Presented below are selected transactions at Windsor, Inc. for 2019. Jan. 1 Retired a piece of machinery that was purchased on January 1, 2009. The machine cost $60,600 on that date. It had a useful life of 10 years with no salvage value. June 30 Sold a computer that was purchased on January 1, 2016. The computer cost $40,200. It had a useful life of 5 years with no salvage value. The computer was sold for $13,800. Dec. 31 Discarded a delivery truck that was purchased on January 1, 2015. The truck cost $41,160. It was depreciated based on a 6-year useful life with a $3,000 salvage value. Required:Journalize all entries required on the above dates, including entries to update depreciation, where applicable, on assets disposed of. Windsor, Inc. uses straight-line depreciation. (Assume depreciation is up to date as of December 31, 2018.)

Answers

Answer 1

Answer:

All journal entries are given below

Explanation:

A. Retired a piece of machinery

Entry                                           DEBIT       CREDIT

Accumulated depreciation     $60,600

Machinery                                                   $60,600    

B. Depreciation for expense for computer sold

Entry                                           DEBIT       CREDIT

Depreciation expense             $4,020

Accumulated depreciation                          $4,020

Working

Depreciation = (40,200/5year) x6/12

Depreciation = $4,020

C. Disposal of computer

Entry                                             DEBIT       CREDIT

Cash                                            $13,800

Accumulated depreciation(w)    $28,140

Gain on disposal                                            $1,740

Computer                                                       $40,200

Workings;-

Accumulated depreciation = depreciation expense per year x number of years

Accumulated depreciation = $8040 x 3.5years = $28,140

D.  depreciation of delivery truck

Entry                                          DEBIT       CREDIT

Depreciation expense             $6,360

Accumulated depreciation                          $6,360

E.  Dicarded delivery truck

Entry                                             DEBIT       CREDIT

Accumulated depreciation(w)   $31,180

Loss on discarded truck            $9,360

Delivery truck                                             $41,160

Workings;-

Accumulated depreciation = depreciation expense per year x number of years

Accumulated depreciation = $6,360 x 5

Accumulated depreciation = $31,180


Related Questions

Many managers describe performance appraisal as the responsibility that they like least. Why is this so? What could be done to improve the situation?

Answers

Answer:

Many managers describe performance appraisal as the responsibility that they like least. Why is this so?

it might be so because managers may feel that performance appraisal is not as productive as other activities, or because they lack the personal skills, or the motivation, to engage in that activity.

What could be done to improve the situation?

Managers should be taught that performance appraisal can be a very effective and productive method for the firm. When workers are praised for their work (when they deserve it), they are likely to be happier in the workplace, and it has been shown by countless studies that happier workers are also more productive.

A company purchased money market funds with cash during the current year. Which of the following statements is correct?
A. This transaction will result in a decrease in cash from investing activities.B. This transaction will result in a decrease in cash from operating activities.C. This transaction will result in a decrease in cash from financing activities.D. This transaction will not cause a change in cash from operating, investing, or financing activities.

Answers

Answer: This transaction will not cause a change in cash from operating, investing, or financing activities.

Explanation:

When a company purchased money market funds with cash during the current year, it should be noted that this will transaction will not cause a change in cash from operating, investing, or financing activities. This is because the purchase was made with cash during the current year.

Indicate whether each of the following statements is true or false.a. A company has the following assets at the end of the year: cash on hand $40,000, cash refund due from customer $30,000, and checking account balance $22,000. Cash and cash equivalents is therefore $62,000.b. A company that has received NSF checks should report these checks as a current liability on the balance sheet.c. Restricted cash that is a current asset is reported as part of cash and cash equivalents.d. A company has cash in the bank of $50,000, petty cash of $400, and stock investments of $100,000. Total cash and cash equivalents is therefore $50,400.

Answers

Answer:

Indication of whether each of the following statements is true or false:

a. A company has the following assets at the end of the year: cash on hand $40,000, cash refund due from customer $30,000, and checking account balance $22,000. Cash and cash equivalents is therefore $62,000.

True

b. A company that has received NSF checks should report these checks as a current liability on the balance sheet.

False

c. Restricted cash that is a current asset is reported as part of cash and cash equivalents.

False

d. A company has cash in the bank of $50,000, petty cash of $400, and stock investments of $100,000. Total cash and cash equivalents is therefore $50,400.

True

Explanation:

a. Cash and cash equivalents do not include refund due from customers.

b. NSF checks mean that the checks were returned by the bank to the company marked "Not Sufficient Funds."  These checks are to be returned to the customers.  The customers' accounts will be debited to reverse the earlier recorded payment offsetting their accounts.  They are, therefore, not to be recorded as liabilities.

c. Since restricted cash is not available for general and immediate use by the company, it is not part of the cash and cash equivalents.  The cash and cash equivalents deal with cash and near cash items that can easily be converted into cash and used in settlement of financial obligations.

d. This is while only marketable securities (bonds, shares, etc) are included in cash and cash equivalents, because most of them have a duration of less than 3 months.  Stock investments, without any qualification, do not qualify to be classified as cash and cash equivalents, unless they are held as marketable securities.

Determine the future value if $5,000 is invested in each of the following situations: 7 percent for seven years $8,130 $8,031 $8,030 $7,030

Answers

Answer:

The answer is $8,030

Explanation:

Present Value (PV) = $5,000

Future Value(FV) = ?

Interest rate(r) = 7 percent

Number of years (N) = 7 years

The formula for future value is:

FV = PV(1+ r)^n

= $5,000(1+0.07)^7

$5,000(1.07)^7

$5,000 x 1.605781476

=$8,028.91

Approximately $8,030

Alternatively, we can use a Financial calculator:

N= 7; I/Y= 7, PV= -5,000 CPT FV= $8,028.91

Approximately $8,030

IBM just paid a dividend of and expects these dividends to grow at ​% a year. The price of IBM is per share. What is​ IBM's cost of equity​ capital?

Answers

Question

The question is incomplete. The complete version is given below:

IBM just paid a dividend of $3.5 and expects these dividends to grow at 7% a year. The price of IBM is $100 per share. What is? IBM's cost of equity? capital?

Answer:

Cost of equity = 10.7%

Explanation:

Cost of equity can be ascertained using the dividend valuation model. The dividend valuation model states that the price of a stock is the present value of future dividends discounted at the required rate of return.  The required rate of return is the cost of equity.

The cost is the minimum rate of return that ordinary shareholders are willing to accept considering the opportunity cost of their capital

Cost of equity (Ke) =( Do( 1+g)/P ) + g

DATA

Ke- ?

D0- 3.5

P-100

g-7%

Ke= 3.5×(1.07)/100  + 0.07 = 0.10745

Ke- 0.10745 × 100 = 10.7%

Cost of equity = 10.7%

L Corporation produces and sells 15,100 units of Product X each month. The selling price of Product X is $21 per unit, and variable expenses are $15 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $72,000 of the $101,000 in monthly fixed expenses charged to Product X would not be avoidable even if the product was discontinued. If Product X is discontinued, the annual financial advantage (disadvantage) for the company of eliminating this product should be: Multiple Choice $10,400 ($61,600) ($39,400) $39,400

Answers

Answer:

If Product X is discontinued, the company’s overall net operating income would: increase by $61,600

Explanation:

                                          Not drop        Drop       Difference

Sales                                   317,100                           317,100

(15100*21)

Less: Variable expenses   226,500                         226,500

(15,100 * 15)

Contribution margin            90,600                          90,600

Less: fixed expenses          101,000       72,000      29,000

Net operating income      -$10,400                         $61600

Conclusion: If Product X is discontinued, the company’s overall net operating income would: increase by $61,600

Jane Cagle’s company wants to establish kanbans to feed a newly established work cell. The following data have been provided. How many kanbans are needed?Daily demand 750 unitsLead time 1/2 daysSafety stock 1/4 daysKanban size 25 untis

Answers

Answer:

22.5

Explanation:

According to the given situation, the computation of the number of kanbans is shown below:-

Number of kanbans needed = [(Demand × Lead time) + (Demand × Safety stock)] ÷ Kanban size

= (750 × 0.5) + (750 × 0.25) ÷ 25

= 22.5

Therefore for computing the number of Kanbans we simply applied the above formula by considering all items

Which of the following dimensions of entrepreneurial orientation is described as a forward-looking perspective characteristic of a marketplace leader that has the foresight to seize opportunities?
A) proactiveness
B) risk taking
C) autonomy
D) competitive aggressiveness

Answers

Answer:

A) Proactiveness.

Explanation:

This explained to be a conceptual development in entrepreneurial orientation that enacts a degree of anticipation in product and also increase a productivity in the entrepreneurial sphere. Some undiluted descriptions shows it to be the introduction of results based on its qualitative study, which is been aimed at the characterizing of the proactiveness in entrepreneurial software firms. Experienced researched organizations has shown that the one which are related to environment monitoring and opportunities quest been highlighted are also core part of proactiveness.

You consider undertaking the research project. It will increase sales by $100K per year starting next year and its life is 10 years. The maintenance cost is $50K and the depreciation of the equipment is 20K per year. The tax rate is 40% and there are no changes in net operating working capital. What is the annual operating cash flow from the project? A. $10,000 B. $18,000 C. $38,000 D. $30.000

Answers

Answer: C. $38,000

Explanation:

The Operating cashflow for a project will be the net income earned from it less any taxes but including depreciation.

In formula form;

Operating cash flow = EBIT - tax paid + depreciation

Earnings Before Interest and Tax

= Sales - Expenses

= 100,000 - 50,000 - 20,000

= $30,000

Tax paid

= EBT * 40%

= 30,000 * 40%

= $12,000

Operating cash flow = EBIT - tax paid + depreciation

= 30,000 - 12,000 + 20,000

= $38,000

Note; Depreciation is added back because it is a non-cash expense.

what happens to aggregate output if both taxes and government spending are lowered by $300 billion and mpc

Answers

Answer:

The answer is:

1. consumers' expenditure increases by $150 billion

2. output will decrease by $600 billion

Explanation:

Tax impact:

$300 billion x 0.5

= $150 billion.

If taxes are lowered by $300 billion, consumers' expenditure increases by $150 billion because with lower tax, there is money money to be spent because their disposable income has increased.

Government spending impact:

$300/(1-0.5)

$300/0.5

=$600 billion.

Due to government spending that has increased by this amount, output will decrease by this amount too because government has directly competed with firms that should have used this money to increase the total output.

Therefore, net effect on total output is $300billion($600 - $300)

In the Solow model with constant technological knowledge (A), if the economy is initially below its steady-state capital stock:

Answers

Answer: catching up growth will occur

Explanation:

In the Solow model with constant technological knowledge (A), if the economy is initially below its steady-state capital stock,. catching up growth will occur.

This is because, we are informed in the question that the Solow model has a constant technological knowledge. This implies that no innovation took place for that period, hence, the catching up growth will occur.

In an Oligopoly industry a change in price by one firm will _____ impact the other firms in the industry.

Answers

Answer:

The answer is significantly.

Explanation:

Oligopoly is a market situation in which there are few sellers, selling similar goods and services and many buyers. The barriers to entry in this market in high. Example of a oligopoly market is OPEC.

The competition amongst the few sellers is high because they are selling the same thing and a change in price by one firm will significantly affect other firms in the industry. For example, if a firm reduces the price of its goods, this creates a price war and other firms to start reducing their price to match the lower price. And if another firm increases its price, consumers will switch to competitors

You have just joined the project management office after five years of working on projects. One of the things you want to introduce to your company is the need to create and utilize WBSs. Some of the project managers are angry that you are asking them to do "extra work". Which of the following would be the BEST thing you could tell the project managers to convince them to use WBSs?a. Tell them that it is not needed b. Tell them it is required only if the project involves contracts. c. Tell them it is the only way to identify risks. d. Tell them it will prevent work from slipping through the cracks

Answers

Answer:  d. Tell them it will prevent work from slipping through the cracks

Explanation:

Work Breakdown Structures work to make a large and by extension all projects more manageable by dividing it into different portions that will then be managed individually to ensure that they are accomplished.

With different portions, various team members can be assigned to them which will lead to greater work efficiency as work is done simultaneously on a project.

Due to this division of the project and the micro-management that comes with it, tasks can be better monitored meaning that there will be less chances of work slipping through the cracks because all tasks will be assigned to different portions of the project and can therefore be traced easily and their completion will form part of the completion of a portion.  

"A customer holds 10 ABC Jan 60 Call contracts. ABC Corporation is paying a 20% stock dividend. On the ex date, the contracts will show as:"

Answers

Answer:

On the ex date, the contracts will show as:

10 ABC Jan 60 Calls

The customer must exercise call contracts to buy the stock prior to the Ex-Date

Explanation:

The reason is that if the customer is not exercising the call contracts then it will not be able to receive the stock dividend. Furthermore, the OCC doesn't adjust the contract because of the dividend announcement prior to exercise of contract. This means it will only adjust if the contract is exercised.

The settlement of the exercise takes around 2 business working days, hence the customer must exercise the option 2 days earlier to the ex-date.

Prentice Company had cash sales of $94,275, credit sales of $83,450, sales returns and allowances of $1,700, and sales discounts of $3,475. Prentice's net sales for this period equal:________a. $94,275. b. $177,725 c. $174,250. d. $176,025 e. $172,550.

Answers

Answer:

Prentice net sales for the period is ;

e. $172,550

Explanation:

The data below were extracted from the information above;

Cash sales = $94,275

Credit sales = $83,450

Sales returns and allowances = $1,700

Sales discount = $3,475

Therefore, Prentice's net sales for the period

= Cash sales + Credit sales - Sales returns and allowances - discounts

= $94,275 + $83,450 - $1700 - $3,475

= $172,550

Tatham Corporation produces a single product. The standard costs for one unit of its Clan product are as​ follows:
Direct materials (8 pounds at $0.70 per pound) $5.60
Direct labor (2 hours at $8 per hour) 16.00
Variable manufacturing overhead
(2 hours at $7 per hour) 1,400
Total 3,560
During November Year​ 2, 3,500 units of Clan were produced. The costs associated with November operations were as​ follows:
Material purchased (35,000 pounds at $0.80 per pound) 28,000
Material used in production (31,500 pounds)
Direct labor (7,500 hours at $7.50 per hour) 56,250
Variable manufacturing overhead incurred 55,500
What is the variable overhead efficiency variance for Clan for November Year​ 2?
1. $3,500 favorable.
2. $3,500 unfavorable.
3. $4,000 favorable.
4. $4,000 unfavorable.

Answers

Answer:

$3,500 Unfavorable

Explanation:

The computation of variable overhead efficiency variance for Clan for November Year 2 is shown below:-

Variable overhead efficiency variance

=  (Standard labor hours - actual labor hours) × (Standard variable overhead rate)

= (3,500 × 2 - 7,500) × $7

= (7,000 - 7,500) × $7

= $3,500 Unfavorable

Therefore for computing the Variable overhead efficiency variance we simply applied the above formula.

Fremont Enterprises has an expected return of and Laurelhurst News has an expected return of . If you put of your portfolio in Laurelhurst and in​ Fremont, what is the expected return of your​ portfolio?

Answers

The question is incomplete as it is missing the figures. The complete question is,

Fremont Enterprises has an expected return of 15% and Laurelhurst News has an expected return of 20%.  If you put 70% of your portfolio in Laurelhurst and 30% in Fremont, what is the expected return of your portfolio?

Answer:

Portfolio return = 0.185 or 18.5%

Explanation:

The expected return of a portfolio is a function of the weighted average of the individual stocks returns' that form up the portfolio. The expected return of a portfolio can be calculated using the following formula,

Portfolio return = wA * rA  +  wB * rB  +  ...  +  wN * rN

Where,

w represents weight of each stock in the portfolior represents the return of each stock in the portfolio

Portfolio return = 0.3 * 0.15  +  0.7 * 0.2

Portfolio return = 0.185 or 18.5%

If you were on the Federal Reserve Board and you were concerned only with reducing high unemployment, you would implement_____________ monetary policy with a focus.

a. Short-term
b. Long-term
c. Contractionary
d. Expansionary

Answers

Answer: Expansionary; Short-term

Explanation:

If you were on the Federal Reserve Board and you were concerned only with reducing high unemployment, you would implement an expansionary monetary policy with a short-term focus.

Expansionary monetary policy has the effect of putting more money into the economy. As there is now more money in the economy, the expectation is that there will be more consumption spending as well as investment. More consumption because people have more money and more investment because interest rates reduce when there is an increased money supply. As there is now more investment as well as the need to satiate the increased demand, more companies can expand and employ people thereby reducing unemployment.

This should however be done with a short term view because expansionary monetary policy will lead to higher inflation in the longer term making business operations less profitable.

Fallow Corporation has two separate profit centers. The following information is available for the most recent year: West Division East Division Sales (net) $ 410,000 $ 560,000 Salary expense 47,000 61,000 Cost of goods sold 143,000 259,000 The West Division occupies 10,250 square feet in the plant. The East Division occupies 6,150 square feet. Rent, which was $ 82,000 for the year, is an indirect expense and is allocated based on square footage. Compute operating income for the West Division.

Answers

Answer:

$168,750

Explanation:

The data below are extracted from the above question.

West division

Sales (S) = $410,000

Salary expense (E) = $47,000

Cost of goods sold (C) = $143,000

Proportional rent (R) = $82,000 % of square footage

Area of the division = 10,250 square feet.

Total area of both division = 10,250 + 6,150

= 16,400 square feet

Therefore, the operating income (I) for the West Division is given by the amount of sales minus salary expenses , cost of goods sold and rent.

I = S - E - C - R

= $410,000 - $47,000 - $143,000 - (82,000 × 10,250 / 16,400)

= $220,000 - $51,250

= $168,750

The yearly operating income for Fallow's Corporation West Division is $168,750.

Buyers want to pay the lowest possible​ price, so why would they be willing to pay more than​ $12 for a​ pizza?

Answers

Maybe because they also want to get a drink and some wings

Identify at least two challenges that Salesforce faces and explain why these are important challenges to Salesforce.

Answers

Answer:

Two challenges that Salesforce may face today:

1. Competitions

2. Cash Flows

Explanation:

1. Salesforce has been the global Software-as-a-Service (SaaS) provider for Customer Relationship Management (CRM) system. However, they are challenged by new market joiners such as Hubspot. There are also new startups offering free and simple cloud-based CRM systems that targetting small businesses. The entry of the new competitors seriously threatens the leading market share of Salesforce.

2. The current pandemic affected negatively to all enterprises, including Salesforce's outstanding customers. They should expect a drop in their total number of fee payers while the cost to maintain their high product standard is still the same as before. It may give them a lot of working capital headaches.

Which of the following is not an example of a counterproductive cultural trait that adversely impacts a company's work climate, performance, and strategy execution initiatives?
a) Heavily politicized decision-making
b) The presence of incompatible, clashing subcultures
c) Strictly enforced policies and conservative financial management practices
d) Hostility to change
e) Unethical and greed-driven behaviors

Answers

Answer:

I think D is not an example for a company's work climate, performance, and strategy execution initiatives.

Strictly enforced policies and conservative financial management practices out of the following are not an example of counterproductive cultural trait that adversely impacts a company's work climate, performance, and strategy execution initiatives. The correct option is C.

How do you deal with counterproductive work behavior?

Encourage them to improve the work they already generate or present them with new tasks to work on. Be confident. Fight against unproductive workplace activities assertively without losing your temper. Establish and uphold your authority that a productive workplace is essential to the success of your facility.

A wide range of factors, such as environmental causes, a lack of training, employee personality and life changes, and external circumstances, might be the motivating drivers behind unproductive work behavior. To recognize and categorize CWB in the workforce, typologies are utilized.

Thus, the ideal selection is option C.

Learn more about counterproductive work here:

https://brainly.com/question/4307465

#SPJ6

Choose the best scenario for refinancing.

a. You have a current mortgage at 5% and have been approved for a new mortgage at 3.75%. You’ll break even on the closing costs in two years, and you don’t plan to move for at least five.
b. You intend to move in about nine months, but you have been approved for a mortgage with an interest rate two whole points lower than your current rate.

Answers

Answer:

Correct Answer: The best scenario for refinancing is:

a. You have a current mortgage at 5% and have been approved for a new mortgage at 3.75%. You’ll break even on the closing costs in two years, and you don’t plan to move for at least five.

Explanation:

This is because, being aware that you will break even on the closing cost in 2 years which is quite better when compared to no of years to stay (atleast five years) gives the person a competitive advantage.

You bought one of Great White Shark Repellant Co.’s 6.6 percent coupon bonds one year ago for $1,056. These bonds make annual payments and mature 11 years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 4.5 percent. The bonds have a par value of $1,000. If the inflation rate was 3.2 percent over the past year, what was your total real return on investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Answers

Answer:

14.25%

Explanation:

For computing the total real return first we have to find out the present value and the required return which is shown below:

Given that,  

Future value = $1,000

Rate of interest = 4.5%

NPER = 11 years

PMT = $1,000 × 6.6% = $66

The formula is shown below:

= -PV(Rate;NPER;PMT;FV;type)

So, after applying the above formula the present value is $1,179.11

Now the required return is

= ($1,179.11 + $66) ÷ ($1,056) -1

= 17.91%

And finally,

total real return

= ($1.1791 ÷ 1.032) - 1

= 14.25%

Why do we need to deduct gain on sale of plant assets from net income to arrive at net cash flow from operating activities

Answers

Answer:

The money received from the sale of assets is included in the net cash flows from investing activities, that is why you must adjust net income by eliminating any gain or loss resulting from these transactions.  

Explanation:

E.g. net income = $50,000, and it includes a gain of $5,000 resulting from the sale of a truck. The truck had a book value of $15,000, but was sold at $20,000.

Net cash flows from operating activities:

Net income $50,000

Adjustments to net income:

- Gain on sale of asset ($5,000)

Net cash flow provided by operating activities $45,000

Net cash flows from investing activities:

Sale of truck $20,000

Net cash flow provided by investing activities $20,000

Blaster, Inc., manufactures portable radios. Each radio requires 3 units of Part XBEZ52, which has a standard cost of $1.75 per unit. During May, the company purchased 24,120 units of the part for a total of $43,416. Also during May, the company manufactured 6,240 radios, using 20,620 units of part XBEZ52. The direct materials purchases variance is computed when the materials are purchased. During May, the materials price variance for part XBEZ52 was:

Answers

Answer:

$1,206 unfavorable

Explanation:

materials price variance = (AP – SP) x AQ

SP = $1.75

AQ = 24,120 units (units purchased)

AP = $43,416 / 24,120 = $1.80

materials price variance = ($1.80 - $1.75) x 24,120 = $1,206 unfavorable

Since the price paid for each part is higher than the standard price, the variance is unfavorable.  

Target costing is arrived at by taking a.the selling price and adding desired profit b.the selling price minus desired profit c.the budget standard cost and reducing it by 10% d.the selling price and subtracting the budget standard cost

Answers

Answer:

The answer is B. the selling price minus desired profit

Explanation:

The formula for target costing is:

Selling price minus desired profit(profit margin).

Target costing is one of the tools used by management to determine the cost at which a product will be sold for at every stage of its life-cycle.

One of the advantages of target costing is that it enables firms to think about the best way to produce a product at the lowest possible costs

In 2019, Tim sells Section 1245 property for $28,000 that he had purchased in 2009. Tim has claimed $5,000 in depreciation on the property and originally purchased it for $15,000. How much of the gain is taxable as ordinary income?

Answers

Answer:

The taxable amount at an ordinary rate = $5000

Explanation:

The selling price of a property in 2019 is = $28000

The depreciation on the property = $5000

Original purchased price of property = $15000

Adjusted tax = an orginal price – depreciation  

Adjusted tax = 15000 – 5000 = $10000

Gain = selling price – adjusted tax

Gain = 28000 – 10000 = $18000

The part of gain ($18000) that is taxable as ordinary rate = $5000

Here, $13000 will be taxed as section 1231 as a gained tax at capital gain rate.

For this milestone, you will discuss Case Study Three. Identify the main types of business entities, and discuss the advantages and disadvantages of each. Your active participation in this discussion is essential to improving your understanding of the advantages and disadvantages of the various business entities. Actively engaging with your peers will help you complete the remaining critical elements for the final project.

Answers

Answer:

Sole proprietorship:

Advantage: is very easy to establish, and gives total control to the owner.

Disadvantage: the sole owner is personally liable in case of bankruptcy.

Partnership:

Advantage: involve two or more people, meaning that capital is likely to be higher. Gives tax benefits to partners.

Disadvantage: partners are also personally liable in case of bankruptcy.

Corporation:

Advantage: a corporation is legally, a separate entity from its stockholders, meaning that stockholders are not personally liable in case of bankruptcy. Corporations can also grow to include a large number of people (stockholders).

Disadvantage: they are more difficult to start than other types of business entities, and are more closely inspected.

Limited Liability Company:

Advantage: they combine the pass-through characteristics of partnerships with the limited liability of corporations.

Disadvantage: they are not necessarily as profitable as corporations.

JWU Company has been growing at a rate of 5% for the past two years and is expected to continue for several years. The company paid a Dividend of $2.00 last year. If your required rate of return is 13%, what is the current value of this company’s stock?
A. $26.25
B. $15.38
C. $40.00
D. $29.50

Answers

Answer: A. $26.25

Explanation:

Using the Gordon Growth model, the value of the stock can be determined using the available variables.

The formula is;

Value of a Stock = Next Dividend / (Required Return - Growth Rate)

Value of a Stock  = Current Dividend (1 + Growth Rate) / (Required Return - Growth Rate)

= 2 ( 1 + 0.05) / ( 0.13 - 0.05)

= (2 * 1.05) / 0.08

= $26.25

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