Answer:
cost plus regulation
Explanation:
Cost plus regulation is generally used by the government to regulate monopolies (mainly natural monopolies like utilities, and others). The price that the monopoly can charge for its goods or services is set by the government and it should generally cover all of the company's costs plus allow it to make a "normal" profit.
Green Inc. made no adjusting entry for accrued and unpaid employee wages of $38,000 on December 31. This error would Multiple Choice Understate assets by $38,000. Overstate net income by $38,000. Understate net income by $38,000. Have no effect on net income.
Answer:
The answer is B. Overstate net income by $38,000.
Explanation:
Accrued expense is an expense that has been enjoyed or incurred but has been paid for. Examples of an accrued expense are unpaid wages/salary, unpaid electricity bill etc.
Usually, the adjusting entry for accrued expense is to debit the expense and debit increases expense while credit decreases it. Since there is no adjusting entry, that means no expense is being recognized on the income statement for this transaction. Hence, the net income increases (overstated). because ordinarily expense reduces net income.
A local restaurant increases the prices on its burgers as soon as it begins a promotional campaign. Which of the following is most likely to be true?
a) The promotional campaign featured how much better their burgers are.
b) The promotional campaign focused on the value per dollar.
c) The promotional campaign made demand more elastic.
d) All of the above.
Answer: The promotional campaign featured how much better their burgers are
Explanation:
The most likely reason why a local restaurant will increase the prices on its burgers as soon as it begins a promotional campaign is that the promotional campaign featured how much better their burgers are.
Through the promotional campaign, the message has been passed to the customers and anyone interested that the burgers are better and customers will enjoy value for their money.
An existing robot can be kept if $2,300 is spent now to upgrade it for future service requirements. Alternatively, the company can purchase a new robot to replace the old robot. The following estimates have been developed for both the defender and the challenger. The company's before-tax MARR is 25% per year. Based on this information, should the existing robot be replaced right now? Assume the robot will be needed for an indefinite period of time.
Defender Challenger
Current MV $39,000 Purchase price $50,000
Required upgrade $2,300 Installation cost $5,000
Annual expenses $1,600 Annual expenses $1,000
Remaining useful life 6 years Useful life 10 years
MV at end of useful life -$1,500 MV at end of useful life $7,000
The AW value of the defender is:________ $.
Answer:
The AW value of the defender is:________ $15,729.
Explanation:
a) Data and Calculations:
Defender Challenger
Current MV $39,000 Purchase price $50,000
Required upgrade $2,300 Installation cost $5,000
Annual expenses $1,600 Annual expenses $1,000
Remaining useful life 6 years Useful life 10 years
MV at end of useful life -$1,500 MV at end of useful life $7,000
Investment = $39,000 + $2,300 Investment = $50,000 + $5,000
= $41,300 = $55,000
Present Value = ($41,300 + Present Value = ($55,000 +
$1,600 x 2.951) = $46,021.60 $1,000 x 3.571) = $58,571
$46,022 + $393 ($1,500 x .262) $58,571 - $749 ($7,000 x .107)
Equivalent Annual Cost Equivalent Annual Cost
= $46,415/ 2.951 = $57,822/3.571
= $15,729 = $16,192
The robots' Equivalent Annual Costs (or Average Weighted Value) are the total costs of owning, operating, and maintaining the robots for 6 years and 10 years respectively. For the old robot, additional cost of $1,500 will be incurred to retire the asset, while the new robot will have a salvage value of $7,000. These are factored into the equivalent annual costs, after discounting them to their present values.
Whenever an existing piece of equipment is considered for replacing by a new piece of equipment, the old piece is referred to as the defender, and the new piece of equipment is referred to as the challenger.
The AW value of the defender is------------$15,729.
a) Data and Calculations:
Defender Challenger
Current MV -------$39,000 Purchase price-------$50,000
Required upgrade----------$2,300 Installation cost------$5,000
Annual expenses-----------$1,600 Annual expenses -------$1,000
Remaining useful life--------6 years Useful life ------10 years
MV at end of useful life------$1,500 MV at end of useful life--$7,000
Investment--------- $39,000 + $2,300 Investment = $50,000 + $5,000
= $41,300 = $55,000
Present Value = ($41,300 + Present Value = ($55,000 +
[tex]\$1,600 \times 2.951[/tex]) = $46,021.60 [tex]\$1,000 \times3.571[/tex]) = $58,571
$46,022 + $393 [tex](\$1,500 \times .262)[/tex] $58,571 - $749 ([tex]\$7,000 \times .107[/tex])
Equivalent Annual Cost Equivalent Annual Cost
= [tex]\frac{\$46,415}{ 2.951}[/tex] = [tex]\frac{\$57,822}{3.571}[/tex]
= $15,729 = $16,192
The overall expenses of owning, operating, and maintaining the robots for 6 - 10 years, correspondingly, are the Equivalent Annual Costs (or Average Weighted Value).
The old robot will incur an additional cost of $1,500 to retire it, but the new robot will have a salvage value of $7,000. After discounting to the current value, these are included in the comparable yearly expenses.
To know more about the calculations of the AM value of defender, refer to the link below:
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our parents have made you two offers. The first offer includes annual gifts of $5,000, $6,000, and $8,000 at the end of each of the next three years, respectively. The other offer is the payment of one lump sum amount today. You are trying to decide which offer to accept given the fact that your discount rate is 6.2 percent. What is the minimum amount that you will accept today if you are to select the lump sum offer? D) $17,709.48 C) $16,360.42 B) $16,407.78 E) $17,856.42 A) $16,707.06
Answer:
A) $16,707.06
Explanation:
The computation of the minimum amount is shown below:
Here we find the present value which is shown below:
(in dollars) (in dollars)
Year Cash flows Discount factor Present value
1 5000 0.9416195857 4708.098
2 6000 0.8866474442 5319.885
3 8000 0.834884599 6679.077
Total 16707.059
A stock has a beta of 1.15 and a reward-to-risk ratio of 6.15 percent. If the risk-free rate is 3 percent, what is the stock's expected return
Answer:
10.07%
Explanation:
According to CAPM
the stock's expected return = risk free rate + (beta x reward-to-risk ratio )
3% + (6.15% x 1.15) = 10.07%
The following data relate to the Denver Company's operations for the year ended December 31, 20XX:
Direct Materials Purchases $100,000
Indirect meterial usage 10,000
Indirect labor 10,000
Direct Labor 300,000
Sales salaries 100,000
Administrative salaries 50,000
Factory water and electricity 20,000
Advertising expenses 60,000
Depreciation-sales and general office 40,000
Depreciation-factory 50,000
Beginning Inventories:
Direct Materials $20,000
Work In Progress 60,000
Finished goods 80,000
Ending Inventories:
Direct Materials $30,000
Work in Progress 50,000
Finished goods 60,000
Required:
Prepare a statement of cost of goods manufactured.
Answer:
Cost of goods manufactured= $490,000
Explanation:
Giving the following information:
Overhead:
Indirect material usage 10,000
Indirect labor 10,000
Factory water and electricity 20,000
Depreciation-factory 50,000
Total overhead= 90,000
To calculate the cost of goods manufactured, we need to use the following formula:
cost of goods manufactured= beginning WIP + direct materials + direct labor + allocated manufacturing overhead - Ending WIP
Direct materials= 100,000 + 20,000 - 30,000= 90,000
cost of goods manufactured= 60,000 + 90,000 + 300,000 + 90,000 - 50,000
cost of goods manufactured= $490,000
A small firm intends to increase the capacity of a bottleneck operation by adding a new machine. Two alternatives, A and B, have been identified, and the associated costs and revenues have been estimated. Annual fixed costs would be $38,000 for A and $31,000 for B; variable costs per unit would be $7 for A and $11 for B; and revenue per unit would be $19.
a. Determine each alternative’s break-even point in units. (Round your answer to the nearest whole amount.)
QBEP,A units
QBEP,B units
b. At what volume of output would the two alternatives yield the same profit? (Round your answer to the nearest whole amount.)
c. If expected annual demand is 10,000 units, which alternative would yield the higher profit?
Answer:
Instructions are below.
Explanation:
Giving the following information:
Machine A:
Fixed costs= $38,000
Unitary cost= $7
Machine B:
Fixed costs= $31,000
Unitary cost= $11
Revenue per unit= $19
To calculate the break-even point in units, we need to use the following formula:
Break-even point in units= fixed costs/ contribution margin per unit
Machine A:
Break-even point in units= 38,000 / (19 - 7)
Break-even point in units= 3,167
Machine B:
Break-even point in units= 31,000 / (19 - 11)
Break-even point in units= 3,875
Now, we need to determine the indifference point:
Machine A= 38,000 + 7x
Machine B= 31,000 + 11x
x= number of units
We will equal both formulas and isolate x:
38,000 + 7x = 31,000 + 11x
7,000 = 4x
1,750=x
Indifference point= 1,750 units
Finally, the total cost for 10,000 units:
Machine A= 38,000 + 7*10,000= $108,000
Machine B= 31,000 + 11*10,000= $141,000
Which of the following conditions would necessitate the use of non-verbal communication instead of verbal communication?A) Low physical distanceB) Need for immediate feedbackC) Personal nature of communicationD) Familiarity with the listenerE) Increased noise
Answer:
E) Increased noise
Explanation:
The answer is that the condition that would necessitate the use of non-verbal communication instead of verbal communication is increased noise because the noise is any type of sound that affects the verbal communication and in a case of increased noise, it could be necessary to use non-verbal communication to be able to deliver a message.
The other options are not right because they don't affect the verbal communication in a way that forces you to use non-verbal communication.
If budgeted beginning finished goods inventory is $8,000, budgeted ending finished goods inventory is $9,400, and budgeted cost of goods sold is $10,260, budgeted cost of goods manufactured should be
Answer:
Cost of goods manufactured= $11,660
Explanation:
Giving the following information:
Beginning inventory= $8,000
Ending inventory= $9,400
COGS= $10,260
To calculate the cost of goods manufactured, we need to use the following formula:
COGS= beginning finished inventory + cost of goods manufactured - ending finished inventory
10,260 = 8,000 + cost of goods manufactured - 9,400
cost of goods manufactured= 10,260 - 8,000 + 9,400
cost of goods manufactured= $11,660
Bronco Corporation discovered these errors in August of Year 3:
Year Depreciation Overstated Prepaid Expense Omitted
1 $2500 $3000
2 4000 2000
Assume all current items are two months in duration. Net Income for Year 2 was $18,000. Assume all errors are discovered in August of Year #3. The Year #2 books are closed. The net effect on Year #3 Beginning Retained Earnings caused by the August Year #3 correcting journal entries was:
a. $5,500
b. $6,500
c. $6,000
d. $8,500
e. $4,500
Answer:
e. $4,500
Explanation:
Year Depreciation overstated Prepaid expense omitted
1 $2,500 $3,000
2 $4,000 $2,000
Year 2's net income = net income (year 2) + overstated depreciation (year 2) + omitted prepaid expenses (year 1) - omitted prepaid expenses (year 2) = $18,000 + $4,000 + $3,000 - $2,000 = $23,000
This means that year 2's net income was understated by $5,000.
But year 1's net income was overstated by = $2,500 - $3,000 = -$500.
The adjustment on the retained earnings account should be $5,000 - $500 = $4,500
Parker & Stone, Inc., is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land six years ago for $4.3 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent these facilities from a competitor instead. If the land were sold today, the company would net $4.6 million. The company wants to build its new manufacturing plant on this land; the plant will cost $11.8 million to build, and the site requires $700,000 worth of grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project? (Enter your answer as a positive value in dollars, not millions of dollars, e.g., 1,234,567.)
Answer:
$17.1 million
Explanation:
The proper cash flow amount to use as the initial investment in fixed assets when evaluating this project can be calculated as follows
DATA
Fair value of land = 4.6 million
Cost to build a plant = 11.8 million
Grading cost = 0.7 million
Solution
Initial investment = Fair value of land + Cost to build a plant + Grading cost
Initial investment = $4.6 million + $11.8 million + $0.7 million
Initial investment = $17.1 million
Assume that the CEO of a company gave you the project charter specifying your authority, among others to work on an initiative providing health services to the community in a certain neighborhood. Before the company embarked on the project, the team analyzed the health sector development program of the country and read through laws the country enacted regarding the health sector. It also did a market survey to solicit information as to who does what. From the analysis, it learned that several companies where engaged in the provision of solar energy. As it did not want to be engaged in providing the same service that others were offering, it started developing solar powered mobile clinic. With an initial outlay of birr 5 Million, the project would last for 7 years. Since the whole work was too huge to consider all at once, the project manager and the team decomposed the project into manageable compartments and then to activities. It also developed schedule, set standards, and anticipated possible bottlenecks along the way. From the analysis it made, it found out that there would be a 20% chance that medical supplies would be delivered late costing the company ETB 350,000. There would also be a 40% chance that the company would save ETB 175,000 in time as it would build the component using already existing templates instead of starting from scratch. Finally, the team would like to make sure that the work would satisfy all of the requirements so that it would get the acceptance of the clients. 1. Characterize a project based on the above narration and distinguish the project manager from an operations manager? 2. What is the Expected Monetary Value for the two possibilities? What would you suggest as a solution to respond to risks? 3. Mention and elaborate the input the company used to develop products using templates already existing instead of starting from the scratch. 4. What are the areas of expertise indicated in the story? 5. If you were to produce documents thereby convince stakeholders to buy in the project idea, what would you do for a successful initiation? 6. Discuss the processes, process groups and knowledge areas narrated in the story.
Answer:
Characterize a project based on the above narration and distinguish the project manager from an operations manager?
Explanation:
Jeff has the opportunity to receive lump-sum payments either now or in the future. Which of the following opportunities is the best, given that the interest rate is 4% per year?
a. one that pays $ 900 now
b. one that pays $ 1080 in two years
c. one that pays $ 1350 in five years
d. one that pays $ 1620 in ten years
Answer:
c. one that pays $ 1350 in five years
Explanation:
we have to calculate the present value of each option:
option a, $900 (that is the present value)option b, $1,080 in 2 years. PV = $1,080 / (1 + 4%)² = $998.52option c, $1,350 in 5 years. PV = $1,350 / (1 + 4%)⁵ = $1,109.60option d, $1,620 in 10 years. PV = $1,620 / (1 + 4%)¹⁰ = $1,094.41Option c yields the highest present value = $1,109.60
Which of the following represents a difference in the process by which a monopolistic competitor and a monopolist make their respective decisions about quantity and price?a. only the monopolist competitor faces a downward-sloping demand curve.b. the monopolist's perceived demand curve is market demandc. the monopolist competitor's perceived demand curve is market demandd. a monopolist need not fear entry and also selection b above
Answer:
a monopolist need not fear entry and also selection b above
Explanation:
A monopolistic competition is when there are many firms selling differentiated products in an industry. A monopoly has characteristics of both a monopoly and a perfect competition. the demand curve is downward sloping. it sets the price for its goods and services.
examples of monopolistic competition are restaurants
A monopoly is when there is only one firm operating in an industry. there is usually high barriers to entry of firms. the demand curve is downward sloping. it sets the price for its goods and services.
An example of a monopoly is an utility company
Denise contracts with Long Life Insurance Co., agreeing to pay premiums in return for which the company agrees to pay $500,000 to Denise's husband Barn when Denise dies. Barn is a(n):
Answer:
Donee Beneficiary
Explanation:
In the scenario being described, it can be said that Barn is a Donee Beneficiary. This is a third-party beneficiary that occurs when the second party in the contract does not owe anything to the third party but wants to provide them with the benefit of the performance of the first party. Which since in this scenario, Denise wants to provide Barn with all the benefits of the contract even though she does not owe him anything, then it technically makes Barn a Donee Beneficiary to the Long Life Insurance Contract.
Based on a predicted level of production and sales of 22,000 units, a company anticipates total variable costs of $99,000, fixed costs of $30,000, and operating income of $36,000. Based on this information, the budgeted amount of fixed costs for 20,000 units would be:
Answer:
Budgeted amount of fixed cost for 20,000 units = $30,000
Explanation:
For 22,000 units, Budgeted fixed cost was $30,000
Thus, since fixed cost do not change in totality under ordinary circumstances, the same amount of fixed cost would be budgeted for 20,000 units as well
Based on the information given, the budgeted amount of fixed costs for 20,000 units would be $30,000.
What is a budget?A budget simply means a financial plan that is used by an individual, business organization or government to estimate the amount of revenue and expenditures over a specified period of time, and it is usually on an annual basis i.e one year.
In this scenario, the budgeted amount of fixed costs for 20,000 units would be equal to $30,000 because fixed cost remains the same and doesn't change under ordinary circumstances.
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As the athletic shoe buyer for Sports Authority, how would you go about forecasting sales for a new Nike running shoe?
Answer:
The answer is below
Explanation:
I would go about forecasting sales for a new Nike running shoe in the following ways:
1. Check past sales history: Examining Nike's sales history to check and differentiate which items have high sales well and those items that didn’t. This will help anticipate and forecast sales for the new Nike running shoe by putting it side by side with a similar product.
2. Conduct detailed market research: This is vital to predicting prospective sales in order to determine if the shoes will sell satisfactorily.
Making research to infer specifically the products, consumers wants will give Nike a current idea of what is in vogue. Thus, by conducting detailed research and discovering what their consumers prefer and disfavor, they will have the ability to predict sales for a new item.
Onslow Co. purchases a used machine for $178,000 cash on January 2 and readies it for use the next day at a $2,840 cost. On January 3, it is installed on a required operating platform costing $1,160, and it is further readied for operations. The company predicts the machine will be used for six years and have a $14,000 salvage value. Depreciation is to be charged on a straight-line basis. On December 31, at the end of its fifth year in operations, it is disposed of.Required:Prepare journal entries to record the machine's disposal under each of the following separate assumptions: a. It is sold for $22,000 cash. b. It is sold for $88,000 cash. c. It is destroyed in a fire and the insurance company pays $32,500 cash to settle the loss claim.
Answer:
All the requirements are solved below
Explanation:
Purchase = $178,000
Ready to use cost = $2,480
Installation cost = $1,160
Salvage value = $14,000
Depreciation method = Straight line
Useful life = 6 years
Solution
Requirement A If sold for $22,000
Entry DEBIT CREDIT
Cash $22,000
Accumulated depreciation $140,000
Profit/loss on disposal $20,000
Machinery $182,000
Requirement B If sold for $88,000
Entry DEBIT CREDIT
Cash $82,000
Accumulated depreciation $140,000
Profit/loss on disposal $40,000
Machinery $182,000
Requirement C If destroyed in fire and insurance company paid $32,500
Entry DEBIT CREDIT
Cash $30,000
Accumulated depreciation $140,000
loss from fire $12,000
Machinery $182,000
Workings
Cost =$178,000 + $2,480 + $1,160
Cost = $182,000
Accumulated depreciation = ([tex]\frac{182,000-14,000}{6}x5[/tex]
Accumulated depreciation = 140,000
MV Corporation has debt with market value of million, common equity with a book value of million, and preferred stock worth million outstanding. Its common equity trades at per share, and the firm has million shares outstanding. What weights should MV Corporation use in its WACC?
Answer:
The Weighted Average cost of capital measures the cost to the company of its current capital structure by using the weights of the various capital measures. WACC usually uses market values so;
Total amount = Debt + Preferred stock + common equity
= 100 million + 20 million + ( 50 * 6 million)
= $420 million
Proportions.
Debt
= 100/420
= 24%
Preferred Stock
= 20/420
= 5%
Common Equity
= 300/420
= 71%
The Chinese government chooses to control the value of its currency so that it is consistently worth some fixed amount of U.S. dollars. Which of the following terms would relate to what the Chinese government would be doing?
a. floating exchange rate
b. flexible exchange rate
c. exchange rate freedom
d. pegged exchange rate
Answer: pegged exchange rate
Explanation:
A pegged exchange rate also referred to as the fixed exchange rate, sometimes is an exchange rate regime type whereby the value of a currency is fixed by the monetary authority of a particular country against the value of the currency of another country.
This is the type of exchange rate used by the Chinese government in the question above.
Bob: Listen, donuts are made to bring joy into our lives and to wake up our glazed faculties. Just let them be distributed according to unchanging moral principles of justice. The donuts will distribute themselves according to natural principles. We just take what we want and the leftovers will be appreciated by those who enjoy them most. Don't overcomplicate this. Where's the chocolate milk? End Part 2
Answer:
National law school of thought
Explanation:
The natural law school of thoughts refers to analyze the behavior of humans also it figured out the moral rule occurs from the behaviors.
It is inherent laws that are applied to all societies, communities, etc also it is common for all whether it is mentioned or officially announced
It should be rational and reasonable too
Therefore the given scenario represents the National law school of thought
Braxton's Cleaning Company stock is selling for $33.25 per share based on a required return of 11.7 percent. What is the the next annual dividend if the growth rate in dividends is expected to be 4.5 percent indefinitely?
Answer:
So, the next annual dividend will be $2.394
Explanation:
The constant growth model of DDM is used to calculate the price of a stock today whose dividend growth rate is expected to be constant forever. The price of such a stock is calculated using the formula for price under the constant growth model of DDM,
P0 = D1 / (r - g)
Where,
P0 is price todayD1 is the next annual dividend that will be paid by the stockr is the required rate of return g is the growth rate in dividendsTo calculate the next annual dividend, we will input the available values for P0, r and g in the formula,
33.25 = D1 / (0.117 - 0.045)
33.25 * (0.072) = D1
2.394 = D1
So, the next annual dividend will be $2.394
Heather Smith is considering a bond investment in Locklear Airlines. The $1,000 par value bonds have a quoted annual interest rate of 8 percent and the interest is paid semiannually. The yield to maturity on the bonds is 12 percent annual interest. There are 10 years to maturity.Required:Compute the price of the bonds based on semiannual analysis.
Answer:
Price of bond = $770.60
Explanation:
The value of the bond is the present value(PV) of the future cash receipts expected from the bond. The value is equal to present values of interest payment plus the redemption value (RV).
Value of Bond = PV of interest + PV of RV
The value of bond for Heather Smith can be worked out as follows:
Step 1
PV of interest payments
Semi annul interest payment
= 8%× 1000 × 1/2 =40
Semi-annual yield = 12/2 = 6% per six months
Total period to maturity (in months) = (2 ×10) = 20 periods
PV of interest =
40 × (1- (1+0.06)^(-20)/0.06) = 458.796
Step 2
PV of Redemption Value
= 1,000 × (1.06)^(-20) = 311.80
Step 3 :Price of bond
= 458.796 + 311.80 = 770.60
Price of bond = $770.60
Whispering Corporation began 2017 with a $94,200 balance in the Deferred Tax Liability account. At the end of 2017, the related cumulative temporary difference amounts to $352,400, and it will reverse evenly over the next 2 years. Pretax accounting income for 2017 is $505,400, the tax rate for all years is 40%, and taxable income for 2017 is $388,500.
Part 1
Compute income taxes payable for 2017.
Income taxes payable
$
Part 2
Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Account Titles and Explanation
Debit Credit
Part 3
Prepare the income tax expense section of the income statement for 2017 beginning with the line "Income before income taxes.". (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Answer:
1. Income tax payable = Taxable income for 2017 * Income tax rate
Income tax payable = $388,500 * 40%
Income tax payable = $155,400
2. Journal Entry
Account Titles and Explanations Debit Credit
Income tax expense $202,160
($505,400*40%)
Deferred tax liability $46,760
($202,160-$155,400)
Income tax payable $155,400
($388,500*40%)
3. Income Statement (Partial)
For the Year Ended Dec 31, 2017
Income before income taxes $505,400
Income tax expense
Current $155,400
Deferred $46,760 $202,160
Net Income $303,240
Beta is Question 10 options: a) A measure of the volatility of returns on an individual stock relative to the market b) Relates the risk-return trade-offs of individual assets to the market returns c) The computed cost of capital determined by multiplying the cost of each item in the optimal capital structure by its weighted presentation in the overall capital structure and summing up the results d) The cost of the last dollar of funds raised
Answer: a) A measure of the volatility of returns on an individual stock relative to the market
Explanation:
Beta is indeed a measure of the volatility of returns on an individual stock relative to the return on the market as a whole.
It is used in the Capital Asset Pricing Model which enables for the calculation of the stock's expected return.
Market Beta is always 1. Therefore betas measure shows how much more or less volatile than the market return, the stock return is. For instance, a beta of 2 means that the stock's returns are twice as volatile as the markets and a beta of 0.5 means the returns are only half as volatile as the market.
A stock had returns of 15.51 percent, 22.47 percent, −8.68 percent, and 9.43 percent over four of the past five years. The arithmetic average return over the five years was 12.71 percent. What was the stock return for the missing year?
Answer:
24.82%
Explanation:
Arithmetic average = sum of observations / number of observations
Let x = the stock return for year 5
12.71 % = (15.51% + 22.47% −8.68% + 9.43 + x) /5
Multiply both sides by 5
63.55% = (5.51% + 22.47% −8.68% + 9.43 + x)
63.55% = 38.73% + x
x = 63.55% - 38.73% = 24.82%
What's the present value of $4,500 discounted back 5 years if the appropriate interest rate is 4.5%, compounded semiannually?
Answer:
The present value = $3,602.30
Explanation:
To calculate this, we will use the formula for calculating the future value for an amount invested, compounded semiannually at a certain interest rate. This is done as follows:
[tex]FV\ =\ PV(1+\frac{r}{n})^{(n\times t)}\\[/tex]
where:
FV = Future value = $4,500
PV = Present value = ??
r = interest rate = 4.5% = 4.5/100 = 0.045
n = number of compunding period per year = semiannually = 2
t = time = 5
[tex]4,500\ =\ PV(1+\frac{0.045}{2})^{(2\times 5)}\\\\4,500 = PV( 1+0.0225)^{10}\\4,500 = PV(1.0225)^{10}\\4,500 = PV (1.249203)\\Dividing\ both\ sides\ by\ 1.249203\ and\ making\ PV\ the\ subject\ of\ the\ formula\\\PV = \frac{4,500}{1.249203} \\PV= 3,602.297[/tex]
Therefore, the present value = $3,602.30
You purchased 100 shares of stock for $5 per share. After holding the stock for 8 years and not recieving any dividends, you sell the stock for $42 per share. What are the holding period and annual return on this investment?
a. 185%, 14.42%
b. 920%, 41.63%
c. 740%, 30.48%
d. 625%, 27.66%
Answer:
The answer is C.
Explanation:
The formula for holding period is:
(Future value/present value) - 1
Future value = $42 per share
Present Value = $5 per share
(42/5) - 1
=8.4 - 1
7.4
Expressed as a percentage:
740%
B. Annual return on investment
(1+AHP)^(1/n) - 1
Where AHP is the annual holding period
n is the number of years
[(1+7.4)^(1/8)] - 1
[8.4^ 0.125] - 1
1.3048 - 1
0.3048
Expressed as a percentage
30.48%
Mickey and Jenny Porter file a joint tax return, and they itemize deductions. The Porters incur $3,425 in employment-related miscellaneous itemized deductions. They also incur $5,375 of investment interest expense during the year. The Porters' income for the year consists of $178,500 in salary and $4,495 of interest income.
What is the amount of Porters' investment interest expense deduction for the year?
Answer:
$4,995
Explanation:
Calculation of the amount of the Porters' investment interest expense deduction for the year
Based on the information given we were told that Porters' income consists of the amount of
$4,495 of interest income which means that $4,995 will be the investment interest expense deduction for the year. While the amount of $380 ($5,375-$4,995) will be the amount that will be carried forward to the following year.
Therefore Porters' investment interest expense deduction for the year will be $4,995
A modified DCF analysis is best for evaluating and selecting the optimal strategic alternative when a company has ___ goal(s) and ___ measure(s).
Answer: single; quantitative
Explanation:
The discounted cash flow analysis is a method that is used to determine the value of a project, security, or assets by using time value of money.
The discounted cash flow analysis is used in real estate, investment finance, patent valuation etc. A modified DCF analysis is best for evaluating and selecting the optimal strategic alternative when a company has single goal(s) and quantitative measures.
Answer:
Multiple; quantitative
Explanation:
A modified DCF analysis is best for evaluating and selecting the optimal strategic alternative when a company has ___ goal(s) and ___ measure(s).
