At the end of the first year of operations, 6,400 units remained in the finished goods inventory. The unit manufacturing costs during the year were as follows:
Direct materials $75
Direct labor 35
Fixed factory overhead 15
Variable factory overhead 12
Determine the cost of the finished goods inventory reported on the balance sheet under (a) the absorption costing concept and (b) the variable costing concept.

Answers

Answer 1

Answer:

Results are below.

Explanation:

Giving the following information:

The unit manufacturing costs during the year were as follows:

Direct materials $75

Direct labor 35

Fixed factory overhead 15

Variable factory overhead 12

Number of units= 6,400

The absorption costing method includes all costs related to production, both fixed and variable. The unit product cost is calculated using direct material, direct labor, and total unitary manufacturing overhead.

The variable costing method incorporates all variable production costs (direct material, direct labor, and variable overhead).

Absorption method:

Unit product cost= direct material + direct labor + total unitary overhead

Unit product cost= 75 + 35 + 15 + 12

Unit product cost= $137

Total ending inventory cost= 137*6,400

Total ending inventory cost= $876,800

Variable costing method:

Unit product cost= direct material + direct labor + variable overhead

Unit product cost= 75 + 35 + 12

Unit product cost= $122

Total ending inventory cost= 122*6,400

Total ending inventory cost= $780,800


Related Questions

All of the following are symptoms of organizations struggling with strategy disconnect and unclear priorities EXCEPT Multiple Choice inadequate resources. people are working on multiple projects and feel inefficient. frequent conflicts between managers. confused employees regarding which projects are more important. not enough projects within the portfolio to make a profit.

Answers

Answer:

All of the following are symptoms of organizations struggling with strategy disconnect and unclear priorities EXCEPT

not enough projects within the portfolio to make a profit.

Explanation:

Strategy disconnect does not support an organization to be consistent in its actions at every level.  However, where the strategy is shared across board, there is an integrated and coordinated attempt at long-term planning with the organization positioned to exceed the needs of its customers and to achieve success.  With strategy connect, the organization responds well to changes in its external environment and is able to allocate scarce resources for the improvement of its competitive position.

A company uses the weighted average method for inventory costing. During a period, Department B finished and transferred 62,000 units to Department C. Also in Department B during the period, 16,000 units were started but brought only to a stage of being 60% completed. The number of equivalent units produced by Department B during the period was:_____.a. 60,000 units.
b. 55,000 units.
c. 62,500 units.
d. 67,500 units.
e. 47,500 units.

Answers

Answer:

Total Equivalent units of production= 71,600 units

Explanation:

The weighted average method blends the costs and units of the previous period with the costs and units of the current period.

Units completed in the period + Equivalent units in ending inventory WIP (units*%completion) = Equivalent units of production

Equivalent units of production:

Units completed in the period= 62,000

Equivalent units in ending inventory WIP= (16,000*0.6)= 9,600

Total Equivalent units of production= 71,600 units

The Paw Patrol Smartphone lets kids learn about colors, numbers, and music. It has four Paw Patrol characters for the game plus numbers and colors. Before developing the Smartphone, Paw Patrol researched the market to see if this Smartphone would face stiff competition. Which step of segmenting the market does this example represent

Answers

Answer:

Profiling and analysing segments

Explanation:

Segmentation is the division of people into certain groups based on shared characteristics.

For example, In demographic segmentation, people are placed into groups based on age, gender, ethnicity and other demographic factors

Stages of segmenting a market

Selecting a product category to study - the product whose market would be segmented is chosen Choosing a basis for segmentation Selecting segmentation descriptors Profiling and analyzing segments

A physical count of merchandise inventory on July 30 reveals that there are 48 units on hand. Using the LIFO inventory method, the amount allocated to cost of goods sold for July is

Answers

Answer:

The amount allocated to cost of goods sold for July is $2,070.

Explanation:

Note: This question is not complete. The complete question is therefore provided before answering the question as follows:

Olympus Climbers Company has the following inventory data:

July 1 Beginning inventory 30 units at $19    $570

      7 Purchases 105 units at $20                  2100

    22 Purchases 15 units at $22                      330

                                                                      $3000  

A physical count of merchandise inventory on July 30 reveals that there are 48 units on hand. Using the LIFO inventory method, the amount allocated to cost of goods sold for July is

The explanation of the answers is now provided as follows:

Last in, first out (LIFO) inventory method refers to a method under which the costs of the costs of the most recent goods purchased or manufactured are expensed first.

Thereforee, the amount allocated to cost of goods sold for July can be calculated as follows:

Total units available for sales = 30 + 105 + 15 = 150 units

Units sold = Total units available for sales - Units on hand on July 30 = 150 - 48 = 102 units

Cost of goods sold for July = Value of 15 units July 22 purchases + (87 units * Cost per units of purchases on July 7) = $330 + (87 * $20) = $330 + $1,740 = $2,070

Therefore, the amount allocated to cost of goods sold for July is $2,070.

Nathan and Diana are married and have three married children and seven minor grandchildren. For tax year 2020, what is the maximum amount they can give to the family (including the sons- and daughters-in-law) without using any of their unified transfer tax credit

Answers

Answer:

Maximum amount that can be given to family (including the sons- and daughters-in-law) without using unified transfer tax credit is $390,000.

Explanation:

Given the data in the question;

Nathan and Diana are married and they have 3 married children, meaning Nathan and Diana also have 3 daughters/sons in law married to their children. In addition, they have 7 minor grand children.

Number of donees will be ⇒ 3 + 3 + 7 = 13

Now, we know that; The annual gift tax exclusion for 2019-2020 is $15,000 per donee or individual for every tax payer while that of married couple is $30,000.

Meaning Nathan and Diana can give $30,000as a gift to each of their family members without using any of their unified transfer tax credit.

Hence,

Maximum amount that can be given to family (including the sons- and daughters-in-law) without using unified transfer tax credit will be;

⇒ 13 × $30,000

= $390,000.

Your income is $10,000 over the cutoff for the next lowest tax bracket. Your average tax rate is 10%. Your marginal tax rate is 25%. You contribute $3,000 to a traditional IRA and your contribution is fully deductible, should you decide to go that way. You decide, in fact, to make this a traditional IRA. How much did your contribution actually cost you, in after-tax dollars

Answers

Answer:

"$2,250" is the appropriate answer.

Explanation:

Given values are:

Before tax cost,

= $3000

Marginal tax rate,

= 25%

or,

= 0.25

The after tax cost of contribution will be:

= [tex]Before \ tax \ cost\times (1-Marginal \ tax \ rate)[/tex]

By putting the values, we get

= [tex]3000(1-25 \ percent)[/tex]

= [tex]3000(1-0.25)[/tex]

= [tex]3000\times 0.75[/tex]

= [tex]2250[/tex] ($)

Farris Corporation, which has only one product, has provided the following data concerning its most recent month of operations:Selling price 156 Units in beginning inventory 0Units produced 9,500Units sold 9,100Units in ending inventory 400 Variable costs per unit: Direct materials 29Direct labor 71Variable manufacturing overhead 17Variable selling and administrative expense 21Fixed costs: Fixed manufacturing overhead 142,500Fixed selling and administrative expense 9,900What is the net operating income for the month under absorption costing?a. $35,400
b. $11,400
c. $17,400
d. $6,000

Answers

Answer:

c. $17,400

Explanation:

The computation of the net operating income under absorption costing is given below:

unit product cost under Absorption costing    

direct materials $29  

direct labor $71  

variable manufacturing overhead $17  

fixed manufacturing overhead ($142,500 ÷ 9,500) $15  

unit product cost $132  

Now  

Sales  (9,100 × 156)  $1,419,600  

less:Variable cost of good sold (9,100  × 132) $1,201,200  

Gross profit $218,400  

Selling and administrative expense    

variable selling expens (9,100  × 21) $191,100    

Fixed selling & adm expense $9,900    

Net operating income  $17,400

The index weighting that results in portfolio weights shifting away from securities that have increased in relative value toward securities that have fallen in relative value whenever the portfolio is rebalanced is most accurately described as:_________
a) float-adjusted market-capitalization weighting.
b) fundamental weighting.
c) equal weighting.

Answers

Answer: B. Fundamental weighting.

Explanation:

A fundamentally weighted index refers to a type of equity index whereby the components that are chosen based on the fundamental criteria like the dividend rates, book value, revenue, dividend rates, etc.

Fundamental weighting is the index weighting which results in portfolio weights shifting away from securities that have increased in relative value toward securities that have fallen in relative value whenever the portfolio is rebalanced.

Frank decides that a social media campaign is the best way for him to attract new business to Slice of Life Pizza. After Frank identifies his strategies and goals, the next step in the campaign is

Answers

Answer: identify your target audience

Explanation:

Since Frank has identified his strategies and goals, then the next step in the campaign will be to identify the target audience.

The target audience refers to the consumers that are likely to attract new business to Slice of Life Pizza. This is vital for Frank to be able to reach out to more customers and make profit.

Portside Watercraft uses a job order costing system. During one month Portside purchased $173,000 of raw materials on credit; issued materials to production of $164,000, of which $24,000 were indirect. Portside incurred a factory payroll cost of $95,000, of which $25,000 was indirect labor. Portside uses a predetermined overhead rate of 170% of direct labor cost. The journal entry to record the issuance of materials to production is:

Answers

Answer:

Debit Work in Process Inventory $140,000

Debit Factory Overhead $24,000

Credit Raw Materials Inventory $164,000.

Explanation:

Preparation of The journal entry to record the issuance of materials to production

Based on the information given The journal entry to record the issuance of materials to production is:

Debit Work in Process Inventory $140,000

($164,000-$24,000)

Debit Factory Overhead $24,000

Credit Raw Materials Inventory $164,000

(To record the issuance of materials to production)

Margas Framing's cost formula for its supplies cost is $2,240 per month plus $6 per frame. For the month of May, the company planned for activity of 808 frames, but the actual level of activity was 810 frames. The actual supplies cost for the month was $7,090. The supplies cost in the flexible budget for May would be closest to:_____.a. $7,106.
b. $7,088.
c. $7,100.
d. $7,090.

Answers

Answer: c. $7,100

Explanation:

Supplies cost according to the flexible budget is to be calculated based on the actual level of activity.

The cost is:

= Fixed cost + (Variable cost * actual level of activity)

= 2,240 + (6 * 810)

= 2,240 + 4,860

= $7,100

Company X has a P/E ratio of 10 and a stock price of $50 per share. Calculate earnings per share of the company.A) $5 per share.B) $ per share.C) $0. per share.D) $6 per share.

Answers

Answer:

A) $5 per share

Explanation:

Calculation to determine the earnings per share of the company.

Using this formula

EPS=Stock price/P/E ratio

Let plug in the formula

EPS = 50/10

EPS= $5 per share

Therefore the earnings per share of the company will be $5 per share

XYZ Co. uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. It based its predetermined overhead rate for the current year on total fixed manufacturing overhead cost of $440,000, variable manufacturing overhead of $2.20 per machine-hour, and 50,000 machine-hours. The estimated total manufacturing overhead is closest to:

Answers

Answer:

the estimated total manufacturing overhead is $550,000

Explanation:

The computation of the estimated total manufacturing overhead is given below:

= Fixed manufacturing overhead + variable manufacturing overhead

= $440,000 + $2.20 × 50,000 machine hours

= $440,000 + $110,000

= $550,000

hence, the estimated total manufacturing overhead is $550,000

which of the following would be included in the set of electrical plans for individual residence?

A. Individual romex cables
B. Power panels to be installed
C. routes of cables
D. Wire sizes

Answers

Answer:

A. Individual romex cables

Explanation:

Individual romex cables would be included in the set of electrical plans for individual residence.

This is because they are a non-metallic sheathed cables, and they are flexible electrical cables which are popularly used in residential setups.

This cable comes with two insulated wires that include a ground copper wire that ensures safe passage of electrical current in case of any unfortunate event.

Amount of
Invoice
Terms of
Sale
Partial
Payment
Credit for
Partial Payment
Net
Amount Due
$5,998.20
4/15, n/60
$3,100
$
$

Answers

Answer:

Credit partial payment is "$3229.17" and Net amount due is "$2769.03".

Explanation:

Given:

Invoice,

= $5998.20

Sales terms,

= 4/15, n/60

Partial payment,

= $3100

The credit partial payment will be:

= [tex]\frac{Partial \ payment}{1-Discount}[/tex]

= [tex]\frac{3100}{1-0.04}[/tex]

= [tex]\frac{3100}{0.96}[/tex]

= [tex]3229.17[/tex] ($)

The due net amount will be:

= [tex]5998.20-3229.17[/tex]

= [tex]2769.03[/tex] ($)

What is the purpose of an inspection report ​

Answers

Answer:The purpose of inspection reports is to document the inspection scope, observation, and findingsof inspections conducted by the NRC. 

Explanation:The NRC performs inspections to oversee the commercial nuclear industry to determine whether its requirements are being met by licensees and their contractors.

The ABC Corporation makes collections on sales according to the following schedule: 45% in month of sale 50% in month following sale 5% in second month following sale The following sales have been budgeted: Sales April $ 160,000 May $ 180,000 June $ 170,000 Budgeted cash collections in June would be:

Answers

Answer: $170500

Explanation:

Based on the information given in the question, the budgeted cash collections in June would be calculated thus:

= (45% × $160000) + (50% × $180000) + (5% × $170000)

= $72000 + $90000 + $8500

= $170500

Therefore, the budgeted cash collections in June would be $170500

Carmen Co. can further process Product J to produce Product D. Product J is currently selling for $23.80 per pound and costs $15.00 per pound to produce. Product D would sell for $44.55 per pound and would require an additional cost of $11.75 per pound to produce. The differential cost of producing Product D is

Answers

Answer:

$20.75

Explanation:

Calculation to determine what The differential cost of producing Product D is

Using this formula

Differential cost =Revenue from sale of product D−Revenue from sale of product J

Let plug in the formula

Differential cost ​=$44.55−$23.80

Differential cost =$20.75

Therefore The differential cost of producing Product D is $20.75

Ames Trading Co. has the following products in its ending inventory.Product Quantity Cost per Unit Market per UnitMountain bikes 11 $600 $550Skateboards 13 $350 $425Gliders 26 $800 $700Compute lower of cost or market for inventory applied separately to each product.

Answers

Answer:

Mountain Bikes

Market value is $550 and cost is $600.

Lower is market.

Inventory value is therefore:

= Quantity * Market

= 11 * 550

= $6,050

Skateboards

Market value is $425 and cost is $350.

Cost is lower.

Inventory value is:

= 13 * 350 cost

= $4,550

Gliders

Market value is $700 and cost is $800.

Inventory value is:

= 26 * 700 market value

= $18,200

Granfield Company is considering eliminating its backpack division, which reported an operating loss for the recent year of $42,200. The division sales for the year were $963,800 and the variable costs were $477,000. The fixed costs of the division were $529,000. If the backpack division is dropped, 40% of the fixed costs allocated to that division could be eliminated. The impact on Granfield's operating income for eliminating this business segment would be:__________.
a. $275,200 increase
b. $486,800 decrease
c. $211,600 increase
d. $275,200 decrease
e. $486,800 increase

Answers

Answer:

d. $275,200 decrease

Explanation:

Calculation to determine what The impact on Granfield's operating income for eliminating this business segment would be:

Using this formula

Impact on operating income =Saving in relevant fixed cost -loss of Contribution margin of backpack Division

Let plug in the formula

Impact on operating income=($529,000*40%)-($963,800-$477,000)

Impact on operating income=$211,600-$486800

Impact on operating income=$275,200 decrease

Therefore The impact on Granfield's operating income for eliminating this business segment would be:$275,200 decrease

Hayward Industries manufactures dining chairs and tables. The following information is available: Dining Chairs Tables Total Cost Machine setups 200 600 $48,000 Inspections 250 470 $72,000 Labor hours 2,600 2,400 Hayward is considering switching from one overhead rate based on labor hours to activity-based costing. Perform the following analyses for these two components of overhead: Compute total machine setups and inspection costs assigned to each product, using a single overhead rate.

Answers

Answer and Explanation:

The computation is shown below:

Single overhead rate is

= total cost ÷ total labor hours

= ($48000 + $72000 ) ÷ (2600+2400)

= 24 per labour hour

Now  

Dining chairs

= 2600 × 24

= $62400

And,

tables

= 2400 × 24

= $57600

total = $120000

Along any downward sloping straight-line demand curve: Group of answer choices both the price elasticity and slope are constant. both the price elasticity and slope vary. the price elasticity varies, but the slope is constant. the slope varies, but the price elasticity is constant.

Answers

Answer:

the price elasticity varies, but the slope is constant

Explanation:

The demand curve is a curve that shows the relationship between price and quantity demanded. The demand curve is negatively sloped because the higher the price, the lower the quantity demanded. This is in line with the law of demand.

According to the law of demand, the higher the price, the lower the quantity demanded and the lower the price, the higher the quantity demanded.

At the midpoint of the demand curve, demand is usually unit elastic. Above the midpoint of the demand curve, demand is elastic and blow the midpoint, demand is inelastic

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  

Price elasticity of demand = midpoint change in quantity demanded / midpoint 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.  

Demand is inelastic if a small change in price has little or no effect on quantity demanded. The absolute value of elasticity would be less than one

Demand is unit elastic if a small change in price has an equal and proportionate effect on quantity demanded.  

Infinitely elastic demand is perfectly elastic demand. Demand falls to zero when price increases  

Perfectly inelastic demand is demand where there is no change in the quantity demanded regardless of changes in price.

A money market security that has a par value of $10,000 sells for $8,924.70. Given that the security has a maturity of two years, what is the investor's required rate of return?

Answers

Answer:

The answer is "5%".

Explanation:

[tex]\to \$8,924.70 = \frac{10,000}{(1 + r )^2}\\\\\to \$8,924.70 (1+r)^2= 10,000\\\\\to (1+r)^2= \frac{10,000}{\$8,924.70}\\\\\to (1+r)^2= \frac{10,000}{\$8,924.70}\\\\\to (1+r)^2= 1.1204\\\\\to (1+r)= 1.05\\\\\to r= 1.05-1\\\\\to r=0.05\\\\\to r=5\%\\\\[/tex]

One reason IT is important is because video conferencing has become cheaper, quicker, more collaborative, and more efficient. Of what IT benefit is this an example

Answers

Answer:

Communication

Explanation:

Communication

This is simply defined as information exchange or simply say the sharing of thoughts, messages, or information, by speech, signals, writing, or behavior etc.

Communication Technology

This is simply an act or form of communication that involves the use of technical equipment.

Input devices

This are used to enter information into a communication technology system; it includes the keyboard, microphone, a television camera etc.

Output

This are used in getting information or messages out using communication systems devices such as TV, speakers, computer monitor, etc.

Information

This are said to be data that has been sorted and arranged with a particular mindset.

In communication, due to the internet and mobile technologies, we can communicate with anyone in the world and form relationships with people who are some distance away, rather than being limited to people within our physical vicinity. This has some great benefits for both work and home life.

The current account balance equals​ _______. A. net exports plus net foreign investment in the United States B. exports minus imports plus net interest and net transfers C. the capital and financial account balance minus the official settlements account balance D. net exports plus the official settlements balance

Answers

Answer:

a

Explanation:

the current account of a country measures the value of the trade balance, transfers and the net income

the component of the current account includes

trade balance - it measures the value of the  import and export of goods and services of a country.

net income - measures the value of the income received by a country's residents less the income paid to foreigners

transfers - it includes income sent home by a country's citizens working outside the country

Current account = net export + net income + net transfers

Two towns, each with three members, are deciding whether to put on a fireworks display to celebrate the New Year. Fireworks cost $360. In each town, some people enjoy fireworks more than others. In the town of Bayport, each of the residents values the public good as follows:

Resident Value (Dollars)
Musashi 50
Rina 100
Sean 300

he total benefit of the fireworks display to the town of Bayport is $: ___________

Answers

Answer:

$450

Explanation:

The benefit an individual derives from an activity can be described as the total satisfaction or utility that individual derives from carrying out a particular activity. It is the value an individual derives from a particular activity

Benefit can be measured in dollars or in utils

the higher the value of the dollar or util, the higher the benefit the consumer derives from an activity

A rational person would weigh the cost of an activity to the benefit that would be derived from the activity. The individual would carry out the activity only if benefit outweigh the cost.

For example, in this question, the total benefit of fireworks display is 450. this is greater than the cost. So, the town would carry out the firework display

Total benefit is the sum of individual value individuals would derive from an activity.

total benefit = $50 + $100 + $300 = $450

Fresh Veggies, Inc. (FVI), purchases land and a warehouse for $450,000. In addition to the purchase price, FVI makes the following expenditures related to the acquisition: broker's commission, $25,000; title insurance, $1,500; and miscellaneous closing costs, $5,200. The warehouse is immediately demolished at a cost of $25,000 in anticipation of building a new warehouse. Determine the amount FVI should record as the cost of the land

Answers

Answer:

$506,700

Explanation:

Calculation to determine the amount FVI should record as the cost of the land

Purchases land and a warehouse for $450,000

Add Commission $25,000

Add Title insurance $1,500

Add Miscellaneous closing costs $5,200

Add Demolished cost $25,000

Cost of the land $506,700

Therefore the amount FVI should record as the cost of the land is $506,700

Beta Company reported the following operating data for its baking division for the year: Sales $560,000 Contribution margin 308,000 Direct fixed costs 47,000 Average operating assets 230,000 How much is controllable margin for the year

Answers

Answer: $261000

Explanation:

Based on the information given in the question, the controllable margin for the year will be calculated thus:

Contribution margin = $308000

Less: Direct fixed cost = $47000

Controllable margin = $261000

Therefore, the controllable margin is $261000.

Consider a Cournot duopoly with the following inverse demand function: P = 96 - 2Q1 - 2Q2, where Q1 and Q2 are quantities produced by firms 1 and 2, respectively. The firms' marginal cost are identical and given by MCi(Qi) = 2Qi, where i is either firm 1 or firm 2. Based on this information firm 1 and 2's reaction functions are:_____.
a. MR1(Q1, Q2) = 100-2Q1-Q2 and MR2(Q1, Q2) 100-Q1-2Q2.
b. MR1(Q1, Q2) = 100-4Q1-2Q2 and MR2(Q1, Q2) = 100 - 2Q1 - 402.
c. MR1(Q1, Q2) = 100 - 2Q1 - 4Q2 and MR2(Q1, Q2) = 100 - 4Q1 - 2Q2.
d. MR1(Q1, Q2) = 24.5 - 0.5Q2 and MR2(Q1, Q2) = 24.5 - 0.5Q1.
Two identical firms compete as a Cournot duopoly. The demand they face is P = 90-Q. The cost function for each firm is C(Q_i) = 6Qi. Each firm earns equilibrium profits of:_____.

Answers

Answer: See explanation

Explanation:

The revenue - firm 1 will be:

= P x Q1

= 100Q1 - 2Q1² -2Q1Q2

Then, marginal revenue MR1 will be:

= dR1/dQ1

= 100 - 4Q1 -2Q2

Similarly, the revenue for firm 2 will be:

= P x Q2

= 100Q2 - 2Q2² -2Q1Q2

Then, MR2 will be:

= 100 - 4Q2 - 2Q1

Therefore, MR1(Q1, Q2) = 100-4Q1-2Q2 and MR2(Q1, Q2) = 100 - 2Q1 - 402.

Option B is the correct answer.

P = 90 - Q

Q = Q1 + Q2

The revenue for firm 1 (R1) will be:

= PQ1

= 90Q1 - Q1² - Q2Q1

The marginal revenue MR1 will be:

= 90 - 2Q1 - Q2

The marginal cost MC is:

= dC/dQ

= 6

Since profit is maximized when MR = MC, this will be:

90 - 2Q1 - Q2 = 6

- 2Q1 - Q2 = 6 - 90

- 2Q1 - Q2 = - 84

2Q1 + Q2 = 84

3Q = 84

Q1 = Q2 = 28

Therefore,

P = 90-Q.

P = 90 - (Q1 + Q2)

P = 90 - (28 + 28)

P = 90 - 56

P = 34

Then, the equilibrium profit will be:

= Total revenue - Total cost

= (34 × 28) - (6 × 28)

= 952 - 168

= 784

A stock will pay no dividends for the next 5 years. Then it will pay a dividend of $5 growing at 2%. The discount rate is 10%. What should be the current stock price?

Answers

Answer:

$38.81

Explanation:

The value of the stock is the present value of its future divided payments, bearing in mind that the first dividend is payable six years from,hence, the present value of dividend in year 5( a year before its payment) is then computed thus:

PV of dividend at the end of year 5=expected dividend/discount rate-growth rate

expected dividend in year 6=$5

discount rate=10%

growth rate=2%

PV of dividend at the end of year 5=$5/(10%-2%)

PV of dividend at the end of year 5=$62.50

We need to discount the PV backward by 5 years to show the stock value today

the current stock price=$62.50/(1+10%)^5

the current stock price= $38.81  

Other Questions
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