Answer:
a. Marginal product of a factor of production diminishes as more of it is employed with a given quantity of other inputs
Explanation:
The law of diminishing return states that in applying a successive unit of variable cost to a fixed cost, the return per unit of variable cost will eventually diminish or fall.
What the above means is that at a certain point, the continuous addition of land, labor , capital and entrepreneur will bring about a fall or reduction in output.
An example is where a company operate at a maximum level, there would be a fall in output even when additional workers are employed given that the factors of production are constant.
Asteroid Industries accumulated the following cost information for the year:
Direct materials $15,200
Indirect materials 3,200
Indirect labor 7,700
Factory depreciation 12,000
Direct labor 36,200
Using the above information, total factory overhead costs equal: _________
Answer:
Factory overhead= $22,900
Explanation:
Giving the following information:
Direct materials $15,200
Indirect materials 3,200
Indirect labor 7,700
Factory depreciation 12,000
Direct labor 36,200
Factory overhead is all the indirect costs related to production. In this case:
Factory overhead= indirect materials + indirect labor + factory depreciation
Factory overhead= 3,200 + 7,700 + 12,000
Factory overhead= $22,900
Label each of the following statements true, false, or uncertain. Explain your choice carefully.
a. The present discounted value of a stream of returns can be calculated in real or nominal terms.
b. The higher the one-year interest rate, the lower the present discounted value of a payment next year.
c. Interest rates are normally expected to be constant over time.
d. Bonds are a claim to a sequence of constant payments over a number of years.
e. The yield curve normally slopes up.
Answer:
a. The present discounted value of a stream of returns can be calculated in real or nominal terms. TRUE
This is true because the present value of returns can be calculated using nominal rates which do not account for inflation, or using real rates which will account for inflation.
b. The higher the one-year interest rate, the lower the present discounted value of a payment next year. TRUE
Higher interest rates discount payments faster because they discount by dividing the payment so a higher rate would divide the payment more and lead to a lower present value.
c. Interest rates are normally expected to be constant over time. FALSE
Interest rates change over time in response to economic conditions.
d. Bonds are a claim to a sequence of constant payments over a number of years. TRUE
As a bondholder, you are entitled to payments over the life of the bond which means that it is a claim to constant payment over a number of years.
e. The yield curve normally slopes up. TRUE
The yield curve slopes upward to represent that interest rates increase in future.
DAN Enterprise purchased a building at the cost of RM250,000. The
purchase was paid RM50,000 in cash and the remaining RM200,000 is on
account. Based on these transactions, what are the effects of these
transactions on the accounting equation?
RM250,000 increase in asset; RM250,000 increase in owner's equity
RM200,000 increase in asset; RM200,000 increase in owner's equity
RM200,000 increase in asset; RM200,000 increase in liability
RM250,000 increase in asset; RM250,000 increase in liability
Answer:
guyttiyvk6jfcurifsrtu
Purchase of inventory on credit transactions that Affect Assets and Liabilities. The accounting equation states that there must be a credit for each debit.
Explain about the accounting equation?
The accounting equation demonstrates that the total assets of a company equal the sum of its liabilities and shareholders' equity (assets = liabilities + equity). The basis of double-entry bookkeeping is the distinct relationship between a company's liabilities, assets, and equity.
The three variables in the accounting equation are assets, liabilities, and shareholders' equity. A company's assets are equal to the sum of its liabilities and shareholders' equity, according to a straightforward formula
Liabilities and equity add up to the total amount of assets in the fundamental accounting equation. Assets = Liabilities + Equity is the accounting equation. You use capital or debt to fund your purchases, so both sides of the equation must be equal.
To learn more about accounting equation refer to:
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Antitrust regulators are likely to prohibit two firms from merging if: __________.
a. There are sizable synergies to the combination
b. The combined firm will have a large share of the market
c. There are many other firms in industry
d. The combined firm will undercut competitiors with lower prices
Answer:
If the combined firm will have a large share of the market.
Explanation:
Doescribe an incidence when a leader had a strong vision but failed to implement it. What could the leader have done to better implement their vision?
Also, why is it important that the level of challenge included in a vision be neither too much nor too little? What specific steps could the leader take to ensure the level of challenge is appropriate to their audience?
well it is quite difficult to tell because if in politics we talk so the the answer is greed of modey because one rotten fruit rotes spoils the other fruit of basket and so yes it has different answers for example if we talk of a middle class human so may be there is a reason behind!
Porter Inc. acquired a machine that cost $367,000 on October 1, 2019. The machine is expected to have a five-year useful life and an estimated salvage value of $43,000 at the end of its life. Porter uses the calendar year for financial reporting. Depreciation expense for one-fourth of a year was recorded in 2019.
Required:
a. Using the straight-line depreciation method, calculate the depreciation expense to be recognized in the income statement for the year ended December 31, 2021, and the balance of the Accumulated Depreciation account as of December 31, 2021.
b. Using the double-declining-balance depreciation method, calculate the depreciation expense for the year ended December 31, 2021, and the net book value of the machine at that date.
Answer:
The answer is "148050 and 246740".
Explanation:
Please find the complete question in the attached file.
for point a:
Cost [tex]365000[/tex]
Less: Salvage value [tex]36000[/tex]
Depreciable cost [tex]329000[/tex]
Divide by Useful life [tex]5[/tex]
Annual Depreciation [tex]65800[/tex]
Depreciation expense [tex]65800[/tex]
Accumulated Depreciation[tex]=(65800\times \frac{1}{4})+65800+65800= 148050[/tex]
for point b:
Double declining balance rate [tex]=\frac{1}{5}\times 2= 40\%[/tex]
Depreciation for 2019 [tex]=365000\times 40\%\times \frac{1}{4}=36500[/tex]
Depreciation for 2020[tex]=(365000-36500)\times 40\%=131400[/tex]
Depreciation expense for 2021 [tex]=(365000-36500-131400)\times 40\%= 78840[/tex]
Depreciation expense 78840
Accumulated Depreciation [tex]=36500+131400+78840 =246740[/tex]
Salge Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The variable overhead rate is $8.10 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $74,730 per month, which includes depreciation of $20,670. All other fixed manufacturing overhead costs represent current cash flows. The direct labor budget indicates that 5,300 direct labor-hours will be required in September. The company recomputes its predetermined overhead rate every month. The pre-determined overhead rate for September should be:___.
a. $18.30.
b. $14.10.
c. $8.10.
d. $22.20.
Answer:
d. $22.20
Explanation:
Calculation to determine what the pre-determined overhead rate for September should be:
Using this formula
Predetermined overhead rate = Variable overhead rate per direct labor hour + Estimated fixed manufacturing overhead/Estimated direct labor hour
Let plug in the formula
Predetermined overhead rate=$8.10 + ($74,730/5,300)
Predetermined overhead rate= $8.10+$14.1
Predetermined overhead rate= $22.20 per direct
Therefore the pre-determined overhead rate for September should be:$22,20
Dentaltech Inc. projects the following data for the coming year. If the firm follows the residual dividend policy and also maintains its target capital structure, what will its payout ratio be?
Answer:
37.2%
Explanation:
Payout ratio is the rate at which a firm distributes its net income. The payout ratio can be calculated as;
Payout Ratio = Dividends declared / Net Income
Payout ratio = $74,400 / $200,000 = 37.2%
Dentaltech Inc. has payout ratio of 37.2%
The probability distribution of damage claims paid by Insurance ABC on collision insurance is as followed: Payment ($) Probability 0 0.85 500 0.04 1000 0.04 3000 0.03 5000 0.02 8000 0.01 10000 0.01 How much should the collision insurance premium be so the company can break even
Answer:
The appropriate response is "$430".
Explanation:
According to the question, the solution will be:
⇒ [tex]E(x)=\Sigma xP(x)[/tex]
By substituting the values, we get
⇒ [tex]=0\times 0.85+500\times 0.04+1000\times 0.04+3000\times 0.03+5000\times 0.02+8000\times 0.01+10000\times 0.01[/tex]
= [tex]430[/tex] ($)
Thus, the above is the correct answer.
The Japanese concept of a company coalition of suppliers is:________.
a. poka-yoke.
b. kaizen.
c. keiretsu.
d. dim sum.
e. illegal.
Answer:
C. Keiretsu
Explanation:
A means mistake proofing, b is a Japanese philosophy, d is a food, and e is wrong because it's still done in the 21st century.
The difference between a low-cost provider strategy and a focused low-cost strategy is Multiple choice question. the company's willingness to accept a lower profit margin. the uniqueness of the product or service. the size of the company's targeted buyer group. the length of the value chain.
Answer:
the size of the company's targeted buyer group.
Explanation:
Low cost strategies are used by sellers to gain more patronage of their products. It gives them competitive advantage of having low prices and this will in turn increase sales.
The low-cost provider strategy involves a reduction in prices of all the products a company sells in all locations while still making a profut. An appeal is made to a broad market to attract customers in mass.
The focused low-cost strategy on the other hand involves cost reduction in a targeted niche. It does not appeal to the broad market but rather to a specific customer profile.
So the difference between these two strategies is the size of the company's targeted buyer group.
The statement of cash flows will not report the Group of answer choices amount of checks outstanding at the end of the period. sources of cash in the current period. uses of cash in the current period. change in the cash balance for the current period.
Answer: amount of checks outstanding at the end of the period.
Explanation:
Accounting uses the accrual based system which means that revenue and costs are only recognized when they occur. This means that a company might get revenue in a period but would not have the actual cash in that period to represent that revenue.
The statement of cash flows is created to see the actual amount of cash that a company has instead of revenue or expenses based on the accrual basis of accounting.
That being said, it only includes cash based transactions and will not include checks outstanding at the end of the month.
which of the following is a benefit of search engine marketing
Group of answer choices.
A. Reach out to potential customers actively looking for your product or service
B. Create different types of ad formats to show to potential customers
C. Target people based on their interests and habits
D. SEM is a lot cheaper than any other advertising medium
Answer:
A. Reach out to potential customers actively looking for your product or service
Explanation:
A pre-service strategy refers to the process of planning and analyzing activities that enable a business entity to identify and determine its end users or consumers and the uniquely defined services that will be offered to these customers as they enter into the system. The pre-service strategies includes identifying the following; target market, design, branding, market research.
Search engine optimization (SEO) can be defined as a strategic process which typically involves improving and maximizing the quantity and quality of the number of visitors (website traffics) to a particular website by making it appear topmost among the list of results from a search engine such as Goo-gle, Bing, Yah-oo etc.
This ultimately implies that, search engine optimization (SEO) helps individuals and business firms to maximize the amount of traffic generated by their website i.e strategically placing their website at the top of the results returned by a search engine through the use of algorithms, keywords and phrases, hierarchy, website updates etc.
Search engine marketing (SEM) can be defined as a scalable and an inexpensive form of digital marketing that avails businesses the ability or opportunity to advertise their goods and services using search engine services such as Bing, Go-ogle etc.
Hence, a benefit of search engine marketing (SEM) through search engine optimization is that it helps you to reach out to potential customers actively looking for your product or service.
Elliott Credit Corp. wants to earn an effective annual return on its consumer loans of 15.7 percent per year. The bank uses daily compounding on its loans. What interest rate is the bank required by law to report to potential borrowers
Answer:
the rate of interest needed to report to the potential borrower is 14.59%
Explanation:
The computation of the rate of interest needed to report to the potential borrower is given below:
= ((1 + rate of interest per year)^(1 ÷ number of days in a year) - 1) × number of days in a year
= ((1 + 15.7%)^(1 ÷ 365) -1) × 365
= 14.59%
hence, the rate of interest needed to report to the potential borrower is 14.59%
Group of answer choicesThe horizon value is calculated by discounting the free cash flows beyond the horizon date and any tax savings at the cost of debt. The horizon value is calculated by discounting the expected earnings at the WACC. The horizon value is calculated by discounting the free cash flows beyond the horizon date and any tax savings at the WACC. The horizon value must always be more than 20 years in the future. The horizon value is calculated by discounting the free cash flows beyond the horizon date and any tax savings at the levered cost of equity.
Answer:
The horizon value is calculated by discounting the free cash flows beyond the horizon date and any tax savings at the WACC
Explanation:
Horizon value
This is simply known as the value of a security. It is regarded as present value usually at future point in time of all cash flows when we stable growth rate is anticipated forever. Its simply known also as present value of all free cash flows beyond the horizon date discounted back to the horizon date. It is also called the terminal value due to it being regarded as end of the explicit forecast period or the continuing value due to the fact that it is the value if operations continue to be used rather than be liquidated.
The growth in free cash flows is usually not constant so modification has to be made to the constant growth formula to find the value of free cash flows beyond the horizon date discounted back to the horizon Formula to calculate horizon value.
Mathematically;
HV = V option at time t =FCFt(1+g)
(WACC-g)
The formula for Terminal Value using the Gordon Growth method includes: Terminal Value = Final Year Free Cash Flow * (1 + Growth Rate) / (Discount Rate - Growth Rate)
Bottlebrush Company has income from operations of $73,745, invested assets of $245,000, and sales of $1,053,500. Use the DuPont formula to calculate the return on investment, and show (a) the profit margin, (b) the investment turnover, and (c) the return on investment. Round answers to one decimal place. a. Profit Margin fill in the blank 1 % b. Investment Turnover fill in the blank 2 c. Return on Investment
Answer:
a. Profit margin = Income from operations / Sales
Profit margin = $73,745/$1,053,500
Profit margin = 0.07
Profit margin = 7%
b. Investment turnover = Sales/Invested assets
Investment turnover = $1,053,500/$245,000
Investment turnover = 4.3 times
c. Rate of return on investment = Profit margin * Investment turnover
Rate of return on investment = 7% * 4.3
Rate of return on investment = 30.10%
Assume, for Canada, that the domestic price of wheat without international trade is lower than the world price of wheat. This suggests that, in the production of wheat, a.Canada has a comparative advantage over other countries and Canada will export wheat. b.Canada has a comparative advantage over other countries and Canada will import wheat. c.other countries have a comparative advantage over Canada and Canada will import wheat. d.other countries have a comparative advantage over Canada and Canada will export wheat.
Answer:
a.Canada has a comparative advantage over other countries and Canada will export wheat.
Explanation:
In the case when the domestic price is less than the world price of wheat so it is shown that there is the comparative advantage over the other countries due to this the canada would export the wheat. Also the demand is less or the supply of the wheat is higher. So ultimately it decrease the opportunity cost of generating the wheat
Therefore the above represent the answer
After hearing a knock at your front door, you are surprised to see the Prize Patrol from a large, well-known magazine subscription company. It has arrived with the good news that you are the big winner, having won $27 million. You have three options. (a)Receive $1.35 million per year for the next 20 years. (b)Have $9.75 million today. (c)Have $3.75 million today and receive $1,050,000 for each of the next 20 years. Your financial adviser tells you that it is reasonable to expect to earn 13 percent on investments.
Answer:
option A - $9.48 miilion
Option B - $9.75 million
Option C - 11.13 miilion
option c
Explanation:
Calculate the present value of each option. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Enter your answers in dollars but not in millions.)
2. Determine which option you prefer.
Option A
Option B
Option C
Present value is the sum of discounted cash flows
Present value can be calculated using a financial calculator
Option 1
Cash flow each year from year 1 to 20 = $1.35 million
I = 13%
Present value = 9.48 miilion
option 2
PV = $9.75 million
Option 3
Cash flow in year 0 = $3.75 million
Cash flow each year from year 1 to 20 = $1.05 million
I = 13%
Present value = 11.13 million
option 3 has the highest present value and should be chosen
To find the PV 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
9.48 miilion
11.13 miilion
The following data have been provided by XYZ Corporation, a company that produces forklift trucks: Budgeted production 3,400 trucks Standard machine-hours per truck 2.9 machine-hours Standard supplies cost $ 1.50 per machine-hour Actual production 3,800 trucks Actual machine-hours 10,930 machine-hours Actual supplies cost (total) $ 17,496 Supplies cost is an element of variable manufacturing overhead. The variable overhead efficiency variance for supplies cost is:
Answer:
Variable overhead efficiency variance= $135 favorable
Explanation:
Giving the following information:
Standard supplies cost $ 1.50 per machine-hour
Standard machine-hours per truck 2.9 machine-hours
Actual production of 3,800 trucks
Actual machine-hours 10,930 machine-hours
To calculate the variable overhead efficiency variance, we need to use the following formula:
Variable overhead efficiency variance= (Standard Quantity - Actual Quantity)*Standard rate
Variable overhead efficiency variance= (2.9*3,800 - 10,930)*1.5
Variable overhead efficiency variance= (11,020 - 10,930)*1.5
Variable overhead efficiency variance= $135 favorable
An investor purchased on margin Orange Computer for $30 a share. The stock's price subsequently increased to $47 a share at which time the investor sold the stock. The margin requirement is 60 percent and the interest rate on borrowed funds is 7 percent. What would have been the return if the investor had not bought the stock on margin
Answer:
56.67%
Explanation:
Purchase cost = 30 dollars
Margin x price = 0.60x30 = $18
30-18 = $12
Profit = $47 - $30 - 0.07(12)
= 16.16
Percentage earned = (16.16 /18) * 100
= 89.78%
Profit from the trade
= 47-30
= 17
Percentage earned = 17/30 * 100
= 56.67%
The return would have been 56 67% if the investor had not done this.
Alliance Company budgets production of 24,000 units in January and 28,000 units in the February. Each finished unit requires 3 pounds of raw material K that costs $3.00 per pound. Each month's ending raw materials inventory should equal 35% of the following month's budgeted materials. The January 1 inventory for this material is 25,200 pounds. What is the budgeted materials needed in pounds for January
Answer:
Total direct material needed in pounds= 101,400 pounds
Explanation:
Giving the following information:
Each finished unit requires 3 pounds of raw material K that costs $3.00 per pound.
Each month's ending raw materials inventory should equal 35% of the following month's budgeted materials.
The January 1 inventory for this material is 25,200 pounds.
Production:
January= 24,000 units
February= 28,000 units
Direct material budget:
Production= 24,000*3= 72,000 pounds
Desired ending inventory= (28,000*0.35)*3= 29,400 pounds
Total direct material needed in pounds= 101,400 pounds
Purchases= production + desired ending inventory - beginning inventory
Purchases= 101,400 - 25,200
Purchases= 76,200 pounds
Direct material purchase cost= 76,200*3= $228,60
To many businesspeople, one of the major attractions of a sole proprietorship is: A)the ability to obtain additional financial resources. B)the protection of limited liability. C)an unlimited lifespan. D)the chance to be their own boss
Answer:
D)the chance to be their own boss
Explanation:
Proprietorship may be defined as the state of a business that is owned by oneself. When one is the rightful owner or holds the business independently, it is known as the proprietorship.
The sole proprietorship is also called as the individual entrepreneurship or the sole tradership. It is when a business or a firm is owned by one person. In such cases there many not be any legal difference between owner and the business entity.
Thus one of the major attraction of the sole proprietorship is the chance to be their own boss for many businessmen.
Glacier Mining Co. acquired mineral rights for $494,000,000. The mineral deposit is estimated at 475,000,000 tons. During the current year, 31,500,000 tons were mined and sold. Required: A. Determine the depletion rate. B. Determine the amount of depletion expense for the current year. C. Journalize the adjusting entry on December 31 to recognize the depletion expense. Refer to the Chart of Accounts for exact wording of account titles.
Answer:
a. Depletion rate:
= Mineral rights acquisition costs / Estimated mineral deposits
= 494,000,000 / 475,000,000
= $1.04 per ton
b. Depletion expense for current year:
= Depletion rate * Minerals mined and sold in current year in tons
= 1.04 * 31,500,000
= $32,760,000
c. Journal entries:
Date Account title Debit Credit
12/31-20XX Depletion expense $32,760,000
Accumulated Depreciation $32,760,000
What is accounting? and what is accounting all about?
Answer:
accounting is the process of recording financial transaction pertaining to a business.
Explanation:
......
Consider the following stock price and shares outstanding data: Stock Name Price per Share Shares Outstanding (Billion) Lowes $28.80 1.53 Wal-Mart $47.90 4.17 Intel $19.60 5.77 Boeing $75.00 0.79 If you are interested in creatinga value-weighted portfolio of these four stocks, then the percentage amount that you would invest in Lowes is closest to: A) 25% B) 11% C) 20.0% D) 12% E) 8%
Answer:
B) 11%
Explanation:
We need to determine the total amount to invest in all the stocks in the first place as computed below:
Lowes= $28.80*1.53=$44.06
Wal-Mart=$47.90*4.17=$199.74
Intel=$19.60*5.77 =$113.09
Boeing=$75.00*0.79=$59.25
Total amount invested in the portfolio=$44.06+$199.74+$113.09+$59.25
Total amount invested in the portfolio=$416.14
Lowes' portion of the portfolio=amount invested in Lowes/total portfolio amount
Lowes' portion of the portfolio=$44.06/$416.14
Lowes' portion of the portfolio=11%
The Maris-Crane partnership is terminated when creditor claims exceed partnership assets by $40,000. Crane is a millionaire and Maris has no personal assets. Maris'partnership interest is 75% and Crane's is 25%. Creditors:__________.
A) may not require Crane to use his personal assets to satisfy the $40,000 in claims.
B) must collect their claims equally from Maris and Crane.
C) may collect the entire $40,000 from Crane.
D) must collect their claims 75% from Maris and 25% from Crane.
Answer:
Option "c".
Explanation:
Option "c" is the correct answer.
Given the creditor's claim = $40000
Partnership interest of Maris = 75%
Partnership interest of Crane = 25%
The entire amount can be collected from the Crane because in the partnership there is not a limited liability to pay the debt. Therefore, the creditor can claim the entire amount from the Crane.
Whole Life Spa believes in meeting societal expectations whether or not mandated by law. It uses only organic products that are environmentally friendly. Whole Life Spa is operating at the _______________________ level of the pyramid of corporate social responsibility.
Answer:
ethical
Explanation:
Corporate social responsibility (CSR) can be defined as an organization's obligation to act in a manner that benefits and adds significant value to the society, usually it has its business operations.
Hence, in addition to making profits and maximizing shareholders, organizations are required to lessen negative environmental impact or degradation and provide social amenities such as pipe-borne water, electricity, roads etc.
According to Carroll, the four (4) main levels of an organization's pyramid of corporate social responsibility are;
I. Legal
II. Economic.
III. Philanthropic.
IV. Ethical.
In this scenario, Whole Life Spa uses only organic products that are mainly considered to be environmentally friendly. Thus, Whole Life Spa is operating at the ethical level of the pyramid of corporate social responsibility because it involves doing or performing actions that are considered to be morally right.
The financial statement effects of the payment of a cash dividend (on the date of payment for a previously declared dividend) include:_________.
Answer:
The financial statement effects of the payment of a cash dividend (on the date of payment for a previously declared dividend) include:_________.
a. Cash (Current Asset) is decreased.
b. Dividends Payable (Current Liability) is decreased.
Explanation:
The journal entry debits the Dividends Payable account and credits the Cash account. This reduces the dividends payable and the cash accounts respectively by the same amount. Therefore, current assets and current liabilities are decreased. The effects of the cash payment are on the Balance Sheet and Statement of Cash Flows only.
eBookItem 7 The U.S. Department of Agriculture guarantees dairy producers that they will receive at least $1.00 per pound for butter they supply to the market. Below is the current monthly demand and supply schedules for wholesale butter (in millions of pounds per month). Market for Wholesale Butter Price (dollars per pound) Quantity of Butter Demanded (millions of pounds) Quantity of Butter Supplied (millions of pounds) $0.80 114 70 0.90 111 78 1.00 108 86 1.10 105 94 1.20 102 102 1.30 99 110 1.40 96 118 1.50 93 126 1.60 90 134 1.70 87 142 1.80 84 150 Instructions: Round your answer for price to 2 decimal places. Enter your answers for quantity as a whole number. a. What are the equilibrium price and quantity in the wholesale butter market
Answer:
The U.S. Department of Agriculture
a. The equilibrium price in the wholesale butter market is:
= $1.20.
b. The equilibrium quantity in the wholesale butter market is:
= 102 million pounds.
Explanation:
a) Data and Calculations:
Market for Wholesale Butter
Price (dollars Quantity of Butter Quantity of Butter
per pound) Demanded Supplied
(millions of pounds) (millions of pounds)
$0.80 114 70
0.90 111 78
1.00 108 86
1.10 105 94
1.20 102 102
1.30 99 110
1.40 96 118
1.50 93 126
1.60 90 134
1.70 87 142
1.80 84 150
b) The equilibrium price and quantity are the price and quantity at which the quantity of butter demanded in the wholesale butter market equals the quantity of butter supplied in the same market. At this price of $1.20 per pound, the total quantity demanded and supplied equaled 102 million pounds of butter. At this price and quantity, both consumers and suppliers of butter in the wholesale market go home satisfied.
Cold Goose Metal Works Inc. just reported earnings after tax (also called net income) of $95,000,000, and a current stock price of $14.75 per share. The company is forecasting an increase of 25% for its after-tax income next year, but it also expects it will have to issue 2,800,000 new shares of stock (raising its shares outstanding from 5,500,000 to 8,300,000). If Cold Goose’s forecast turns out to be correct and its price-to-earnings (P/E) ratio does not change, what does the company’s management expect its stock price to be one year from now? (Note: Round intermediate calculations to four decimal places. Round the expected stock price to two decimal places.)
Answer:
$12.22 per share
Explanation:
The computation of the stock price one year from now is shown below;
Current EPS = Net Income ÷ Number of shares
= $95,000,000/5,500,000
= $17.2727
Now
P/E Ratio = Market Price per share ÷ Earnings per share
= $14.75 ÷ 17.2727
= 0.8539 times
Now
Revised EPS = $95,000,000 × 1.25 ÷ 8,300,000
= $14.3072
So, the Price is
= 14.3072 × 0.8539
= $12.22 per share
