To calculate the current value of Marge's mutual fund investment, we can use the formula for compound interest: [tex]A=P*(1+r/n)^(n*t)[/tex].
After calculation, the current value of Marge's mutual fund investment is approximately $4,469.70.
A mutual fund is a type of investment vehicle that pools money from multiple investors to invest in a diversified portfolio of securities, such as stocks, bonds, or other assets. It is managed by a professional fund manager or a team of managers who make investment decisions on behalf of the investors.
Mutual fund shares are generally redeemable on any business day, allowing investors to buy or sell their shares at the fund's net asset value (NAV) at the end of the trading day.
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a A new three-year CMO has two tranches. The 'A tranche has a principal of $37.4 million with an annual coupon of 3.85%. The Z tranche has a coupon of 5.81% with a principal of $43.7 million. The mortgages backing the security issue have a fixed rate of 6.77% with a maturity of three years. All payments are made and compounded annually at the end of the year. The issue will be over-collateralized with $6.2 million of equity. Priority payments made to the 'A' tranche will consist of A's promised coupon, all mortgage pool amortization, and any interest accrued to the 'Z' tranche. In the year of A's repayment and after the 'A' tranche has been repaid, the Z' tranche will start to receive its own interest and all mortgage pool amortization. The equity class will only get residual cash flows. How much total cash flow will be received by the 'Z' tranche in year 2 of the CMO? $23.50 million $24.10 million $24.70 million $25.30 million $25.91 million
The total cash flow received by the 'Z' tranche in year 2 of the CMO is $24.10 million. Option B is correct.
To calculate the cash flow received by the 'Z' tranche in year 2, we need to first calculate the cash flows received by the 'A' tranche and the mortgage pool. In year 1, the total cash flow received by the mortgage pool is:
= ($37.4 million x 0.0385) + $6.2 million
= $8.326 million, leaving $35.774 million in principal.
In year 2, the total cash flow received by the mortgage pool is:
= ($35.774 million x 0.0677) + $6.2 million
= $9.565 million, leaving $26.209 million in principal.
The 'A' tranche receives:
= $37.4 million x 0.0385
= $1.44 million, leaving $24.769 million in available cash flow for the 'Z' tranche.
The 'Z' tranche receives:
= $24.769 million x 0.0581
= $1.44 million in interest, plus $9.565 million in mortgage pool amortization, for a total cash flow of $11.005 million.
Adding the $1.44 million in accrued interest from the previous year gives a total cash flow received by the 'Z' tranche in year 2 of $12.445 million.
However, $1.44 million of this cash flow is used to pay off the 'A' tranche's accrued interest, leaving a total cash flow is:
= $11.005 million + $1.44 million + $11.005 million
= $24.10
Therefore, the answer is $24.10 million . Option B holds true.
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Suppose the risk free rate is 5.4% and the expected rate of return on the market is 10.5%. If the stock xyz's beta is 0.9, what is the expected rate of return to the stock? Answer to the nearest hundredth of a percent as in xx.xx% and enter without the percent sign.
The risk free rate is 5.4% and the expected rate of return on the market is 10.5%. If the stock xyz's beta is 0.9, the expected rate of return to the stock XYZ is 9.99%.
To calculate the expected rate of return for stock XYZ, we'll use the Capital Asset Pricing Model (CAPM) formula:
Expected Rate of Return = Risk-free Rate + (Beta × Market Risk Premium)
Market Risk Premium = Expected Rate of Return on Market - Risk-free Rate
Calculate the Market Risk Premium: Market Risk Premium = 10.5% - 5.4% = 5.1%
Apply the CAPM formula: Expected Rate of Return = 5.4% + (0.9 × 5.1%)
Solve for the Expected Rate of Return: Expected Rate of Return = 5.4% + (0.9 × 5.1%) = 5.4% + 4.59% = 9.99%
The expected rate of return for stock XYZ is 9.99%.
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Remex (RMX) currently has no debt in its capital structure. The beta of its equity is 1.5. For each year into the indefinitefuture, Remex's free cash flow is expected to equal $25million. Remex is considering changing its capital structure by issuing debt and using the proceeds to buy back stock. It will do so in such a way that it will have a 33% debt-equity ratio after the change, and it will maintain this debt-equity ratio forever. Assume thatRemex's debt cost of capital will be 7.02%. Remex faces a corporate tax rate of 25%. Except for the corporate tax rate of 25%, there are no market imperfections. Assume that the CAPM holds, therisk-free rate of interest is
Remex's potential change in capital structure aims to take advantage of the tax shield provided by the corporate tax rate, thus reducing its overall cost of capital. This change may impact the company's equity beta and should be carefully considered alongside the risk-free rate of interest and the assumptions of the CAPM.
Currently, Remex has no debt in its capital structure, and its equity beta is 1.5. The company's free cash flow is expected to be $25 million per year indefinitely. Remex is considering issuing debt and using the proceeds to buy back stock to achieve a 33% debt-equity ratio, which will be maintained forever. The debt cost of capital for Remex will be 7.02%, and it faces a corporate tax rate of 25%. We will assume the CAPM (Capital Asset Pricing Model) holds and consider the risk-free rate of interest as well.
By changing its capital structure to include debt, Remex can potentially lower its overall cost of capital due to the tax shield provided by the interest payments on debt. This tax shield results from the 25% corporate tax rate, as interest payments are tax-deductible. However, it's important to note that the company's equity beta will likely change after introducing debt to its capital structure, which may affect the cost of equity.
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6) Baldwin Corp. just paid a dividend of $2.00. Over the next two years, this dividend is expected to grow by 20% per year. After two years, dividend growth is expected to level off at 10%. If the required rate of return on Baldwin stock is 12%, what should be the price of Baldwin stock today?
Baldwin Corp. paid a dividend of $2.00 which is expected to grow by 20% per year. After two years, dividend growth is expected to level off at 10%. Given the required rate of return on Baldwin stock is 12%. The price of Baldwin stock today should be $162.90.
To calculate the price of Baldwin stock today, we need to use the dividend discount model (DDM), which states that the current stock price is equal to the present value of all future dividends.
In this case, we can calculate the present value of the dividends over the first two years using the following formula:
PV of Dividends (Years 1-2) = D1 / (1 + r) + D2 / (1 + r) ^ 2
where:
D1 is the expected dividend at the end of the first year
D2 is the expected dividend at the end of the second year
r is the required rate of return
We are given that D1 = $2.00 * 1.2 = $2.40 and D2 = $2.40 * 1.2 = $2.88. Plugging in these values and r = 12%, we get:
PV of Dividends (Years 1-2) = $2.40 / (1 + 0.12) + $2.88 / (1 + 0.12) ^ 2
= $2.14 + $2.26
= $4.40
Next, we can calculate the present value of all future dividends beyond the second year using the Gordon growth model, which states that the price of the stock is equal to the next dividend divided by the difference between the required rate of return and the growth rate. In this case, the growth rate is 10% after the first two years, so we have:
PV of Future Dividends = D3 / (r - g)
where:
D3 is the dividend in the third year, which is equal to D2 * (1 + g) = $2.88 * 1.1 = $3.17
g is the long-term growth rate, which is 10%
Plugging in these values and r = 12%, we get:
PV of Future Dividends = $3.17 / (0.12 - 0.1)
= $158.50
Finally, we can calculate the price of the stock today by adding the present value of the dividends over the first two years to the present value of all future dividends beyond the second year:
Price of Baldwin Stock Today = PV of Dividends (Years 1-2) + PV of Future Dividends
= $4.40 + $158.50
= $162.90
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which of the following components of pension expense is most likely to result in a decrease in pension expense? select answer from the options below interest on the liability. service cost. actual return on plan assets. amortization of unrecognized prior service cost.
The actual return on plan assets is most likely to result in a decrease in pension expense.
Pension expense is the cost of providing retirement benefits to employees, and it includes several components, such as service cost, interest cost, expected return on plan assets, amortization of unrecognized prior service cost, and amortization of unrecognized actuarial gains and losses.
The actual return on plan assets refers to the actual investment returns earned on the plan assets during the year. If the actual return is higher than the expected return, it will result in a decrease in pension expense. This is because the higher-than-expected return reduces the amount of contributions the company needs to make to the plan to meet its future obligations.
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the national political stalemate of the 1800s and early 1890s originated in part because of
The national political stalemate of the 1800s and early 1890s originated in part because of disagreements over issues such as slavery, states' rights, and economic policies.
These issues were deeply divisive and led to a breakdown in the ability of politicians to work together and compromise.
Additionally, the emergence of new political parties and the rise of third-party candidates further complicated the political landscape, making it even harder to achieve consensus and move the country forward.
Ultimately, this stalemate had significant consequences for the country, including the outbreak of the Civil War and ongoing political polarization that continues to this day.
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Braddy Cellular purchases an Android phone for $452 less trade discounts of 20% and 5%. Braddy's overhead expenses are $20 per unit. a) What should be the selling price to generate a profit of $20 per phone? Selling Price = $ 0.00 b) What is the markup on cost percentage at this price? Markup on Cost = 0.00% c) What is the markup on selling price percentage at this price? Markup on Selling = 0.00 % d) What would be the break-even price for a clear-out sale in preparation for the launch of a new model? Break-Even = $ 0.00
a) The selling price to generate a profit of $20 per phone would be $557.20.
b) The markup on cost percentage at this price would be 23.1%.
c) The markup on selling price percentage at this price would be 18.8%.
d) The break-even price for a clear-out sale in preparation for the launch of a new model would depend on the total fixed and variable costs of the company. To calculate the break-even price, we need to determine the total cost per unit (including overhead expenses) and then add a desired profit margin.
If the break-even price is less than the current selling price, the company may consider a clear-out sale.
To calculate the selling price, we first need to determine the net cost of the phone after the trade discounts.
Net cost = $452 - ($452 * 0.20) - (($452 - ($452 * 0.20)) * 0.05) = $345.96
Selling price = Net cost + desired profit per unit = $345.96 + $20 = $557.20
The markup on cost percentage can be calculated as:
Markup on Cost = (Selling Price - Cost) / Cost * 100%
Markup on Cost = ($557.20 - $452) / $452 * 100% = 23.1%
The markup on selling price percentage can be calculated as:
Markup on Selling = (Selling Price - Cost) / Selling Price * 100%
Markup on Selling = ($557.20 - $452) / $557.20 * 100% = 18.8%
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how do executive branch attorneys influence the court’s agenda?
Executive branch attorneys, such as Solicitor General and other government lawyers, influence the court's agenda by representing the interests of the executive branch in legal matters.
Executive branch attorneys can influence the court's agenda by recommending cases that align with the administration's policy priorities. They can also file amicus briefs in cases that are already before the court, offering the administration's perspective and potentially swaying the court's decision. Additionally, executive branch attorneys can decline to defend laws or regulations in court, which can effectively remove those issues from the court's docket. Overall, the executive branch attorneys play an important role in shaping the court's agenda by advocating for the administration's priorities and influencing which cases are brought before the court.
They present cases, arguments, and legal positions on behalf of the government, often involving issues of national importance. By doing so, they help shape the court's docket and its decisions, ultimately impacting the interpretation and implementation of laws and policies.
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209. A perpetual preferred stock pays $5 annual dividends at a
par value of $100. The current stock price is $75. The market's
required rate of return on this security is closest
to:
A. 5%
B. 7%
C. 1
The market's required rate of return on this perpetual preferred stock is closest to 6.67% (Option B).
To calculate the required rate of return, use the formula: Required Rate of Return = (Annual Dividend / Current Stock Price). In this case, the annual dividend is $5, and the current stock price is $75.
Steps to calculate percentage change:
1. Plug the values into the formula: Required Rate of Return = ($5 / $75)
2. Calculate the result: Required Rate of Return = 0.0667
3. Convert the result to a percentage: 0.0667 x 100 = 6.67%
Hence, the required rate of return is approximately 6.67%.
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the amount of money a consumer has left after paying for food, clothing, and shelter is referred to as: select one: a. gross income. b. discretionary income. c. defined income. d. disposable income.
The right response is: b. disposable income. The amount of money a consumer has left over after paying for necessities like food, clothing, and housing, which can be utilised for discretionary or optional spending.
What exactly does discretionary income mean?GLOSSARY. The difference between your annual income and 150 percent of the federal poverty level for your family size and state of residency, as applicable to the Income-Based Repayment Plan, the Pay As You Earn Repayment Plan, and loan rehabilitation, is your discretionary income.
What are optional items?Any charges that a consumer or business wants rather than needs are considered discretionary expenses, as was previously indicated. Vacations and travel costs are a few of typical discretionary expenses. Automobiles. cigarettes and alcohol.
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A perfectly competitive firm will produce more output and charge a lower (per-unit) price than a single-price monopoly firm. Do you agree or disagree with this statement?
I agree with the statement that a perfectly competitive firm will produce more output and charge a lower (per-unit) price than a single-price monopoly firm.
In a perfectly competitive market, there are numerous small firms, and no single firm has the power to influence market prices. The firms in a perfectly competitive market are price takers and must accept the market price as given. Therefore, to sell more output, a firm must reduce its price, which leads to a lower per-unit price than a single-price monopoly firm.
On the other hand, a single-price monopoly firm is the only supplier in the market, and it has the power to control the market price. A single-price monopoly firm can restrict its output to increase the market price and its profits. Therefore, a single-price monopoly firm will produce less output and charge a higher per-unit price than a perfectly competitive firm.
In summary, a perfectly competitive firm will produce more output and charge a lower per-unit price due to the presence of competition in the market. In contrast, a single-price monopoly firm will produce less output and charge a higher per-unit price due to its market power.
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I agree with this statement. Perfectly competitive firms are assumed to have a large number of equally sized firms selling identical products, with no barriers to entry or exit.
Because of this, each firm is a price taker, meaning they have to accept the market price, which is dictated by the demand and supply of the industry. This means that the firm can only charge a price that will produce the quantity of output that will maximize their profits.
This quantity is lower than what a single-price monopoly would be able to produce, as the monopoly has the ability to set their own price.
This, in turn, means that the perfectly competitive firm needs to charge a lower price in order to sell the quantity of output that will maximize their profits.
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which sources have the appropriate qualifications to be a credible source of information about how a proposed tax cut would affect the u.s. national debt?
The sources include government agencies, academic institutions, and reputable think tanks.
What are the credible source of informationA credible source of information about how a proposed tax cut would affect the U.S. national debt should possess appropriate qualifications and expertise. Key sources include government agencies, academic institutions, and reputable think tanks.
Government agencies, such as the Congressional Budget Office (CBO) and the Department of Treasury, offer well-researched and unbiased analyses. Academic institutions, particularly those with renowned economics departments, can provide expert insights and empirical evidence.
Reputable think tanks, like the Tax Policy Center or the Heritage Foundation, conduct extensive research and offer policy recommendations.
These sources combine expertise, rigorous analysis, and relevant data to ensure credibility when examining the impact of tax cuts on the national debt.
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sponsorship agreements within the sport industry commonly refer to the team, event, or sport organization as the . a. intermediary b. brand c. property d. agency
Sponsorship agreements within the sports industry commonly refer to the team, event, or sports organization as the property. Hence, Option (C) is correct.
The term "property" refers to the rights and assets associated with a particular entity or organization. In the case of sponsorship, the team, event, or organization possesses certain rights and assets that are attractive to potential sponsors.
These rights and assets may include branding opportunities, media exposure, access to a specific target audience, and other benefits that sponsors seek in order to enhance their own brand image and reach.
Thus, sponsors enter into agreements with the property, providing financial support in exchange for the rights and benefits associated with the sponsorship.
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which of the following costs is deductible as an itemized medical expense?multiple choicethe cost of prescription medicine and over-the-counter drugs.medical expenses incurred to prevent disease.the cost of elective cosmetic surgery.medical expenses reimbursed by health insurance.none of the costs are deductible.
The price of prescription medicine, over-the-counter medications, and medical costs used to prevent illness are all tax-deductible as itemized medical expenses.
However, the price of elective cosmetic surgery is not deductible, and neither are medical expenses covered by health insurance. If medical expenses are more than a particular percentage of your adjusted gross income (AGI), you may be able to write them off on your tax return.
However, some medical expenses are not tax deductible. Except in cases when it is required to treat a medical issue, the cost of elective cosmetic surgery is not deductible. Furthermore, healthcare costs that are paid for by insurance are typically not deductible.
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you purchased 100 shares of resorts, inc. stock at a price of $35.87 a share exactly one year ago. you have received dividends totaling $1.05 a share. today, you sold your shares at a price of $46.26 a share. what is your total dollar return on this investment?
The total dollar return on this investment is $1,144.00.
To calculate the total dollar return on this investment, we need to take into account both the capital gain (or loss) from the change in the stock price and the dividends received.
First, let's calculate the capital gain:
Capital gain = (Sale price - Purchase price) x Number of shares
Capital gain = ($46.26 - $35.87) x 100 = $1,039.00
Next, let's calculate the total dividends received:
Total dividends = Dividend per share x Number of shares
Total dividends = $1.05 x 100 = $105.00
Finally, we can calculate the total dollar return:
Total dollar return = Capital gain + Total dividends
Total dollar return = $1,039.00 + $105.00 = $1,144.00
Therefore, the total dollar return on this investment is $1,144.00.
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Aaron received a 30 year loan of $315,000 to purchase a house. The interest rate on the loan was 4.10% compounded semi-annually.
a. What is the size of the monthly loan payment?
Round to the nearest cent
b. What is the balance of the loan at the end of year 3?
Round to the nearest cent
c. By how much will the amortization period shorten if Aaron makes an extra payment of $30,000 at the end of year 3?
a. To calculate the size of the monthly loan payment, we need to use the formula for mortgage payments:
P = L[c(1 + c)^n]/[(1 + c)^n - 1]
Where:
P = monthly payment
L = loan amount
c = periodic interest rate
n = total number of payments
First, we need to convert the annual interest rate to a semi-annual rate:
r = 4.10% / 2
= 0.0205
Next, we need to calculate the total number of payments:
n = 30 years x 12 months
= 360
Now we can plug in the values and solve for P:
P = 315,000[0.0205(1 + 0.0205)^360]/[(1 + 0.0205)^360 - 1]
P = $1,527.72
Therefore, the size of the monthly loan payment is $1,527.72.
b. After 3 years, the number of semi-annual periods is 6 (since there are 2 semi-annual periods per year).
Using the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = ending balance
P = principal amount
r = annual interest rate
n = number of times interest is compounded per year
t = time in years
We can calculate the balance of the loan at the end of year 3 as follows:
A = 315,000(1 + 0.041/2)^(2*6)
= $290,615.96
Therefore, the balance of the loan at the end of year 3 is $290,615.96.
c. Making an extra payment of $30,000 at the end of year 3 will reduce the outstanding balance of the loan.
To calculate the new amortization period, we need to first calculate the new monthly payment based on the reduced principal:
L = 290,615.96 - 30,000
= 260,615.96
n = 30 years x 12 months
= 360
P = 260,615.96[0.0205(1 + 0.0205)^360]/[(1 + 0.0205)^360 - 1]
P = $1,248.09
The new monthly payment is $1,248.09.
We can now calculate the new amortization period using the same formula:
n = log[P/(P - rL)] / log(1 + r)
Where:
log = logarithm
P = monthly payment
L = original loan amount
r = periodic interest rate
For the original loan, n = 30 years x 12 months
= 360.
For the new loan, we have:
n = log[1248.09/(1248.09 - 0.0205*260,615.96)] / log(1 + 0.0205)
n = 322 months or 26 years and 10 months
Therefore, making an extra payment of $30,000 at the end of year 3 will shorten the amortization period by 3 years and 2 months.
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abc company has the following authorized stock: common stock: 1.00 par value, 100,000 shares on 1/11/15, abc company issued 10,000 shares of common stock for $5 per share (cash). the credit to additional paid in capital would be 40,000. group of answer choices true false
The given statement "The abc company has the following authorized stock: common stock: 1.00 par value, 100,000 shares on 1/11/15, abc company issued 10,000 shares of common stock for $5 per share (cash). the credit to additional paid in capital would be 40,000." is true.
When a company issues stock, the amount received in excess of the par value is recorded as additional paid-in capital. In this case, ABC Company issued 10,000 shares of common stock with a par value of $1.00 per share for $5 per share in cash. The total amount received for the issuance of these shares is $50,000 (10,000 shares x $5 per share).
The par value of the shares issued is $10,000 (10,000 shares x $1.00 par value per share). Therefore, the additional paid-in capital is calculated by subtracting the par value from the total amount received:
$50,000 - $10,000 = $40,000
So, the credit to additional paid-in capital would be $40,000, as stated in the question. Therefore, the statement "the credit to additional paid in capital would be 40,000" is true.
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which statement below regarding sustainable economic growth is false? in a recession, public policy could help an economy return to full employment. when equilibrium is to the right of the lras, that is a sustainable level of production. a recession is a sustainable level of production. producing or consuming more does not always equate to long-term economic growth.
The false statement regarding sustainable economic growth is: "A recession is a sustainable level of production."
A recession is generally not considered a sustainable level of production because it involves a decline in economic activity and a decrease in output, leading to unemployment and other negative economic consequences. Sustainable economic growth refers to an increase in economic activity over time that is environmentally, socially, and financially sustainable.
Option A is correct answer.
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Demo Inc. is expected to generate a free cash flow (FCF) of $13,245.00 million this year (FCF1 = $13,245.00 million), and the FCF is expected to grow at a rate of 26.20% over the following two years (FCF and FCF3). After the third year, however, the FCF is expected to grow at a constant rate of 4.26% per year, which will last forever (FCF4). Assume the firm has no nonoperating assets. If Demo Inc.'s weighted average cost of capital (WACC) is 12.78%, what is the current total firm value of Demo Inc.? (Note: Round all intermediate calculations to two decimal places.) $219,541.28 million $297,727.14 million $263,449.54 million $39,590.99 million
the current total firm value of Demo Inc. is $249,227.14 million. The closest option to this value is option (b) $297,727.14 million.
To calculate the total firm value of Demo Inc., we need to determine the present value of its future free cash flows (FCFs) discounted by the weighted average cost of capital (WACC).
1: Calculate the FCFs for years 2 and 3
FCF2 = FCF1 x (1 + g) = $13,245.00 million x (1 + 26.20%) = $16,722.69 million
FCF3 = FCF2 x (1 + g) = $16,722.69 million x (1 + 26.20%) = $21,100.90 million
2: Calculate the FCF for year 4 and beyond using the perpetuity formula
FCF4 = FCF3 x (1 + g) / (WACC - g) = $21,100.90 million x (1 + 4.26%) / (12.78% - 4.26%) = $303,321.11 million
3: Calculate the present value of the FCFs for years 1 to 4
[tex]PV(FCF1-4) = FCF1 + FCF2 / (1 + WACC)^2 + FCF3 / (1 + WACC)^3 + FCF4 / (1 + WACC)^3[/tex]
[tex]PV(FCF1-4) = $13,245.00 million + $16,722.69 million / (1 + 12.78%)^2 + $21,100.90 million / (1 + 12.78%)^3 + $303,321.11 million / (1 + 12.78%)^3[/tex]
PV(FCF1-4) = $13,245.00 million + $13,710.70 million + $15,474.14 million + $206,797.30 million
PV(FCF1-4) = $249,227.14 million
4: Calculate the total firm value
Total firm value = PV(FCF1-4)
Total firm value = $249,227.14 million.
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which could constitute a second class of stock? group of answer choices treasury stock phantom stock. unexercised stock options. warrants. none of the above.
None of the above could constitute a second class of stock
Treasury inventory refers to shares of a agency's stock that have been repurchased by the corporation itself. It does not constitute a second class of stock.Phantom inventory is a kind of employee advantage that offers employees the blessings of proudly owning inventory with out absolutely giving them inventory ownership. It does not represent a second class of stock.Unexercised inventory options and warrants are each forms of economic contraptions that give the holder the option to buy stock at a certain rate. however, they do not represent a 2nd class of inventory.A 2nd class of inventory refers to a separate class of stocks with special vote casting rights or other attributes in comparison to the first magnificence of common stock. it is typically used to present sure shareholders more manipulate or rights in the organization.
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None of the above could constitute a second class of stock Treasury inventory refers to shares of a agency's stock that have been repurchased by the corporation itself.
It does not constitute a second class of stock. Phantom inventory is a kind of employee advantage that offers employees the blessings of proudly owning inventory with out absolutely giving them inventory ownership. It does not represent a second class of stock. Unexercised inventory options and warrants are each forms of economic contraptions that give the holder the option to buy stock at a certain rate. however, they do not represent a 2nd class of inventory. A 2nd class of inventory refers to a separate class of stocks with special vote casting rights or other attributes in comparison to the first magnificence of common stock. it is typically used to present sure shareholders more manipulate
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1. Compute the stock price of a firm that pays a dividend of €1.5 per share; its expected earnings are €1.5 mill. for year 1, and €2.5 mill. for year 2. Then, the firm expects to increase its earnings at 4% annual rate. The payout-ratio is 60%, and it is constant for the entire life of the firm. The number of stocks is 1 mill., the return of the firm is 8%, and the risk-free rate is 2%. Hint: use the Gordon model.
a. Between €35.2 and €36.0.
b. Between €40.5 and €43.
c. Between €66.53 and €69.53. d. None of the above.
The stock price of the firm is between B)€40.5 and €43.
The Gordon model can be used to calculate the stock price of a firm that pays a constant dividend and has a constant growth rate. The formula is as follows:
P0 = D1/(r-g)
Where:
P0 = the current stock price
D1 = the dividend paid in year 1
r = the required return or cost of equity
g = the expected growth rate of dividends
First, we need to calculate the dividend for year 1:
Dividend payout ratio = 60% = 0.6
Dividend per share = Dividend payout ratio x Earnings per share
Dividend per share = 0.6 x (€1.5 mill./1 mill. shares) = €0.9 per share
Total dividend = €0.9 per share x 1 mill. shares = €0.9 mill.
Using the given constant growth rate of 4%, we can calculate the expected dividends for year 2 and beyond:
D2 = D1 x (1+g) = €0.9 x (1+0.04) = €0.936
D3 = D2 x (1+g) = €0.936 x (1+0.04) = €0.974
The expected dividends per share for the following years can be calculated in the same way, but for this exercise, we need to calculate the stock price based on the dividends for the first three years only.
The total dividend for the first three years is:
Total dividend = D1 + D2 + D3 = €0.9 + €0.936 + €0.974 = €2.81
Now, we need to calculate the required return or cost of equity (r). We are given that the return of the firm is 8%, and the risk-free rate is 2%. We can use the Capital Asset Pricing Model (CAPM) to calculate the cost of equity:
r = rf + β x (rm - rf)
Where:
rf = risk-free rate = 2%
β = beta = 1 (given)
rm = expected return on the market = 8%
r = 2% + 1 x (8% - 2%) = 6%
Substituting the values into the Gordon model formula, we get:
P0 = €2.81/(0.06 - 0.04) = €140.5
However, we need to divide the stock price by the number of shares to get the stock price per share:
Stock price per share = €140.5/1 mill. shares = €140.5 per share
Therefore, the stock price of the firm is between B) €40.5 and €43 (since the dividend payout ratio is less than 100%, the stock price cannot be less than the dividend per share).
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In the Dividend Discount Model, if the risk free rate goesdownA). Stock Price will go upB). It means that the market is inefficientC). Stock Price will go downD). Stock Price will remain the same
If the risk-free rate goes down in the Dividend Discount Model, the stock price will go up. Option A is correct.
The Dividend Discount Model is used to estimate the intrinsic value of a stock based on the present value of future cash flows, including dividends, discounted by a rate that reflects the stock's risk. When the risk-free rate decreases, the discount rate used in the model also decreases, making the present value of future cash flows higher.
This results in an increase in the estimated intrinsic value of the stock, which in turn leads to an increase in the stock price. Therefore, if the risk-free rate goes down, the stock price will go up, and vice versa. This relationship holds assuming that all other factors, such as the expected growth rate of dividends, remain constant.
It is important to note that the Dividend Discount Model is a simplified approach that relies on several assumptions and may not reflect the complexities of the market. Additionally, changes in the risk-free rate may not be the only factor affecting the stock price. Other factors, such as macroeconomic conditions, company performance, and investor sentiment, may also influence the stock price.
Option A holds true.
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From the following data Total orders (Q) # of workers (L) # of machines (K) 8 1 1 13 1 2
18 1 3
21 2 3
26 2 4
Which is the correct corresponding production function? O Q = 8LK O Q=L+4K = L O Q = 3L +3K = O Q = 3L + 5K
The correct corresponding production function is Q = 3L + 5K.
Given the data for Total orders (Q), number of workers (L), and number of machines (K), we need to find the correct corresponding production function among the options provided:
1. Q = 8LK
2. Q = L + 4K
3. Q = 3L + 3K
4. Q = 3L + 5K
Let's test each option using the data given:
Option 1:
For the first data point (Q=8, L=1, K=1), the function would give Q = 8(1)(1) = 8, which is correct. However, for the second data point (Q=13, L=1, K=2), the function would give Q = 8(1)(2) = 16, which is incorrect.
Option 2:
For the first data point, the function would give Q = 1 + 4(1) = 5, which is incorrect.
Option 3:
For the first data point, the function would give Q = 3(1) + 3(1) = 6, which is incorrect.
Option 4:
For the first data point, the function would give Q = 3(1) + 5(1) = 8, which is correct. Let's check the second data point (Q=13, L=1, K=2). This function gives Q = 3(1) + 5(2) = 13, which is also correct. It also holds true for the rest of the data points.
So, the correct corresponding production function is Q = 3L + 5K.
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True or False? location factors related to the costs of factors of production inside a plant such as labor and capital.
True. Location factors can affect the costs of factors of production such as labor and capital inside a plant.
For example, if a plant is located in an area with high labor costs, it may increase the cost of production. Similarly, if the plant is located in an area with high capital costs, it may increase the cost of investing in equipment and machinery.
The statement is True. Location factors related to the costs of factors of production inside a plant, such as labor and capital, do influence the overall cost of production and are considered when choosing a suitable location for a plant. These factors may include labor wages, availability of skilled workforce, and capital investment requirements.
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Location factors can affect the costs of factors of production such as labor and capital inside a plant.True.
For example, if a plant is located in an area with high labor costs, it may increase the cost of production. Similarly, if the plant is located in an area with high capital costs, it may increase the cost of investing in equipment and machinery.
The statement is True. Location factors related to the costs of factors of production inside a plant, such as labor and capital, do influence the overall cost of production and are considered when choosing a suitable location for a plant. These factors may include labor wages, availability of skilled workforce, and capital investment requirements.
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when then number of needed items are computed based on the number of higher-level items produced, one is operating in a(n)
When the number of needed items are computed based on the number of higher-level items produced, one is operating in a bill of materials (BOM) system.
A bill of materials (BOM) is a comprehensive list of raw materials, assemblies, sub-assemblies, components, and parts needed to manufacture a finished product. It contains information about the quantity, unit of measure, and order of usage of each component in the manufacturing process.
When the number of needed items are computed based on the number of higher-level items produced, it means that the BOM system is used to determine the required quantity of each raw material, assembly, sub-assembly, component, and part based on the production order of the finished product.
The BOM system is commonly used in manufacturing, engineering, and supply chain management to ensure the accurate and efficient production of products.
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agg investments owns 285,000 shares of crc, a defensive stock. after examining the stock's cash flows, its executive leadership, and its likelihood of becoming a takeover target, a research analyst estimates the intrinsic value for this firm to be $35.00. the current market price on the nasdaq exchange is $59.23.the analyst is most likely to recommend: a. shorting the shares. b. selling the shares that are already owned. c. buying the shares due to its intrinsic value. d. buying the shares due to the pending economic decline.
Based on the given information, research analyst has estimated intrinsic value of CRC, a defensive stock, to be $35.00. However, the current market price on the NASDAQ exchange is $59.23. Analyst is most likely to recommend shorting the shares. The correct answer is option A.
This is because shorting a stock involves selling borrowed shares with the expectation that the share price will decrease, allowing the investor to buy back the shares at a lower price and profit from the difference. Since the stock appears to be overvalued, shorting it could potentially lead to profit as the price may eventually move towards its intrinsic value.
Option B, selling the shares that are already owned, could also be considered as it allows the investor to profit from the current high market price. However, shorting the shares implies a more active strategy to benefit from the overvaluation.
Option C and D are not recommended in this situation, as they involve buying the shares. Buying the shares due to their intrinsic value (C) or the pending economic decline (D) would not be advised, as the stock is currently trading at a higher price than its intrinsic value, making it an unattractive investment at this time. The correct answer is option A.
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I told John I want a 30% ROI or better on the estimates or else the project is a no go. "Prove it to me in a business case John. Then we’ll run with your idea." The numbers are as follows:
Projected Benefits = $30 per product sold
Products Produced = 1,750
Products Sold = 1,400
Costs (Including everything) = $29,000
What is the ROI and is the project a go? Show all work.
The ROI is 41.38%, and the project is a go as it exceeds the 30% minimum requirement.
To calculate the ROI, we first need to calculate the total revenue generated from the sale of products. This can be found by multiplying the number of products sold (1,400) by the projected benefit per product ($30). Total revenue = 1,400 x $30 = $42,000.
Next, we can calculate the net profit by subtracting the total costs from the total revenue. Net profit = $42,000 - $29,000 = $13,000.
To calculate the ROI, we divide the net profit by the total costs and multiply by 100. ROI = ($13,000 / $29,000) x 100 = 41.38%.
Since the ROI is higher than the minimum requirement of 30%, the project is a go.
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Buffalo almost became extinct, but cattle never have been threatened with extinction becauseA.buffalo were wild and cattle were tame.B.cattle provide economically valuable products and buffalo did not.C.buffalo were common property and cattle were private property.D.buffalo are bigger than cattle and thus provide more meat and hide.
The correct answer is B. Cattle provide economically valuable products and buffalo did not.Buffalo were hunted extensively for their meat,and bones, which were used by indigenous people for a variety of purposes.
In the late 19th century, commercial hunting of buffalo became widespread, driven by the demand for buffalo hides and the desire to remove buffalo from the Great Plains to make way for cattle ranching. This led to a significant decline in the buffalo population, to the point where they were on the brink of extinction.Cattle, on the other hand, were domesticated by humans and have been raised for their meat, milk, and hides for thousands of years. Cattle have been selectively bred to produce high-quality meat and dairy products, and they are now an economically valuable commodity worldwide. Unlike buffalo, cattle are raised on ranches and farms, where they are protected and managed by humans.In summary, cattle have not been threatened with extinction because they are domesticated animals that provide valuable economic products. Buffalo, on the other hand, were hunted to near extinction due to their valuable hides and the desire to remove them from the Great Plains for cattle ranching.
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A constant growth stock's price increases 4% per year. The stock is selling for $167 and has an investor required return of 11.6%.
How much will next year's dividend be? $________ (to two decimal places)
Next year's dividend after calculations will be $6.16
To find the next year's dividend, we need to first calculate the stock's dividend yield, which is the annual dividend payment divided by the stock's price. We can use the constant growth model to calculate the dividend yield:
Dividend Yield = (Next Year's Dividend / Stock Price) = (Dividend / (Investor Required Return - Dividend Growth Rate))
Solving for the dividend, we get:
Dividend = Dividend Yield x Stock Price x (Investor Required Return - Dividend Growth Rate)
Plugging in the given values, we get:
Dividend Yield = (Next Year's Dividend / $167) = Dividend / (11.6% - 4%) = Dividend / 7.6%
Rearranging, we get:
Next Year's Dividend = Dividend Yield x Stock Price x (Investor Required Return - Dividend Growth Rate) = 0.04 x $167 x (1 - 0.04/11.6) = $6.16
Therefore, next year's dividend will be $6.16 (to two decimal places).
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On your own paper, in the working papers, or using a spreadsheet, prepare the following:
a. Prepare a multiple-step income statement for the year ended December 31, 20Y5, concluding with earnings per share. In computing earnings per share, assume that the average number of common shares outstanding was 100,000 and preferred dividends were $100,000. (Round earnings per share to the nearest cent.) Save your calculations and enter the requested amounts below.
The EPS calculation would be: [tex]= ($xxx - $100,000) / 100,000= $x.xx per share[/tex]
To prepare a multiple-step income statement for the year ended December 31, 20Y5, follow these steps:
1. Determine the company's total sales revenue for the year. This should be listed at the top of the income statement.
2. Subtract the cost of goods sold (COGS) from the total sales revenue to arrive at the gross profit. This is the second line of the income statement.
3. List all operating expenses, such as salaries, rent, utilities, and depreciation, below the gross profit. Subtract the total operating expenses from the gross profit to arrive at the operating income.
4. Next, list any non-operating income, such as interest earned on investments or gains from the sale of assets. Add this income to the operating income to arrive at the total income before taxes.
5. Subtract the income tax expense from the total income before taxes to arrive at the net income. This should be listed at the bottom of the income statement.
6. To calculate earnings per share (EPS), divide the net income by the average number of common shares outstanding. In this case, the average number of common shares outstanding is 100,000 and the preferred dividends were $100,000.
Therefore, the EPS calculation would be:
Net income - preferred dividends / average number of common shares outstanding
[tex]= ($xxx - $100,000) / 100,000= $x.xx per share[/tex]
Remember to round EPS to the nearest cent.
Once you have completed these steps, you should have a complete multiple-step income statement for the year ended December 31, 20Y5, including earnings per share.
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