Answer:
Progression
Explanation:
Progression in real estate occurs when the property in a given area improves in value as a result of more expensive property bring built in the area.
This is one major way real estate appreciates in value. Some property owners wait for others to develop the area and naturally their own property appreciates in value.
In this scenario the developer buys the last five vacant lots in a subdivision and constructs a large, expensive home on each lot. The homes sell for what are record-setting high prices for the area.
Marsh Corporation purchased a machine on July 1, 2012, for $1,250,000. The machine was estimated to have a useful life of 10 years with an estimated salvage value of $70,000. During 2015, it became apparent that the machine would become uneconomical after December 31, 2019, and that the machine would have no scrap value. Accumulated depreciation on this machine as of December 31, 2014, was $295,000. What should be the charge for depreciation in 2015 under generally accepted accounting principles
Answer:
$191,000
Explanation:
The computation of straight line depreciation is shown below:-
Straight line Depreciation:
= (Book value - Salvage value) ÷ Remaining life
= ($1,250,000 - $295,000 - 0) ÷ (From 2015 to 2019)
= ($1,250,000 - $295,000 - 0) ÷ 5 year
= $191,000
Therefore for computing the straight line depreciation we simply applied the above formula.
Hawkins Poultry Farms is considering the purchase of feeding equipment that costs $139,000 and will produce annual cash flows of approximately $36,000 for five years. The equipment is expected to be sold at the end of five years for $40,000. What is the net present value of the proposed investment
Answer:
NPV = $1,564.65
Explanation:
Here is the full question :
Hawkins Poultry Farms is considering the purchase of feeding equipment that costs $139,000 and will produce annual cash flows of approximately $36,000 for five years. The equipment is expected to be sold at the end of five years for $40,000.
What is the net present value of the proposed investment? Hawkins requires a 15 percent return on all capital investments
Net present value is the present value of after tax cash flows from an investment less the amount invested.
NPV can be calculated using a financial calculator
Cash flow in year 0 = $-139,000
Cash flow each year from year 1 to 4 = $36,000
Cash flow in year 5 = $36,000 + $40,000 = $76,000.
i = 15%
NPV = $1,564.65
To find the NPV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
"A 25-year old client with a low risk tolerance wishes to invest in bonds. The client has invested in equities before, but has no experience investing in bonds. The BEST recommendation would be:"
Answer: AA-rated short-term bonds
Explanation:
The options to the question are:
A. BB-rated short-term bonds
B. BB-rated intermediate-term bonds
C. AA-rated short-term bonds
D. AA-rated long-term bonds
From the question, we have been informed that the client has a low risk tolerance and wants to invest in bond.
Based on this scenario, to reduce the risk of the interest rate risk, it should be noted that short-term maturities are more appropriate than choosing the long-term maturities.
Therefore, the best recommendation will be AA-rated short-term bonds.
A property sold for $198,000 with a listing commission of 8%. The selling office is to receive 40% of the total commission. How much will the listing salesperson receive if she is paid 60% of the amount retained by the listing broker?
Answer:
$5,702.4
Explanation:
A property is sold for $198,000 with a listing commission of 8%
The selling office is to receive 40%
The first step is to calculate the total commission
= $198,00×8/100
= $198,000×0.08
= $15,840
Listing brokers commission
=$15,840×60/100
= $15,840×0.6
= 9,504
Therefore, the amount of listing that will be received by the sales person can be calculated as follows
= 9,504×60/100
= 9,504×0.6
= $5,702.4
Hence the salesperson will receive a listing of $5,702.4
Which of the following statements about the waiver-of-premium provision in life insurance is true?
A) Because the probability of becoming disabled exceeds the probability of premature death, the cost to include this provision is usually prohibitive at younger ages.
B) Premiums are usually waived if the insured becomes partially disabled.
C) Life insurance protection continues in force during a period of disability, but dividends cease and cash values are reduced.
D) The disability must occur before a stated age, such as 65, for premiums to be waived.
Answer:
Correct Answer:
D) The disability must occur before a stated age, such as 65, for premiums to be waived.
Explanation:
In Life insurance, the individual insured against bad events that may likely occur in his or her life through an insurance company. This would led to the company to pay his beneficiary or the individual in question if such event happened.
For waiver-of premium to occur in a life insurance,the disability of the individual must occur before the age of 65 years which is assumed to be the retirement age.
Suppose you manage a delivery company and you must choose between two transportation methods: (a) truck or (b) train. (a)Trucks: Costs U$ 26,000 upfront. For each mile it runs it costs U$ 2.00 in gas. Maintenance costs U$ 4,000 per year and additional U$ 1.00 per mile run. (b)Train: To lease a container that carries the same volume of orders as the truck it costs U$ 10.000 per year. In addition it costs U$ 4.00 per mile to move orders around. Which method has the lowest cost
Answer:
Which method has the lowest cost: Train.
Explanation:
From the scenario given between using the truck or train for transportation, the option with the lowest cost happens to be by train despite having high cost per mile for moving the goods.
For example, if the goods is to be moved over 1000 miles, it would cost the truck higher than when the train was used.
For Truck:
Cost of Truck: $26,000
Gas: $2 × 1000 = $2000
Extra: $1 × 1000 = $1000
Total: $29,000
For Train:
Cost: $10,000
Mile cost: $4 × 1000 = $4000
Total: $14,000
Therefore, for every 1000 miles covered, it was cheaper to use the train (lease a container carrier in train) than to use the Truck.
A company supervisor asks for volunteers from the first shift to help assemble a new binding machine that must be on-line within the next 24 hours. Grady lifts his chin and his shoulders, nods, and says, "I can do it." In the social cognitive perspective of Albert Bandura, Grady has appraised a desired outcome through self-evaluated
A. competencies.
B. emotions.
C. strategies.
D. expectancies.
Answer:
The correct answer is the option D: Expectancies.
Explanation:
To begin with, in this situation where the employee name as Grady has appraised a desired outcome through self-evaluation is because of the expectancies that the employee has over himself regarding the job that is being asked from his superiors and that because he knows that completing the volenteered task without help will show to his employer that he has great courage and force of will to do the tasks that are not even obligated. So that will help understand why Grady decides to do it because of the expectancies he has over the situation.
Answer:
A. competencies.
Explanation:
Competencies are self-evaluations that we bring to a situation. When we think we can do something, we’re more likely to try it than when we don’t think we’ll succeed. Competencies in math, tennis, socializing, or any other field come from experiences of prior success that act as reinforcers.
Racquel deposited $40,000 in an account paying 4.8% annual interest in 2009. She now wants to make four equal annual withdrawals from the account starting with the first withdrawal in 2021. Racquel also wants to have exactly $60,000 left in the account in 2026. How large can each of the annual withdrawals be?
Answer:
the annual withdrawals must be $2,006.49.
Explanation:
First determine how much the $40,000 would be at the end of 2020 that is 7 years following the investment as follows :
PV = - $40,000
r = 4.8%
Pmt = $0
P/yr = 1
n = 7
Fv = ?
Using a Financial Calculator, the $40,000 will be $55,537.84 in 7 years time.
The next step is to determine the annual withdrawals that will result in $60,000 left in 6 years.
PV = - $55,537.84
r = 4.8%
P/yr = 1
n = 6
Fv = $60,000
Pmt = ?
Using a financial calculator, the annual withdrawals must be $2,006.49 for Racquel to achieve her goals.
The following per unit cost information is available: direct materials $36, direct labor $24, variable manufacturing overhead $18, fixed manufacturing overhead $40, variable selling and administrative expenses $14, and fixed selling and administrative expenses $28. Its desired ROI per unit is $30. Compute its markup percentage using a total-cost approach
Answer:
Mark−up percentage = 18.75%
Explanation:
Total manufacturing cost= Direct material + Direct labor + Variable overhead + Fixed overhead
= $36 + $24 + $18 + $40
= $118
Hence, the total manufacturing cost is $118.
Total selling cost = Fixed selling cost + Variable selling cost
Total selling cost = $28 + $14
Total selling cost = $42
Hence, the total selling cost is $42
Total cost = Total Manufacturing cost + Total selling cost
Total cost = $118 + $42
Total cost = $160
Mark−up percentage = ROI / Total cost * 100
Mark−up percentage = $30 / $160 * 100
Mark−up percentage = 0.1875 * 100
Mark−up percentage = 18.75%
the law of demand states that: a) as the price of a good increase, more units are demanded. b) there is a direct relationship between the price of a good and the quantity of the good produced. c) there is a negative relationship between the pridce of a good and the quantity of the good demanded.
Answer:
c) there is a negative relationship between the price of a good and the quantity of the good demanded.
Explanation:
The law of demand states that there is a negative relationship between the price of a good and the quantity of the good demanded.
This ultimately implies that, when the prices of goods and services in the market increases or rises: there would be a significant decline or fall in the demand for this goods and services.
As defined in the Uniform Securities Act, an investment adviser is all of the following except:_______. 1. a broker-dealer who charges for investment advice 2. a publisher of a financial newspaper 3. a person who sells security analysis 4. a CPA who, as an incidental part of his practice, suggests certain tax-sheltered investments to his affluent clients
Answer:
A publisher of financial newspaper
A CPA who as an incidental part of his practice , suggests certain tax sheltered investment to his affluent client
Explanation:
An investment adviser is a firm that is registered for the business of making investment recommendations or conduct securities analysis by managing clients assets and advising on potential investment in securities.
A publisher of financial newspaper and a CPA who as an incidental part of his practice , suggests certain tax sheltered investment to clients are not qualified as investment advisers under the uniform securities act.
Which is most likely a violation of the AICPA Code of Professional Conduct? A member firm buys computer time at wholesale prices from another CPA firm and sells it at retail prices to clients. A member firm’s name is imprinted on a tax booklet prepared by an outside author who is clearly identified. A member forms a partnership for the practice of public accounting with non-CPAs. A member begins a public accounting firm with the trade name "Pay Less Tax Service."
Answer:
A member begin a public accounting services with the trade name "Pay less tax "services"
Explanation:
The AICPA code of professional conduct is a set of mandatory rules describing the minimum level of conduct a member must maintain in order to earn public trust as this is of utmost priority to the professional body.
The code of conduct requires that no member should undergo any activity that undermines the services of the professional body . As a result , no member should charge a fee that that is believed to be be low and he should not mislead the public into believing such as a matter of integrity.
The business name "PAYLESS" appears to have violated this rule.
The absolute value of the price elasticity of demand for gasoline in the long run has been estimated to be 1.5. If an extended war in the Middle East caused the price of oil (from which gasoline is made) to increase and remain high for a decade, how would that affect total expenditures on gasoline in the long run, all other things equal? (Hint: Consider the change in gasoline prices.)
Answer:
The demand for gasoline is elastic
As a result of the extended war which raises the price of oil, the price of gasoline would rise as a result. the rise in price would lead to a greater change in the quantity demanded. In the long run, consumers would have enough time to search for suitable substitutes so total expenditures on gasoline would fall more in the long run
Explanation:
Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.
Price elasticity of demand = percentage change in quantity demanded / percentage change in price
If the absolute value of price elasticity is greater than one, it means demand is elastic. Elastic demand means that quantity demanded is sensitive to price changes.
The manager of a bulk foods establishment sells a trail mix for $5 per pound and premium cashews for $15 per pound. The manager wishes to make a 75-pound mixture of both that will sell for $13 per pound. How many pounds of each should be used
Answer:
15 pounds of trail mix60 pounds of premium cashewsExplanation;
75 pounds of the mixture should be made so assuming the trail mix is x and the premium cashew is y, the following expression is formed;
x + y = 75
The selling price per pound is $13 so in total, sales should be;
= 75 * 13
= $975
5x + 15y = 975
Substitution can then be used;
x + y = 75
y = 75 - x
Then;
5x + 15y = 975
5x + 15 ( 75 - x ) = 975
5x + 1,125 - 15x = 975
-10x = -150
x = 15
y = 75 - 15
= 60
15 pounds of trail mix
60 pounds of premium cashews
self-employed cash basis taxpayer, took out a loan to use in her business. The loan principal is to be repaid on November 30 of Year 3. Jones prepaid the entire interest of $12,000 on December 1 of Year 1. What amount of interest was deductible on Jones' Year 2 income tax return?
Answer: $6,000
Explanation:
Interest is deductible from Income tax but when interest to be paid is more than 12 months, the interest would need to be evenly spread over the period that they apply to. The total interest is $12,000 but the repayment period is 2 years. This means that the interest would need to be spread out over the 24 months involved at a rate of;
= 12,000/24
= $500
In Year 2 therefore, the relevant amount that can be deducted will be for 12 months;
= 500 * 12
= $6,000
The decision to take less salary in a year when the company was less profitable and employees' pay was cut is an example of Nishimatsu's:
Answer: commitment
Explanation:
The Chief Executive Officer of Japan Airlines, who was Haruka Nishimatsu, was an example of a strategic leader who had a high performance.
The The decision to take less salary in a year when the company was less profitable and employees' pay was cut is an example of Nishimatsu commitment to the company.
The ending retained earnings balance of the Taco Heaven restaurant chain increased by $2.6 million from the beginning of the year. The company had declared a dividend of $1.5 million. What was the net income earned during the year
Answer: $4.1 million
Explanation:
From the question, we are informed that the ending retained earnings balance of the Taco Heaven restaurant chain increased by $2.6 million from the beginning of the year and that the company had declared a dividend of $1.5 million.
The net income earned during the year will be:
= $2.6 million + $1.5 million
= $4.1 million
If a manager is called upon to hire a new vendor and negotiate the best services for the best price, which type of role is required?
Answer:
decision making role
Explanation:
Management roles vary depending on which type of manager we are talking about: upper, middle or lower management. Management roles include:
Leadership and Interpersonal RolesInformational RolesDecision Making Roles: are themselves divided into 4 categories (entrepreneur, disturbance handler, resource allocator, negotiator). In this case, the manager is allocating resources since labor is a resource.The buyers purchased a residence for $195,000. They made a down payment of $25,000 and agreed to assume the seller's existing mortgage, which had a current balance of $123,000. The buyers financed the remaining $47,000 of the purchase price by executing a mortgage and note to the seller. This type of loan, by which the seller becomes a mortgagee, is called a
Answer:
purchase-money mortgage
Explanation:
This type of loan, by which the seller becomes a mortgagee, is called a purchase-money mortgage. As described, this is a mortgage issued to the borrower by the current seller of the home as part of the purchase transaction. This usually tends to occur when the buyer cannot qualify for a traditional lending channel mortgage, and in this scenario the buyer can instead become a mortgagee through a simple buying and selling transaction.
In 2006, Gap Inc. ended their relationship with 23 production facilities due to code violations. Several closings occurred because of the use of child labor. In response to these events the Gap created a large team whose purpose is to travel worldwide to ensure compliance with their Code of Vendor Conduct. This is an example of
Answer: Social responsibility.
Explanation: The action portrayed by Gap Inc. demonstrates an expemplary attitude worthy of emulation which nails down the principle of social responsibility by organizations. This principle looks beyond the profits and revenue generated by the company but also aims to play it's role and ensure that it's actions does not violate or degrade social ethics. The closure of some facilities due to human right violation and subsequent enforcement of compliance with the code and conduct is a strict signal towards the company's strict stance at supporting and enforcing social responsibility.
is considering an investment with an initial cost of $236,000. In Year 4, the project will require an additional investment and finally, the project will be shut down in Year 7. The annual cash flows for Years 1 to 7, respectively, are projected as $64,000, $87,000, $91,000, −$48,000, $122,000, $154,000, and −$30,000. If all negative cash flows are moved to Time 0 using a discount rate of 13 percent, what is the project's modified IRR?
Answer:
18.54%
Explanation:
The computation of the project modified IRR is shown below:
Here we use the spreadsheet for determining the IRR
but before that we need to find out the cash inflows
Years Amount (in dollars)
Year 0: = - $278,191.12
($236,000 - $48,000 ÷ 1.13^4 -$30,000 ÷ 1.13^7)
Year 1: 64000
Year 2: 87000
Year 3: 91000
Year 4: 0
Year 5: 122000
Year 6: 154000
Year 7: 0
Now we use the excel
=IRR({-$278,191.12,$64,000,$87,000,$91,000,$0,$122,000,$154,000,0})
= 18.54%
Coda Inc. is an apparel manufacturer. The management at Coda prefers moderate control over the operations of the different departments such as R&D, design, marketing, and sales. It allocates a budget to each function at the beginning of each quarter. This is an example of implementing control through _____.
Answer: input control
Explanation:
From the question, we are informed that Coda Inc. is an apparel manufacturer and that the management at Coda prefers moderate control over the operations of the different departments such as R&D, design, marketing, and sales.
We are further told that it allocates a budget to each function at the beginning of each quarter. This is an example of implementing input control.
If the Central Bank of Macroland puts an additional 1,000 dollars of currency into the economy, the public deposits all currency into the banking system, and banks have a desired reserve/deposit ratio of 0.10, then the banks will eventually make new loans totaling ______ and the money supply will increase by _______.
a. 9,000; 10,000
b. 9,000; 9,000
c. 10,000; 9,000
d. 10,000; 10,000
Answer:
a. 9,000; 10,000
Explanation:
The computation is shown below:
The money multiplier is
= 1 ÷ 0.10
= 10
Now If $1,000 are deposited in banks and the expected reserve ratio is 0.10 ration so the lending amount is $900.
And now if we considered the money multiplier, so it would be increased by
= $900 × $10
= $9,000
And, the increase in money supply is
= $9,000 + $1,000
= $10,000
Hence, the correct option is a.
Suppose that the central bank must follow a rule that requires it to increase the money supply when the price level falls and decrease the money supply when the price level rises. If the economy starts from long-run equilibrium and aggregate demand shifts right, the central bank must
Answer:
central bank must decrease the money supply, which shifts aggregate demand left
Explanation:
In such a situation as the one being described the central bank must decrease the money supply, which shifts aggregate demand left. This decrease in the money supply will lead to a decrease in consumer spending, thus reducing price levels and real output since there is less capital for spending in the economy, which ultimately causes the aggregate demand to shift to the left. Therefore creating balance in this situation.
If the economy is in long-run equilibrium and aggregate demand shifts right, the central bank must reduce the money supply, causing aggregate demand to shift left.
When the economy is in long-run equilibrium:
In a case like this, the central bank must reduce the money supply, which pushes aggregate demand to the left. Because there is less capital for spending in the economy, a fall in the money supply will lead to a decrease in consumer spending, lowering price levels and real output, causing aggregate demand to shift to the left. As a result, there is a sense of equilibrium in this circumstance.
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Jessica invested her savings in two investment funds. The amount she invested in Fund A was $8000 less than the amount she invested in Fund B. Fund A returned a 2% profit and Fund B returned a 8% profit. How much did she invest in Fund B, if the total profit from the two funds together was $2140
Answer:
23,000
Explanation:
Jessica invested her savings in two investment funds
The amount that she invested in fund A was $8000 than the amount invested in fund B
A + B = -8000.......... equation 1
Fund A returned 2% profit and fund B returned 8% profit
2/100= 0.02 , 8/100= 0.08
0.02A + 0.08B= 2140.............equation 2
From equation 1
A -B= -8000
A= -8000+B
Substitute -8000-B for A in equation 2
0.02(-8000+B) + 0.08B= 2140
-160+0.02B + 0.08B= 2140
-160 + 0.1B= 2140
Collect the like terms
0.1B= 2140+160
0.1B= 2300
B= 2300/0.1
B= 23,000
From equation 1
A-B= -8000
A= -8000+B
Substitute 23,000 for B
A = -8000+23000
A= 15,000
Hence Jessica invested 23,000 in fund B
A company is considering purchasing a machine that costs $280,000 and is estimated to have no salvage value at the end of its 8-year useful life. If the machine is purchased, annual revenues are expected to be $100,000 and annual operating expenses exclusive of depreciation expense are expected to be $38,000. The straight-line method of depreciation would be used. If the machine is purchased, the annual rate of return expected on this machine is:__________.
Answer:
19.29%
Explanation:
We can calculate Annual Rate of Return by using the following formula:
ARR = Net Income / Average Investment
Here
Net Income $27,000 Step1
Average Investment $140,000 Step2
By putting values, we have:
ARR = $27,000 / $140,000 = 19.29%
Step1: Net Income
Net Income = Annual Revenue - Depreciation - Operating Expenses
Here
Annual Revenue = $100,000 - $280,000/8 - $38,000
= $100,000 - $35,000 - $38,000
= $27,000
Step2: Average Investment
Average Investment = (Initial Investment + Scrap Value)/ 2
Average Investment = ($280,000 + 0)/2 = $140,000
Select all businesses directly involved in marketing.
Bank
Marketing research form
medical center
government agency
car dealership
advertising agency
Answer:
The correct options are;
Marketing research firm
Advertising agency
Explanation:
Marketing research firms are firms that undertake field data sourcing and assessment with regards to goods and services consumers, local and international competitors, market distribution networks as forces and participants as well as other factors that determine a market place. Market research firms usually work in behalf of other organisations
An advertising, creative, or ad agency are establishment that plan, handle and develop advertising, sales promotions and marketing campaign for their business customers.
For February, the cost components of a picture frame include $0.45 for the glass, $0.68 for the wooden frame, and $0.95 for assembly. The assembly desk and tools cost $500. Two hundred fifty frames are expected to be produced in the coming year. What cost function best represents these costs?
Answer: C(x) = 2.08 + 500x
Explanation:
Given the following :
Cost component of picture frame :
Glass = $0.45
Wooden frame = $0.68
Assembly = $0.95
Assembly desk and tools = $500
Using the linear cost function :
C(x) = mx + b
C(x) = total cost
b = fixed cost
mx = variable cost
b = cost of glass + wooden frame + assembly
b = $(0.45 + 0.68 + 0.95) =$2.08
mx = (cost of assembly desk and tools * number produced) = 500x
C(x) = 2.08 + 500x
Three Point Sports Inc. manufactures basketballs for the Women's National Basketball Association (WNBA).
For the first 6 months of 2017, the company reported the following operating results while operating at 80% of plant capacity and producing 119,400 units:
Sales $4,656,600
Cost of goods sold 3,684,708
Selling and administrative expenses 526,292
Net income $445,600
Fixed costs for the period were cost of goods sold $ 960,000 and selling and administrative expenses $ 266,000.
In July, normally a slack manufacturing month, Three Point Sports receives a special order for 10,000 basketballs at $ 28 each from the Greek Basketball Association (GBA).
Acceptance of the order would increase variable selling and administrative expenses by $ 0.77 per unit because of shipping costs but would not increase fixed costs and expenses.
Required:
(a) Prepare an incremental analysis for the special order.
(Round all per unit computations to 2 decimal places)
Reject Order Accept Order Net Income Increase (Decrease)
Revenues $ $ $
Cost of goods sold
Selling and administrative expenses
Net income $ $ $
(b) Should Three Point Sports Inc. accept the special order?
(c) What is the minimum selling price on the special order to produce net income of $5.16 per ball?
(Round answer to 2 decimal places)
Answer:
a) incremental analysis
normal selling price = $39 per ball
variable costs per unit:
variable COGS $22.82variable S&A $2.18 + $0.77 = $2.95special order for 10,000 balls at $28
INCREMENTAL ANALYSISwithout special with special differential
order order amount
sales revenue $0 $280,000 $280,000
COGS $0 $228,200 $228,200
S&A expenses $0 $29,500 $29,500
Net income $0 $22,300 $22,300
b) The special order should be accepted because it increases operating profits by $22,300
c) current margin = $2.23 per ball
sales price to produce net income of $5.16 per ball = $28 + ($5.16 - $2.23) = $30.93 per ball
A. an incremental analysis of $2.95
B. Increases operating profits by $22,300
C. The minimum selling price is $30.93 per ball
Calculation of Fixed costsa) The incremental analysis
Then, normal selling price = $39 per ball
variable costs per unit:
variable COGS $22.82
Therefore, variable S&A $2.18 + $0.77 = $2.95
special order for 10,000 balls at $28
INCREMENTAL ANALYSIS
without special with special differential
order order amount
sales revenue $0 $280,000 $280,000
COGS $0 $228,200 $228,200
S&A expenses $0 $29,500 $29,500
Net income $0 $22,300 $22,300
b) When The special order should be accepted because it increases operating profits by $22,300
c) Then, The current margin is = $2.23 per ball
After that sales price to produce net income of $5.16 per ball is = $28 + ($5.16 - $2.23) = $30.93 per ball
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Two years ago, a customer purchased 1,000 shares of ABC stock at $45 per share. The stock has appreciated in value and is currently worth $60,000. The company announces that it is spinning off a subsidiary, DEF, to its shareholders. The value of the new company being spun off equals 5% of the old company. The customer will have:___________
Answer:
Explanation:
Spin off can be defined as the splitting of the shares of an existing company in order to form an independent new entities as part of larger business.
In calculating the spill off value of a business ,the aggregate cost of the business is used and not the aggregate cost.
Workings
Shares stock acquired = 1,000
initial share price = $45
Total share value = 45*1000=45,000
Percentage split off to DEF= 5%
Value split off = 5%*45,000 =2,250
Percentage retained in ABC = 95%*5,000
=42,750
