calculate the contribution margin and break-even point in units, we need to use the following formula:
Unitary contribution margin= selling price - unitary variable cost
Break-even point in units= fixed costs/ contribution margin per unit
a:
Unitary contribution margin= 680 - 408= $272
Break-even point in units= 63,920 / 272
Break-even point in units= 235
b:
Unitary contribution margin= 544 - 408= $136
Break-even point in units= 63,920 / 136
Break-even point in units= 470
c:
Unitary contribution margin= 680 - 340= $340
Break-even point in units= 63,920 / 340
Break-even point in units= 188
d:
Unitary contribution margin= 680 - 408= $272
Break-even point in units= 53,040 / 272
Break-even point in units= 195
The CEO of Kwikee Shoppe, a chain of convenience stores, believes that some of his managers aren’t making decisions as effectively as they could. He has hired you as a consultant to analyze the types of bias that could be causing poor decisions. If you can identify the biases that may cloud their judgment, then they can be made aware of these tendencies so they can improve their performance. You gather data about Kwikee Shoppe managers’ most recent decisions.
Stella is in charge of the western region, and she has a strong track record of opening new stores that perform well and closing stores that could not contribute satisfactorily to the bottom line. Lately, however, many of her new stores have had below average performance, and she has closed some stores that probably could have been turned around by putting a different store manager in charge, advertising more, or offering more specials on popular products. Nonetheless, Stella knows that she is great at her job. Which of the following would not be a way for Stella overcome this bias?
A. Consult with other regional managers for their opinion before closing stores.
B. Before closing a store, replace the manager with one from a successful store and revisit the decision in 90 days.
C. Create a checklist of items to ask before closing stores, providing weights to each item based on their importance.
D. Focus on the stores that she closed that would not have improved with a different manager in place, additional advertising, or sales.
Answer:
Kwikee Shoppe
The way that Stella would overcome this bias is:
D. Focus on the stores that she closed that would not have improved with a different manager in place, additional advertising, or sales.
Explanation:
The other listed actions would enable Stella to overcome her personal bias, which may be clouding her sense of judgment. The focus on the stores that she had closed would only puff her ego instead of reducing bias. To focus on the past when Stella is proud of her achievements cannot allow her to objectively review the situation in order to improve on her decisions and performance.
Which of the strategies to enter global markets do you think would be best for a small, 100 person company manufacturing special dog collars
Answer:
Exporting by means of:
Local representative Online salesExplanation:
It would be best that the company engages in exports for the time being because it dos not require much funds to be used and so expenses are less.
The company could find a local representative in the countries that it would like to sell to and use that representative as a middleman to sell their goods there.
The company could also cut out the middle man and directly sell to consumers on the internet through websites dedicated to the sale of their kind of goods.
1. Drawing on discussions of informational justice, how should Andrea approach the morning briefing? Should she be honest and informative in explaining corporate actions in the downsizing, or should she be more guarded?
Answer:
Andrea should be honest and informative in explaining her corporation's actions in downsizing.
Explanation:
By being honest and forthright by providing adequate informational justice to the employees affected by downsizing, she would gain the confidence of those that will not be affected. This will ensure that the workers remain motivated and productive. Doing informational justice requires the management to provide adequate explanations and rationale for the decision made to downsize the entity's workforce.
Texas Curtain Works is in the process of preparing its budget for next year. Cost of goods sold has been estimated at 70 percent of sales. Fabric purchases and payments are to be made during the month preceding the month of sale. Wages are estimated at 20 percent of sales and are paid during the month of sale. Other operating costs amounting to 25 percent of sales are to be paid in the month following the month of sales. Sales revenue is forecasted as follows:
Month Sales
February $440,000
March $450,000
April $480,000
May $500,000
June $510,000
What is the amount of fabric purchases during the month of March?
a) $480,000
b) $336,000
c) $288,000
d) $300,000
Answer:
b. $336,000
Explanation:
Here, the Fabric purchases & payments are to be made during the month before the month of sale.
The Amount of fabric purchases during the month of march = 70% of sales of the month of April
Purchases of March = 70% * $480,000
Purchases of March = 0.70 *$480,000
Purchases of March = $336,000
So, the amount of fabric purchases during the month of March is $336,000.
A company receives a 10%, 90-day note for $2,700. The total interest due on the maturity date is: (Use 360 days a year.)
Answer:
Interest amount = $67.5
Explanation:
Use the below formula to find the interest amount:
Interest amount = The value of note x Interest rate x (90 / 360)
Given value of note = $2700
Interest rate = 10%
Time = 90/360
Now plug the value in the above formula and solve for the interest due:
Interest amount = The value of note x Interest rate x (90 / 360)
Interest amount = 2700 x 10% x (90 / 360)
Interest amount = $67.5
One of the best sources of precall information is a prospect's own salespeople because they empathize with the salesperson's situation.
a. True
b. False
Answer:
a. True
Explanation:
In the case when the information is precalled so here the sources that considered to be best should be the own salespeople as it would emphathize the situation of the sales person
So as per the given situation, the given statement is true
Hence, the option a is correct
Therefore, the second option is wrong
A 3-year bond has an 8.0% coupon rate and a $1,000 face value. If the yield to maturity on the bond is 10%, calculate the price of the bond assuming that the bond makes semiannual coupon payments.
Answer:
$738.68
Explanation:
the price of the bond is $738.68.
Implement a table and re-organize your page contents so that it is displayed within the table (you can organize the table's content as you like).
2) Add one external CSS file and apply it to your 2 pages (the style sheet should have at least Fonts, Color, sizing and background). The CSS should provide a uniform look/feel between the 2 pages.
Answer:
just here for points
Explanation:
iskksns
Stan’s Sporting Goods is a competitor that can manufacture seven soccer balls out of a possible ten, if it makes one soccer net. Which statement correctly compares the two businesses?
Sabrina’s Soccer has a comparative advantage over Stan’s Sporting Goods because Sabrina’s Soccer has a lower opportunity cost.
Stan’s Sporting Goods has a comparative advantage over Sabrina’s Soccer because Stan’s Sporting Goods has a lower opportunity cost.
Sabrina’s Soccer has an absolute advantage over Stan’s Sporting Goods because Sabrina’s Soccer has a lower production cost.
Stan’s Sporting Goods has an absolute advantage over Sabrina’s Soccer because Stan’s Sporting Goods has a lower production cost.
Answer:
Sabrina’s Soccer has a comparative advantage over Stan’s Sporting Goods because Sabrina’s Soccer has a lower opportunity cost.
Answer: A
Explanation: PogChamp
A bond that pays interest semiannually has a price of $941.35 and a semiannual coupon payment of $26.00. If the par value is $1,000, what is the current yield
Answer:
5.52%
Explanation:
Calculation to determine the current yield
Current yield = ($26.00 × 2)/$941.35
Current yield=$52/$941.35
Current yield= .0552*100
Current yield= 5.52%
Therefore the Current yield is 5.52%
A cleaning product company is having trouble with the pH control of one of their products. The product should be slightly basic but the pH is too high. What could the company try to correct the pH of the product
Answer:
sodium hydroxide to raise and acidic solutions to drop ph
Explanation:
how to lower and make highee
Ken Jones, an architect, organized Jones Architects on April 1, 20Y2. During the month, Jones Architects completed the following transactions: Transferred cash from a personal bank account to an account to be used for the business in exchange for Common Stock, $30,000. Purchased used automobile for $20,000, paying $4,500 cash and giving a note payable for the remainder. Paid April rent for office and workroom, $3,000. Paid cash for supplies, $1,440. Purchased office and computer equipment on account, $6,000. Paid cash for annual insurance policies on automobile and equipment, $2,000. Received cash from a client for plans delivered, $7,500. Paid cash to creditors on account, $1,740. Paid cash for miscellaneous expenses, $375. Received invoice for blueprint service, due in May, $1,000. Recorded fees earned on plans delivered, payment to be received in May, $5,200. Paid salary of assistant, $1,600. Paid cash for miscellaneous expenses, $810. Paid installment due on note payable, $240. Paid gas, oil, and repairs on automobile for April, $390.
Required:
Record the above transactions in T accounts.
Answer:
Jones Architects
T-accounts:
Cash
Account Titles Debit Credit
Common Stock, $30,000
Automobile $4,500
Rent expense $3,000
Supplies $1,440
Prepaid Insurance $2,000
Service Revenue $7,500
Accounts Payable $1,740
Miscellaneous expenses, $375
Salary Expense $1,600
Miscellaneous expenses, $810
Note payable, $240
Automobile expense $390
Common Stock
Account Titles Debit Credit
Cash $30,000
Note payable
Account Titles Debit Credit
Automobile $15,500
Cash $240
Automobile
Account Titles Debit Credit
Cash $4,500
Note payable $15,500
Rent expense
Account Titles Debit Credit
Cash $3,000
Supplies
Account Titles Debit Credit
Cash $1,440
Office and computer equipment
Account Titles Debit Credit
Accounts Payable $6,000
Accounts Payable
Account Titles Debit Credit
Office and computer equipment $6,000
Cash $1,740
Blueprint expense $1,000
Prepaid Insurance
Account Titles Debit Credit
Cash $2,000
Service Revenue
Account Titles Debit Credit
Cash $7,500
Accounts receivable $5,200
Miscellaneous expenses
Account Titles Debit Credit
Cash $375
Cash $810
Blueprint expense
Account Titles Debit Credit
Accounts payable $1,000
Accounts Receivable
Account Titles Debit Credit
Service Revenue $5,200
Salary Expense
Account Titles Debit Credit
Cash $1,600
Automobile expense
Account Titles Debit Credit
Cash $390
Explanation:
a) Data and Analysis:
Cash $30,000 Common Stock, $30,000
Automobile $20,000 Cash $4,500 Note payable $15,500
Rent expense $3,000 Cash $3,000
Supplies $1,440 Cash $1,440
Office and computer equipment $6,000 Accounts Payable $6,000
Prepaid Insurance $2,000 Cash $2,000
Cash $7,500 Service Revenue $7,500
Accounts Payable $1,740 Cash $1,740
Miscellaneous expenses, $375 Cash $375
Blueprint expense $1,000 Accounts payable $1,000
Accounts receivable $5,200 Service Revenue $5,200
Salary Expense $1,600 Cash $1,600
Miscellaneous expenses, $810 Cash $810
Note payable, $240 Cash $240
Automobile expense $390 Cash $390
A(n) ______ cost requires a future outlay of cash and is relevant for current and future decision making. Multiple choice question. opportunity sunk historical out-of-pocket
Answer:
out-of-pocket
Explanation:
In Accounting, 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.
Cost pool is simply the amount of money spent by a firm on a particular activity.
Generally, an activity-based costing uses numerous cost pools such as manufacturing cost or customer services and numerous cost drivers such as direct labor hours worked, number of changes used in engineering department, etc.
Generally, an out-of-pocket cost requires that an individual or business outlay their future cash-flow and it must be relevant for current and future decision making.
On December 30, you decide to make a $2,500 charitable donation. (Assume you itemize your deductions.) (a) If you are in the 24 percent tax bracket and you expect to itemize your deductions, how much will you save in taxes for the current year
Answer:
$600
Explanation:
Calculation to determine how much will you save in taxes for the current year
Using this formula
Tax savings = Tax rate × Tax deduction
Let plug in the formula
Tax savings= 0.24 × $2500
Tax savings =$600
Therefore how much will you save in taxes for the current year is $600
If there is a shortage in the market, the market price is too _______________. The quantity demanded will be ________________ the quantity supplied. Thus, the market price must ____________ , which will _____________ the quantity supplied and ____________ the quantity demanded.
Answer:
low
greater
increase
increase
decrease
Explanation:
Equilibrium price is the price at which quantity demand equal quantity supplied. Above equilibrium price there is a surplus - quantity supplied exceeds quantity demanded.
Below equilibrium price there is a shortage - quantity demanded exceeds quantity supplied
When there is a shortage in the market, the market price is too low. As a result, quantity demanded exceeds quantity supplied. Shortage would lead to an increase in price towards equilibrium. This would lead to an increase in the quantity supplied and a decrease in quantity demanded
True or False: It was better for the united states not to receive this foreign investment because it decreases economic growth
Answer:
False
Explanation:
When the foreign investment should received so it generally complement the capital stock of the domestic one. ALso, the foreign investment includes both macro and micro impact. Like for macro, it is good for export, imprort and for micro it improved the labor force quality
So it increased the capital and the new business opportunities
Therefore the given statement is false
Lucy has been the sole shareholder of a calendar year S corporation since 1980. At the end of 2011, Lucy's stock basis is $23,500, and she receives a distribution of $25,000. Corporate level accounts are computed as follows.
AAA 7,000
PTI 11,000
Accumulated E&P 600
How much capital gain, if any, will Lucy have?
a. $600
b. $7,000
c. $6,400
d. $900
e. None of the above
Answer: d. $900
Explanation:
Capital gain = Total distribution - AAA as this isn't taxed - Accumulated E&P - PTI which isn't taxed either - Stock basis
Stock basis = Stock basis - AAA - PTI
= 23,500 - 7,000 - 11,000
= $5,500
Capital Gain = 25,000 - 7,000 - 600 - 11,000 - 5,500
= $900
At the end of business on September 1, the total displayed on the cash register tape shows $1,059 of cash sales for the day. However, when the clerk and the supervisor count the cash in the register, the count reveals that $1,050 was actually collected from customers.
Complete the journal entry.
Answer:
Date Account Title Debit Credit
Sept. 1 Cash $1,050
Cash short and over $ 9
Sales $1,059
Cash short and over is calculated thus:
= 1,059 - 1,050
= $9.00
The electronic invoicing and payment (EIPP) system for the B2B environment is similar to the electronic bill presentment and payment (EBPP) system for the B2C environment. a) True b) False
Answer:
a) True
Explanation:
Electronic bill payment and presentment (EBPP) can be regarded as process that is been utilized by
companies in collection of payments electronically by utilization of systems such as Automated Teller Machines (ATMs) as well as Internet and direct-dial access. This has turned to a core component of online banking as regards to some financial institutions today, some industries such as telecommunications and insurance providers make use of it.
Electronic invoicing and presentment payment (EIPP) can be regarded as process involving sending of electronic invoice to customers using the internet, as well as the ability of customers to be able to pay that invoice online also. It give a solution that brings about increased productivity, as well as given room for business owner to spend more time in developing their business as well as relationships with their customers.
It should be noted that the The electronic invoicing and payment (EIPP) system for the B2B environment is similar to the electronic bill presentment and payment (EBPP) system for the B2C environment.
Prior to recording adjusting entries, the Office Supplies account had a $490 debit balance. A physical count of the supplies showed $175 of unused supplies available. The required adjusting entry is: debit/credit [ Select ] to [ Select ] account for [ Select ] debit/credit [ Select ] to [ Select ] account for [ Select ]
Answer: See explanation
Explanation:
Based on the information that's provided in the question, the required adjusting entry goes thus:
Unadjusted ending balance of supplies = $490
Actual supplies ending balance existing physically = $175
From the information above, the supplies used during the period will be:
= $490 - $175
= $315
Therefore,
Debit office supplies expenses $315 Credit office supplies account $315
In this market, the equilibrium hourly wage is $ , and the equilibrium quantity of labor is thousand workers. Suppose a senator introduces a bill to legislate a minimum hourly wage of $6. This type of price control is called a .
Answer:
The equilibrium hourly wage is the wage where the curve of supply of labor intersects with that of the demand for labor. The same goes for the equilibrium quantity of labor.
The equilibrium hourly wage is $10, and the equilibrium quantity of labor is 450 thousand workers.
If a Senator introduces a minimum hourly wage, this is considered a Price Floor.
Price floors are prices that that the government mandates that one cannot charge below for a good or service. If there is a price floor on cake for instance, a person is not allowed to charge less than that price floor for cake. The Senator's bill is therefore saying that people should not be paid less than $6 an hour.
Consider the following gasoline sales time series data. Click on the datafile logo to reference the data.
Week Sales (1000s of gallons)
1 16
2 20
3 20
4 23
5 18
6 17
8 19
9 23
10 19
11 14
12 21
a. Using a weight of 1/2 for the most recent observation, 1/3 for the second most recent observation, and 1/6 the most recent observation, compute a three-week weighted moving average for the time series (to 2 decimals). Enter negative values as negative numbers.
Week
Time-Series Value Weighted Moving
Average Forecast Forecast
Error
(Error)2
1
2
3
4
5
6
7
8
9
10
11
12
Total
b. Compute the MSE for the weighted moving average in part (a).
MSE =
Do you prefer this weighted moving average to the unweighted moving average? Remember that the MSE for the unweighted moving average is 8.90.
Prefer the unweighted moving average here; it has a (greater/smaller) MSE.
c. Suppose you are allowed to choose any weights as long as they sum to 1. Could you always find a set of weights that would make the MSE at least as small for a weighted moving average than for an unweighted moving average? (Yes/ No)
Answer:
a) attached below
b) MSE for weighted moving average = 14.5
c) Yes
Explanation:
a) Computing a three-week weighted moving average using
1/2 for most recent , 1/3 for second most recent and 1/6 for third most recent observation
Given data :
Week Sales (1000s of gallons)
1 16
2 20
3 20
4 23
5 18
6 17
7 19
8 23
9 19
10 14
11 21
solution attached below
B) Determine MSE for the weighted moving average
MSE = ∑ (error)^2 / 8
= 116.0289 / 8 = 14.50
The MSE for unweighted moving average ( 8.90 ) is smaller than the MSE for weighted moving average
C) Yes I will find a weight that makes at least the MSE for weighted moving average than unweighted moving average
An example of fast tracking a project schedule would be to overlap the design and production phases for a design-to-production project, where the conventional approach would be to move on to construction only after completing the design phase.
a. True
b. False
Answer:
a. True
Explanation:
Project management can be defined as the process of designing, planning, developing, leading and execution of a project plan or activities using a set of skills, tools, knowledge, techniques and experience to achieve the set goals and objectives of creating a unique product or service.
Generally, projects are considered to be temporary because they usually have a start-time and an end-time to complete, execute or implement the project plan.
Furthermore, the main purpose of project management is working toward a common goal.
This ultimately implies that, project managers should ensure adequate attention and time is taken to identify, analyze and manage capital, raw materials, people, system of tasks and other resources, so as to effectively and efficiently achieve a common goal with all project stakeholders.
The fundamentals of Project Management includes;
1. Project initiation
2. Project planning
3. Project execution
4. Monitoring and controlling of the project.
5. Adapting and closure of project.
In the execution of a project, delaying a task normally affects the start or finishing time of the other tasks (successors) in a project.
The amount of time that is permitted for an activity to be delayed without delaying the early start date of any immediately following (succeeding) activities refers to the free slack or having an adverse effect on entire project.
A project schedule can be defined as a plan that comprises of the deliverables, activities and milestones with respect to a project, especially by including the intended start and finish dates.
The time for the implementation or execution of a project can be fast-tracked by a project manager.
For example, you can fast-track a design-to-production project by overlapping the design and production phases; especially by moving on to construction only after completing the design phase.
Consider the markets for three products below. Indicate which characteristics of a competitive market are met by these markets.
Market : Gasoline
a. Large number of buyers
b. Standardized good
c. Full information
d. No transaction cost
e. Participants are price takers
Market: barbershop haircuts
a. Large number of buyers
b. Standardized good
c. Full information
d. No transaction cost
e. Participants are price takers
Market: bicycles
a. Large number of buyers
b. Standardized good
c. Full information
d. No transaction cost
e. Participants are price takers
Answer:
Market : Gasoline
b. Standardized good
c. Full information
e. Participants are price takers.
Market : Barbershop haircuts
a. Large number of buyers
c. Full information
Market : Bicycles
a. Large number of buyers
b. Standardized good
c. Full information
d. No transaction cost
Explanation:
The three markets will have different characteristics which will cause the competition. The Gasoline market has standardized product and the customers are price takers. Usually the prices are fixed for the products and there is no bargaining.
Using the Base Case, calculate total depreciation expense for the year 2023E. Assume that depreciation expense on assets pre-2020E is $15,000 per year. Depreciation on capital expenditures made from 2020E-2024E assumes a 4-year useful life and a salvage value equal to 10% of the original cost.
Review Later
a) $19,500
b) $33,000
c) $30,000
d) $20,000
Answer:
b) $33,000
Explanation:
Capital Expenditure = $20,000
Salvage Value in % = 10%
Useful Life = 4 Years
Salvage Value = Salvage Value% * Capital Expenditure
Salvage Value = 10% * 20,000
Salvage Value = $2,000
Annual Depreciation = (Capital Expenditures - Salvage Value) / Useful Life
Annual Depreciation = ($20,000 - $2,000) / 4
Annual Depreciation = $18,000 / 4
Annual Depreciation = $4,500
Depreciation of 2023E = Depreciation Pre 2020E + Depreciation on capital expenditures in 2020E + Depreciation on capital expenditures in 2021E + Additional Depreciation on capital expenditures in 2022E + Additional Depreciation on capital expenditures in 2023E
Depreciation of 2023E = $15,000 + $4,500 + $4,500 + $4,500 + $4,500
Depreciation of 2023E = $33,000
Managerial implications for the SDT theory include: Group of answer choices to motivate high performance for uninteresting jobs make performance contingent on extrinsic rewards. All of these. to motivate high performance for uninteresting jobs make performance contingent on intrinsic rewards. focus on the hygiene factors in order to reduce dissatisfaction and increase intrinsic motivation to enhance intrinsic motivation for interesting jobs be sure individuals receive large pay bonuses for high achievement
Answer:
to motivate high performance for uninteresting jobs make performance contingent on extrinsic rewards.
Explanation:
Extrinsic rewards means the motivation i.e. controlled and produced via payment, awards and appreciations. In the case when the job is not interesting so the motivation level should be high in this situation and when the job is interesting the motivation level should not high
So as per the given situation, the above statement should be considered as an answer
Cape Corp. will pay a dividend of $3.00 next year. The company has stated that it will maintain a constant growth rate of 4.5 percent a year forever.
a. If you want a return of 15 percent, how much will you pay for the stock?
b. If you want a return of 8 percent, how much will you pay for the stock?
Answer:
a.
$27.27
b.
$75
Explanation:
Use the following formula to calculate the value of the stock
Value of Stock = Expected Dividend / ( Rate of return - Growth rate )
a.
Where
Expected Dividend = $3.00
Rate of return = 15%
Growth rate = 4.5%
Placing values in the formula
Value of Stock = $3.00 / ( 15% - 4% )
Value of Stock = $3 / 11%
Value of Stock = $27.27
b.
Where
Expected Dividend = $3.00
Rate of return = 8%
Growth rate = 4.5%
Placing values in the formula
Value of Stock = $3.00 / ( 8% - 4% )
Value of Stock = $3 / 4%
Value of Stock = $75
