Charlie hopes to accumulate $83,000 in a savings account in 10 years. If he wishes to make a single deposit today and the bank pays 3 percent compounded annually on deposits of this size, how much should Charlie deposit in the account

Answers

Answer 1

Answer:

PV= $61,759.80

Explanation:

Giving the following information:

Future value (FV)= $83,000

Number of years (n)= 10 years

Interest rate (i)= 3% compounded annually

To calculate the initial deposit, we need to use the following formula:

PV= FV/(1+i)^n

PV= 83,000 / (1.03^10)

PV= $61,759.80


Related Questions

Let M be the number of units to make and B be the number of units to buy. If it costs $2 to make a unit and $3 to buy a unit and 4000 units are needed, the objective function is

Min 2M + 3B

Min 4000 (M + B)

Max 2M + 3B

Max 8000M + 12000B

Answers

Answer:

Min 2M + 3B

Explanation:

Data provided in the question

Let us assume M denotes the making units

B denotes the buying units

So,

Making cost per unit = $2

And, the buying cost per unit = $3

And, the total number of units required = 4,000 units

Based on the above information, the objective function is Min 2M + 3B.

This indicates the minimum total cost

Hence, the correct option is A.

Which of the following is an advantage of the corporate form of​ business? A. limited liability of stockholders B. less degree of government regulation C. separation of ownership and management D. low​ start-up costs

Answers

Answer: Limited liability of stockholders

Explanation:

Limited liability in a corporate fo.of business means that the shareholders will be legally responsible for debts of a company based on the on their share's nominal value.

This is an advantage of the corporate form of​ business along with the easy generation of huge equity.

ABC uses the conventional retail method to determine its ending inventory at cost. Assume the beginning inventory at cost (retail) were $393,500 ($594,000), purchases during the current year at cost (retail) were $3,408,000 ($5,193,600), freight-in on these purchases totaled $159,500, sales during the current year totaled $4,666,000, and net markups were $414,000. What is the ending inventory value at cost

Answers

Answer:Ending Inventory at Cost= $981,248.40

Explanation:

                                     Cost                      Retail

Beginning inventory  $393,500         $594,000

purchases                      $3,408,000      $5,193,600                

freight in                        $159,500,

net markups                                                     $414,000

Total                          $3,961,000                     $6,201,600

Sales                                                 $4,666,000

Ending Inventory at Retail:=(Beginning inventory + purchases +net markups - Sales during the current year

594,000 + $5,193,600   +  $414,000- $4,666,000,  = $1,535,600

Cost to Retail Ratio:( Beginning inventory + purchases+freight in)/ (Beginning inventory + purchases +net markups )

=($393,500 + $3,408,000 +$159,500,) ÷ (594,000 + $5,193,600   +  $414,000) =$3,961,000/$6, 201, 600= 0.638= 0.639

Ending Inventory at Cost:   Ending Inventory at Retail x Cost to Retail Ratio

$1,535,600 x 0.639 = $981,248.40

Barnabas had a very rare necklace that he gave to Willie to hold for him for a few weeks. Barnabas wanted to give the necklace to Victoria for her birthday. Please answer true/false for the following statements.
Barnabas and Willie had a bailment for the sole benefit of Barnabas.
A. False
B. True
If Barnabas gives Victoria the necklace, the necklace is a gift causa mortis.
A. False
B. True
Barnabas would be the donee when he gives Victoria the gift.
A. False
B. True
Willie is the bailee when he receives the necklace from Barnabas.
A. False
B. True
For the gift to be valid, Barnabas only needed to delivery it to Victoria.
Identify if the remedy (relief) is equitable or legal.
direct damages
a. equitable
b. legal
rescission
a. equitable
b. legal
specific performance
equitable /legal
nominal damages
equitable /legal
compensatory damages
a. equitable
b. legal
injunction
a. equitable
b. legal
punitive damages
a. equitable
b. legal
consequential damages
a. equitable
b. legal
Dr. Neil met Mr. Hammond's grandson while they were visiting the Park. His grandson loved dinosaurs and Dr. Neil had written many books on the matter. Dr. Neill happened to have a copy of his latest book on him and thought the grandson would love it. Thus, he signed the book and gave it to him. Identify the party.
The donor in the situation would be:________.
the grandson Dr. Neil
The donee in the situation would be:_______.
the grandson Dr. Neil

Answers

Answer:

Answering true/false for the following statements:

Barnabas and Willie had a bailment for the sole benefit of Barnabas.

A. False

B. True

If Barnabas gives Victoria the necklace, the necklace is a gift causa mortis.

A. False

B. True

Barnabas would be the donee when he gives Victoria the gift.

A. False

B. True

Willie is the bailee when he receives the necklace from Barnabas.

A. False

B. True

For the gift to be valid, Barnabas only needed to delivery it to Victoria.

Identify if the remedy (relief) is equitable or legal.

direct damages

a. equitable

b. legal

rescission

a. equitable

b. legal

specific performance

equitable /legal

nominal damages

equitable /legal

compensatory damages

a. equitable

b. legal

injunction

a. equitable

b. legal

punitive damages

a. equitable

b. legal

consequential damages

a. equitable

b. legal

Dr. Neil met Mr. Hammond's grandson while they were visiting the Park. His grandson loved dinosaurs and Dr. Neil had written many books on the matter. Dr. Neill happened to have a copy of his latest book on him and thought the grandson would love it. Thus, he signed the book and gave it to him. Identify the party.

The donor in the situation would be:________.

the grandson Dr. Neil

The donee in the situation would be:_______.

the grandson Dr. Neil

Explanation:

Bailment is the transfer of the rare necklace from Barnabas to Willie so that Willie could hold it for him for a few weeks.  Willie is the bailee when he receives the necklace from Barnabas.

Gift causa mortis is a deathbed gift, which is not applicable in this case.  The gift here is given inter vivos, that is during the life of Barnabas.

A donee is Victoria who receives the necklace for her birthday.  Barnabas is the donor when he gives Victoria the gift.

Additional short-term borrowings $ 20,000
Purchase of short-term investments 5,000
Cash dividends paid 16,000
Interest paid 8,000
Compute cash flows from financing activities using the above company information. (Amounts to be deducted should be indicated by a minus sign.)

Answers

Answer:

Cash flow from from financing activities = $(4,000)

Explanation:

The cash flow from financing activities includes that entails any or a combination of the following; issuance and redemption of stocks , issuance and redemption of debts and payment of interest and/or dividend, and receipt of dividend and or interest.

Kindly note that the purchase of short term investment is not a financing activity but rather an investing activity

Cash flow                              $

Short term borrowing          20,000

Cash dividend paid              (16,000)

Interest paid                          (8,000)

Total Cash flow                      (4000)

Cash flow from from financing activities = $(4,000)

A customer sells short 100 shares of ABC at $17 as the initial transaction in a new margin account. The customer must deposit:_______.
A. $750.
B. $1,500.
C. $2,000.
D. $3,000.

Answers

Answer: $2,000

Explanation:

Regulation T which governs such actions in the investment market would only require that the customer deposit 50% of the total amount to be called which would be;

= 50% * (100 * 17)

= $850

However, as this is a new margin account, there is a set minimum that must be reached to enable it to be open. That minimum is $2,000.

The risk-free rate of return is 3.2 percent and the market risk premium is 4.6 percent. What is the expected rate of return on a stock with a beta of 2.12

Answers

Answer:

12.95%

Explanation:

The risk free rate of return is 3.2%

The market risk premium is 4.6%

The beta is 2.12

Therefore, the expected rate of return on a stock can be calculated as follows

= 3.2% + (2.12×4.6%)

= 3.2% + 9.752

= 12.95%

Hence the expected rate of return on a stock is 12.95%

Luther Corporation Consolidated Balance Sheet December​ 31, 2006 and 2005​ (in $​ millions) Assets 2006 2005 Liabilities and ​Stockholders' Equity 2006 2005 Current Assets Current Liabilities Cash 58.5 Accounts payable 73.5 Accounts receivable 39.6 Notes payable​ / shortterm debt 9.6 Inventories 42.9 Current maturities of longterm debt 36.9 Other current assets 3.0 Other current liabilities 6.0 12.0 Total current assets 144.0 Total current liabilities 132.0 LongTerm Assets LongTerm Liabilities Land 62.1 Longterm debt 168.9 Buildings 91.5 Capital lease obligations Equipment 99.6 Less accumulated depreciation ​(​) ​(52.5) Deferred taxes 22.8 22.2 Net​ property, plant, and equipment 200.7 Other longterm liabilities Goodwill 60.0 Total longterm liabilities 191.1 Other longterm assets 63.0 42.0 Total liabilities 323.1 Total longterm assets 242.7 ​Stockholders' Equity 63.6 Total Assets 386.7 Total liabilities and ​Stockholders' Equity 386.7 Refer to the balance sheet above. ​ Luther's current ratio for 2006 is closest​ to:

Answers

Answer:

Luther Corporation

Current Ratio for 2006 is closest to:

1.1 : 1

Explanation:

a) Data and Calculations:

Total Current Assets = $144 million

Total Current Liabilities = $132 million

Current Ratio = Current Assets/Current Liabilities

= $144/$132

= 1.1 : 1

b) Luther Corporation's current ratio is a liquidity measure that shows Luther's ability to pay off short-term obligations worth $132 million or those due within one year with its current assets of $144 million.  The ratio tells investors and analysts of Luther Corporation how Luther can use its current assets to pay off its current debts.  Since Luther's current ratio is higher than 1, it is considered good, depending on the industry average.  This means that Luther's current ratio of 1.1 : 1 should not be considered in isolation, but in comparison with other firms in the industry and its performance over a number of years.

Company manufactures two products. Both products have the same sales​ price, and the volume of sales is equivalent.​ However, due to the difference in production​ processes, Product A has higher variable costs and Product B has higher fixed costs. Management is considering dropping Product B because that product line has an operating loss.


Total Product A Product B
Sales Revenue $140,000 $70,000 $70,000
Variable Costs 124,250 63,500 60,750
Contribution Margin 15,750 6,500 9,250
Fixed Costs 30,000 3,000 27,000
Operating Income/(Loss) $(14,250) $3,500 $ (17,750)


Required:
a. If fixed costs cannot be avoided, should Richardson drop Product B? Why or why not?
b. If 50% of Product B's fixed costs are avoidable, should Richardson drop Product B? Why or why not?

Answers

Answer:

a. No - Because Richardson will be worse off than what he was before.

b. Yes - Because Richardson will be better off than what he was before.

Explanation:

a. Analysis of Operating Income is Richardson drop Product B

Sales Revenue                  $70,000

Less Variable Costs        ($63,500)

Contribution                        $6,500

Fixed Costs                      ($30,000)

Total Operating Income  ($23,500)

Dropping Product B will result in Total Operating Loss of $23,500. This means Richardson will be worse off than what he was before. He should not drop the product in this case.

b. Analysis of Operating Income is Richardson drop Product B

Sales Revenue                  $70,000

Less Variable Costs        ($63,500)

Contribution                        $6,500

Fixed Costs                      ($15,000)

Total Operating Income   ($8,500)

Dropping Product B will result in Total Operating Loss of $8,500. This means Richardson will be better off than what he was before. He should  drop the product in this case.

Rinaldo wants to know how you recorded the part cash and part credit purchase that occurred during the beginning of May in Sage 50. Rinaldo asks which of the following shows the correct series of actions to open a Sage 50 window that must be used to record the above transaction:

Inventory & Services → Enter Bills → New Bill
Inventory & Services → Purchase Invoice → New Invoice
Vendors & Purchases → Enter Bills → New Bill
Vendors & Purchases → Purchase Invoice → New Invoice

Answers

Answer:

Vendors & Purchases → Enter Bills → New Bill

Explanation:

To record the part cash and part credit entry in Sage 50, we will use the following series.

Vendors & Purchases → Enter Bills → New Bill

To record the purchase transaction we need to enter the transaction in the vendors and purchase option and then we need to create separate bills for our part cash payment and part credit payment separately.

Discounted payback period. Given the following two projects and their cash​ flows, LOADING...​, calculate the discounted payback period with a discount rate of ​%, ​%, and ​%. What do you notice about the payback period as the discount rate​ rises? Explain this relationship. With a discount rate of ​%, the cash outflow for project A​ is:

Answers

Answer:

the numbers are missing, so I looked for a similar question:

Cash Flow                       A                B

Cost                        $10,000         $105,000

Cash flow year 1     $3,571            $21,000

Cash flow year 2     $3,571            $10,500

Cash flow year 3     $3,571            $42,000

Cash flow year 4     $3,571            $31,500

Cash flow year 5     $3,571            $5,250

Cash flow year 6     $3,571            $0

With a discount rate of 5​%, 10% & 15%

Discounted cash flows for project A:

                                                      5%                10%               15%

Cost                        $10,000        

Cash flow year 1     $3,571            $3,401        $3,246          $3,105

Cash flow year 2     $3,571           $3,239       $2,951           $2,700

Cash flow year 3     $3,571           $3,085       $2,683          $2,348

Cash flow year 4     $3,571           $2,938       $2,439          $2,042

Cash flow year 5     $3,571           $2,798       $2,217            $1,775

Cash flow year 6     $3,571           $2,665       $2,016           $1,544

discounted payback period:

5% = 3.09 years

10% = 3.46 years

15% = 3.9 years

The higher the discount rate, the longer the discounted payback period.

Discounted cash flows for project B:

                                                      5%                10%               15%

Cost                        $105,000        

Cash flow year 1     $21,000        $20,000     $19,091          $18,261

Cash flow year 2     $10,500       $9,524       $8,678           $7,940

Cash flow year 3     $42,000      $36,281      $31,555          $27,616

Cash flow year 4     $31,500        $25,915     $21,515           $18,010

Cash flow year 5     $5,250         $4,114         $3,260           $2,610

discounted payback period:

5% = more than 5 years, the project's NPV is negative -$9,166.37

10% = more than 5 years, the project's NPV is negative -$20,901.42

15% = more than 5 years, the project's NPV is negative -$30,563.54  

If the government wants to minimize the deadweight loss of taxation, which of the following items are good candidates for an excise tax? (select all that apply)A. emergency plumber servicesB. Coca-ColaC. insulinD. food at restaurants

Answers

Answer:

A. emergency plumber services and  C.insulin.

Explanation:

From the list provided the best candidates for this would be emergency plumber services and insulin. That is because these are items or services that have a high supply but low demand due to the population of customers being a minority. This, therefore, causes market inefficiency which leads to deadweight loss. Other items like Coca-Cola and food mostly stay in equilibrium because products are made depending on the current demand and the customer population is the vast majority.

An increase in input prices causes:___________
a) the market supply to shift inward, driving the equilibrium price downward.
b) the market supply to shift outward, leading to a higher equilibrium price.
c) the market supply to shift inward, driving the equilibrium price higher.
d) the supply curve to decrease and the demand curve to decrease.

Answers

Answer: the market supply to shift inward, driving the equilibrium price higher.

Explanation:

An increase in input prices will result into a rise in the production costs. This will result in a leftward shift of the supply curve.

Therefore, the market supply will shift inward, driving the equilibrium price higher. This simply means that there will be lesser supply of the product and hence, increase in price.

The EOQ model assumes inventory: Multiple Choice can be delivered immediately upon order. is sold at a steady rate until it is depleted. will be available just as it is needed for production. is held at a constant level. has seasonal fluctuations.

Answers

Answer:

is sold at a steady rate until it is depleted

Explanation:

The EOQ means Economic order quantity that refers to a quantity which the company should purchase for its inventory

In this order quantity, the carrying cost and the ordering cost are equivalent to each other

Also we assume that the demand would remain the same and the inventory should be depleted at a fixed rate unless it reaches to a zero

Hence, the second option is correct

On January 1, Parson Freight Company issues 9.0%, 10-year bonds with a par value of $3,400,000. The bonds pay interest semiannually. The market rate of interest is 10.0% and the bond selling price was $3,168,967. The bond issuance should be recorded as:

Answers

Answer:

January 1

Cash                                           $3168967 Dr

Discount on Bonds Payable    $231033

            Bonds Payable                        $3400000 Cr

Explanation:

The issuance of bond on January 1 is at a discount as the coupon rate paid by the bond is less than the market interest rate. In such case the bond is issued at a lower value than its par/face value. The discount on bonds payable is the difference between the face value and the cash received on issuance.

The entry to record the issues include a debit to cash account as cash is received, a debit to the discount on bonds payable account for the amount of discount and a credit to bonds payable account as liability is created as a result of the issuance of the bonds.

Discount = 3400000 - 3168967 = 231033

A stock is selling today for $40 per share. At the end of the year, it pays a dividend of $2 per share and sells for $44. a. What is the total rate of return on the stock?

Answers

Answer:

The total rate of return on the stock is 14%.

Explanation:

The sources of income from a stock are dividends and increase in its value. Therefore, the total rate of return on stock is calculated by dividing the addition of appreciation in the of the stock and dividends paid by the original stock price.

Therefore, the total rate of return on the stock can be calculated using the following formula:

Total rate of return = [(P1 - Po) + D] / Po .......................... (1)

Where;

P1 = Ending stock price = $44

Po = Initial stock price = $40

D = Dividend paid = $2

Substituting the values into equation (1), we have:

Total rate of return = [(44 - 40) + 2] / 44

Total rate of return = [4 + 2] / 44

Total rate of return = 6 / 44

Total rate of return = 0.14, or 14%

TB MC Qu. 7-137 Farris Corporation, which has ... Farris Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $ 144 Units in beginning inventory 0 Units produced 9,350 Units sold 8,950 Units in ending inventory 400 Variable costs per unit: Direct materials $ 26 Direct labor $ 68 Variable manufacturing overhead $ 14 Variable selling and administrative expense $ 18 Fixed costs: Fixed manufacturing overhead $ 140,250 Fixed selling and administrative expense $ 9,600 What is the net operating income (loss) for the month under variable costing

Answers

Answer:

Net operating income= $11,250

Explanation:

Giving the following information:

Selling price $144

Units sold 8,950

Variable costs per unit:

Direct materials $26

Direct labor $68

Variable manufacturing overhead $14

Variable selling and administrative expense $18

Total variable cost= $126

Fixed costs:

Fixed manufacturing overhead $140,250

Fixed selling and administrative expense $9,600

Variable costing income statement:

Sales= 8,950*144= 1,288,800

Total variable cost= (126*8,950)= (1,127,700)

Contribution margin= 161,100

Fixed manufacturing overhead= (140,250)

Fixed selling and administrative expense= (9,600)

Net operating income= 11,250

You short-sell 200 shares of Rock Creek Fly Fishing Co., now selling for $50 per share. If you want to limit your loss to $2,500, you should place a stop-buy order at ____. A. $37.50 B. $62.50 C. $56.25 D. $59.75

Answers

Answer:

The answer is B. $62.5

Explanation:

A stop order is an order to either buy or sell a stock immediately the stock price reaches a certain price. This particular price is called stop price.

A buy stop order is an order to buy a stock immediately the its price reaches a certain stop price. When stop price is above the current market price, a buy stop order is made.

Let's now go back to the question;

Stop buy order will be placed at:

($2,500 / 200 shares) + $50

= $12.5 + $50

= $62.5

"A customer who is short 1 ABC Jan 65 Call wishes to create a "short call spread." The second option position that the customer must take is:"

Answers

Answer:

long 1 ABC Jan 75 Call

Explanation:

This type of customer (or investor) is bearish about the market, i.e. he/she believes that the stock prices will drop. The investor will try to create a net credit position (the credit spread = $75 - $65). The maximum possible profit is created when the stock price falls below $65, and the maximum possible loss would occur if the price went above $75. This investor is a net seller, since it is a short call spread.

​Jack, an employee of Desert​ Sky, Inc., has gross salary for May of . The entire amount is under the OASDI limit of​ $118,500 and thus subject to FICA. He is also subject to federal income tax at a rate of ​%. Which of the following is a part of the journal entry for accrual of the employer payroll​ taxes? (Assume a FICAOASDI Tax of ​% and FICAMedicare Tax of ​%.) ​Jack's income to date exceeds the FUTA and SUTA tax income limits

Answers

Answer:

Credit to Cash for $4,995 is correct

Explanation:

here is a complete question

has a gross salary for May of $7,000. The entire amount is under the OASDI limit of $118,500 and thus subject to FICA. He is also subject to federal income tax at a rate of 21%. Which of the following is a part of the journal entry to record the disbursement of his net pay? (Assume a FICA-OASDI Tax of 6.2 % and FICA-Medicare Tax of 1.45%. Round the final answer to the nearest dollar.) A. debit to Cash for $4,995 B. debit to FICA Tax Payable of $4,995 O C. debit to Employee Income Tax Payable of $4,995 D. credit to Cash for $4,995

The computation of the amount that becomes the part for accrual the employer payroll taxes is shown below:

Gross Pay                   $7,000  

Less: Deductions    

Federal Income tax       $1,470            ($7000 × 21%)

FICA-OASDI tax             $434              ($7000 × 6.2%)

FICA-Medicare tax         $102              ($7,000 × 1.45%)

Total Deductions          2006  

Net pay                         $4,995  

Lacy Technology transferred items with $12,600 of cost out of the Assembly Department because the items were finished and ready to be sold. What journal entries correctly reflects this transaction?

Answers

Answer:

Dr Finished Goods Inventory 12,600

Cr Work in Process - Assembly 12,600

Explanation:

Based on the information given we were told that the company transferred items that cost the amount of $12,600 from the Assembly Department because the items were finished and ready to be sold which means that the journal entries will be recorded as:

Dr Finished Goods Inventory 12,600

Cr Work in Process - Assembly 12,600

Sound Systems (SS) has 200,000 shares of common stock outstanding at a market price of $37 a share. SS recently paid an annual dividend in the amount of $1.20 per share. The dividend growth rate is 4 percent. SS also has 4,500 bonds outstanding with a face value of $1,000 per bond that are selling at 99 percent of par. The bonds have a 6 percent coupon and a 6.7 percent yield to maturity. If the tax rate is 34 percent, what is the weighted average cost of capital?

Answers

Answer:

the weighted average cost of capital is 6.31 %

Explanation:

Weighted Average Cost of Capital (WACC) is the return required by the providers of long term permanent source of capital to the firm.

WACC = Ke × (E/V) + Kp × (P/V) + Kd × (D/V)

Ke = Cost of equity

    = $1.20 / $37.00 + 0.04

    = 0.0724 or 7.24 %

E/V = Weight of Equity

      = (200,000 × $37) ÷ (200,000 × $37 + 4,500 × $1,000 × 99%)

      = $7,400,000 ÷ ($7,400,000 + $4,455,000)

      = 62.42 %

Kd = Cost of Debt

    = Interest × (1 - tax rate)

    = 6.70 % × (1 - 0.34)

    = 4.42 %

D/V = Weight of Debt

      = (4,500 × $1,000 × 99%) ÷ (200,000 × $37 + 4,500 × $1,000 × 99%)

      = $4,455,000 ÷ ($7,400,000 + $4,455,000)

      = 37.28 %

Therefore,

WACC = 7.24 % × 62.42 % +  4.42 % × 37.28 %

           = 6.31 %

You are in the business of making kombucha tea. Your variable costs to produce each bottle is $1. Your fixed costs are $100,000/year and you expect to sell 300,000 bottles in your first year. How many bottles must you sell at $3/bottle to cover your fixed costs and earn your target profit of $100,000

Answers

Answer:

Break-even point in units= 100,000 units

Explanation:

Giving the following information:

Your variable costs to produce each bottle is $1.

Your fixed costs are $100,000/year.

How many bottles must you sell at $3/bottle to cover your fixed costs and earn your target profit of $100,000

To calculate the number of units to be sold, we need to use the following formula:

Break-even point in units= (fixed costs + desired profit)/ contribution margin per unit

Break-even point in units= (200,000) / (3 - 1)

Break-even point in units= 100,000 units

The number of bottles that must be sold at $3 per bottle to earn a target profit of $100,000 is 200,000 bottles.

Data and Calculations:

Variable cost per bottle = $1

Fixed cost per year = $100,000

Expected sales units in the first year = 300,000 bottles

Selling price per bottle = $3

Target profit = $300,000

Contribution margin per unit = $2 ($3 - $1)

Contribution margin ratio = 67% ($2/$3 x 100)

Sales units to achieve target profit =  (Fixed Costs + Profit)/$2

= ($100,000 + $300,000)/$2

= 200,000 bottles

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A firm has a required return of 14.2% and a beta of 1.63. If the risk-free rate is currently 5.4%, what is the expected return to the market? Assume that CAPM is correct.

Answers

Answer:

10.8%

Explanation:

Required rate of return = Risk free rate + Beta x ( Expected rate - Risk free rate )

14.2% = 5.4% + 1.63 x ( market rate - 5.4% )

14.2% - 5.4% = 1.63 x ( market rate - 5.4% )

8.8% / 1.63 = market rate - 5.4%

5.4% = market rate - 5.4%

Market rate = 5.4% + 5.4%

Market rate = 10.8%

Market rate = 10.8%

The stock pays a dividend of $2 per year and its price is $80. If the market return is 7% and the risk-free rate is 1%, what is the stock beta? A. 0.4 B. 0.5 C. 0.25 D. 0.1

Answers

Answer:

The beta of the stock is 0.25 and option C is the correct answer.

Explanation:

The current price of a stock which pays a constant dividend can be determined using the zero growth dividend model of DDM. The formula to calculate the price under this model is,

P0 = Dividend / r

Where,

r is the required rate of return on the stock

As we already know the value of P0 and Dividend, we can plug in these values in the formula and calculate the value of r.

80 = 2 / r

80 * r = 2

r = 2 / 80

r = 2.5% or 0.025

The required rate of return can also be calculated using the CAPM equation. The formula for r under CAPM is,

r = rRF + Beta * (rM - rRF)

Where,

rRF is the risk free raterM is the return on market

To calculate beta, we will input the values for r, rRf and rM in the CAPM equation.

Let beta be x.

0.025 = 0.01 + x * (0.07 - 0.01)

0.025 - 0.01 = x * 0.06

0.015 / 0.06 = x

x = 0.25

Thus, beta is 0.25

Why might an economist favor activist policies in developed countries and laissez-faire policies in developing countries

Answers

Answer:

One of the main economic issues in developing countries is rampant corruption or extremely inefficient government institutions. This means that less government intervention is always better in developing countries.

On the other hand, in developed countries, the checks and balances system exists within government institutions and even though corruption may exist, it is not as widely spread. The most severe economic problem in developed countries is inequality and huge economic actors. This is why activist policies may be necessary in developed countries, at least in certain economic sectors.

Ultimate Butter Popcorn issues 5%, 15-year bonds with a face amount of $58,000. The market interest rate for bonds of similar risk and maturity is 5%. Interest is paid semiannually. At what price will the bonds issue

Answers

Answer:

So, the bonds will issue at par which means that they will issue at their face value of $58000

Explanation:

If the coupon rate paid by the bond and the market interest rates are same, the bonds are always issued at par. We can check this through the following.

To calculate the price of the bond, we need to first calculate the coupon payment per period. We assume that the interest rate provided is stated in annual terms. As the bond is a semi annual bond, the coupon payment, number of periods and semi annual YTM will be,

Coupon Payment (C) = 0.05 * 1/2 * 58000 = $1450

Total periods (n)= 15 * 2 = 30

r or YTM = 5% * 1/2 = 2.5% or 0.025

The formula to calculate the price of the bonds today is attached.

Bond Price = 1450 * [( 1 - (1+0.025)^-30) / 0.025]  +  58000 / (1+0.025)^30

Bond Price = $58000

Calculate the effective annual interest rate for the following: a. A 3-month T-bill selling at $97,820 with par value $100,000. (Round your answers to 2 decimal places.) b. A 8% coupon bond selling at par and paying coupons semiannually.

Answers

Answer:

A.9.2%

B.8.16%

Explanation:

a. Calculation for the Effective annual rate on three-month T-bill

First step

T-bill =(Par value-Selling amount)/Par value

Let plug in the formula

T-bill =($100,000-$97,820)/$97,820

T-bill =$2,180/$97,820

T-bill =0.02228

Now let calculate for the Effective Annual Interest rate

Effective Annual Interest rate = (1 + 0.02228)^4– 1

Effective Annual Interest rate = (1.02228)^4-1

Effective Annual Interest rate =1.0921-1

Effective Annual Interest rate =0.0921×100

Effective Annual Interest rate=9.2%

B. Calculation for the effective annual interest rate for A 8% coupon bond .

First step

Semi-annual return=8%/2

Semi-annual return=4%

Second step is to calculate for the effective annual interest rate

Using this formula

Effective annual interest rate =(1+Semi-annual return percentage)^2-1

Let plug in the formula

Effective annual interest rate=(1+0.04)^2-1

Effective annual interest rate=(1.04)^2-1

Effective annual interest rate=1.0816-1

Effective annual interest rate=0.0816×100

Effective annual interest rate=8.16%

Therefore the Effective annual rate on three-month T-bill will be 9.2% while that of coupon bond is 8.16%

.

The Janjua Company had the following account balances at 1/1/18: Common Stock $65,000 Treasury Stock (at cost) 13,400 Paid-in-Capital in Excess of Par 82,000 Investments in AFS Debt Securities 40,000 FVA (AFS) 1,500 credit Retained Earnings 22,000 On that date, the Accumulated OCI account was at its proper balance. There were no sales or purchases of Common Stock or Investments during 2018. Prior to any adjusting journal entries related to the investments, 2018 Net Income was $10,300. No other transactions affecting Retained Earnings occurred. Fair Value of the Investments at 12/31/2018 was $40,000.Required:a. Prepare the 12/31/18 journal entry to adjust the investment to fair value.b. Prepare the complete 12/31/18 Equity section of the balance sheet.

Answers

Answer:

The Janjua Company

a) Journal Entry:

Debit FVA (AFS) $1,500

Credit Unrealized Gain on Investments $1,500

To record the unrealized gain on AFS investment.

b) Equity Section of the Balance Sheet as of December 31, 2018:

Common Stock                                $65,000

Treasury Stock (at cost)                     (13,400)

Paid-in-Capital in Excess of Par         82,000

Retained Earnings                              32,300

Total Stockholders' Equity             $165,600

Explanation:

Retained Earnings:

1/1/18 = $22,000

Net income = $10,300

12/31/18 = $32,300

FVA = The Janjua Company's Funding Valuation Adjustment is the contra account of Investments where The Janjua Company adjusts the value of investments at the end of the account period.  When the value of the investment reaches $40,000, the unrealized gain is debited to the FVA account.  This effectively reverses the credit balance and restores the investments to the adjusted balance of $40,000.

Sue Helms Appliances wants to establish an assembly line to manufacture its new​ product, the Micro Popcorn Popper. The goal is to produce five poppers per hour. The​ tasks, task​ times, and immediate predecessors for producing one Micro Popcorn Popper are as​ follows:

Task Performance time(minutes) Predecessor
A 8 -
B 10 A
C 8 A,B
D 10 B,C
E 8 C
F 4 D,E

a. The theoretical minimum number of workstations is:___________
b. The assignment of tasks to workstations should be:________

Were you able to assign all the activities to workstations equivalent to the theoretical minimum workstation ?

c. The efficiency of the assembly line is:________

Answers

Answer:

Please see explanation below.

Explanation:

a. Cycle time = Production time available per hour / Units required per hour

= 60 / 5

= 12minutes

Minimum number of workstations = Sum of the task time / Cycle time

Sum of task time

= 8 + 10 + 8 + 10 + 8 + 4

= 48

The theoretical minimum number of work stations is

= 48 / 12

= 4

b. In order to assign the tasks to the work station, events that precede the task must be considered together with the time taken to complete each task.

°Task A This task is assigned to work station 1 and no task would further be assigned to work station 1, otherwise it will exceed the cycle time.

°Task B. This next task will be assigned to work station 2, no additional task will be assigned to station 2.

Task C is assigned to workstation 3, hence can no longer accept any other assigned task.

°Task D is the next task and will be assigned to work station 4, and we cannot assign any more task to work station 4.

°Task E and F will not be assigned as there are no more available stations.

Task Time Workstation

A. 8 1

B. 10 2

C. 8 3

D. 10 4

E. 8 -

F. 4 -

Please note that due to the theoretical minimum number of work station, which is 4, it will not be possible to assign task to all the workstations hence task E and F remains unassigned.

C. Efficiency of the assembly line

Efficiency ;

= Sum of task times / Actual number of work stations × cycle time

Although the actual number of required workstation is 5 but we cannot assign task E and F due to the theoretical minimum number of workstation. Therefore, additional work station will be required and there are 5 work stations in total.

= 48 ÷ (5 × 12) × 100

= 80%

The theoretical minimum should be = 4

The efficiency of the assembly line should be 80 percent

The production time = 60

The units that are required per hour = 5

[tex]cycle time = \frac{minutes in one hour}{units needed in a day} \\\\cycle time=\frac{60}{5}[/tex]

= 12

The workstation = 8+10+8+10+8+4

= 48

[tex]The minimum number = \frac{48}{12} \\\\= 4[/tex]

The efficiency of the assembly line

[tex]\frac{48}{5*60} \\\\= 0.8\\\\0.8*100 = \\\\80percent[/tex]

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