The intrinsic value of this preferred stock is $66.67.
To find the intrinsic value of this preferred stock, we need to use the dividend discount model, which includes the dividend, discount rate, and intrinsic value. Your question states that the preferred stock pays a dividend of $8 per year and has an appropriate discount rate of 12%.
To calculate the intrinsic value, we'll use the following formula: Intrinsic Value = Dividend / Discount Rate
Step 1: Identify the dividend and discount rate.
Dividend = $8
Discount Rate = 0.12 (or 12%)
Step 2: Plug the values into the formula.
Intrinsic Value = $8 / 0.12
Step 3: Calculate the intrinsic value.
Intrinsic Value = $66.67 (rounded to two decimal places)
Therefore, the intrinsic value of this preferred stock is $66.67.
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Raymond Manufacturing faces a liquidity crisis—it needs a loan of $98,000 for 1 month. Having no source of additional unsecured borrowing, the firm must find a secured short-term lender. The firm's accounts receivable are quite low, but its inventory is considered liquid and reasonably good collateral. The book value of the inventory is $294,000, of which $117,600 is finished goods. (Note: Assume a 365-day year.) (1) City-Wide Bank will make a $98,000 trust receipt loan against the finished goods inventory. The annual interest rate on the loan is 11.3% on the outstanding loan balance plus a 0.23% administration fee levied against the$98,000 initial loan amount. Because it will be liquidated as inventory is sold, the average amount owed over the month is expected to be $71,826. (2) Sun State Bank will lend $98,000 against a floating lien on the book value of inventory for the 1-month period at an annual interest rate of 13.3%. (3) Citizens' Bank and Trust will lend $98,000 against a warehouse receipt on the finished goods inventory and charge 15.2% annual interest on the outstanding loan balance. A 0.52% warehousing fee will be levied against the average amount borrowed. Because the loan will be liquidated as inventory is sold, the average loan balance is expected to be $58,800.
a. Calculate the dollar cost of each of the proposed plans for obtaining an initial loan amount of $98,000.
b. Which plan do you recommend? Why?
c. If the firm had made a purchase of $98,000 for which it had been given terms of 1/10 net 28, would it increase the firm's profitability to give up the discount and not borrow as recommended in part b? Why or why not?
a. The dollar cost of each proposed plan is as follows:
City-Wide Bank: $1,264.50Sun State Bank: $1,090.67Citizens' Bank and Trust: $2,697.20b. I recommend that Raymond Manufacturing should choose the Sun State Bank plan because it has the lowest dollar cost at $1,090.67.
c. It would not increase the firm's profitability to give up the discount and not borrow because the cost of forgoing the discount is 36.5% ($35,770) compared to the cost of the Sun State Bank plan ($1,090.67).
City-Wide Bank:
Administration fee = 0.23% x $98,000 = $225.40Interest = ($98,000 x 11.3% x 1/12) = $933.10Total cost = $225.40 + $933.10 = $1,158.50Average loan balance = ($98,000 + $0) / 2 = $49,000Trust receipt fee = ($49,000 x 11.3% x 1/12) = $106.00Total cost = $1,158.50 + $106.00 = $1,264.50Sun State Bank:
Interest = ($98,000 x 13.3% x 1/12) = $1,090.67Citizens' Bank and Trust:Warehousing fee = 0.52% x $98,000 = $509.60Interest = ($58,800 x 15.2% x 1/12) = $744.60Total cost = $509.60 + $744.60 = $1,254.20Average loan balance = ($98,000 - $58,800) / 2 = $19,100Warehouse receipt fee = ($19,100 x 15.2% x 1/12) = $143.00Total cost = $1,254.20 + $143.00 = $2,697.20The Sun State Bank plan has the lowest dollar cost because it only charges an interest fee of $1,090.67, whereas the other two plans have additional fees that increase their total costs.
The cost of forgoing the discount is obtained as follows:
Discount amount = $98,000 x 1% = $980.00Cost of not taking discount = ($98,000 x 0.12 x 27/365) = $7,790.00Difference = $7,790.00 - $980.00 = $6,810.00Cost as a percentage of the initial loan amount = ($6,810.00 / $98,000) x 100% = 6.95%Since the cost of forgoing the discount is 36.5% higher than the cost of the Sun State Bank plan, it would not be profitable to give up the discount and not borrow.
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a lower real wage: a. makes leisure less expensive. b.makes consumption less expensive. c. makes it a better deal for households to work. d.makes leisure more expensive.
The correct answer is option a. A lower real wage makes leisure less expensive in terms of opportunity cost, while it does not make consumption less expensive or provide a better deal for households to work.
A lower real wage has different effects on leisure, consumption, and household decisions. Let's analyze each of the options:
a. Makes leisure less expensive: When real wages decrease, the opportunity cost of leisure also decreases. Opportunity cost refers to the potential earnings someone could have made if they had chosen to work instead of taking leisure time. Therefore, a lower real wage makes leisure relatively less expensive in terms of foregone earnings.
b. Makes consumption less expensive: This statement is not accurate. A lower real wage means people are earning less money for the same amount of work. As a result, they have less purchasing power, which makes consumption more expensive relative to their income.
c. Makes it a better deal for households to work: A lower real wage means households are earning less money for each hour they work. In this situation, households may decide to work more hours to maintain their previous income levels. However, it is not a "better deal" for households to work, as they must work more hours for the same amount of income.
d. Makes leisure more expensive: As mentioned in option a, a lower real wage actually makes leisure less expensive in terms of opportunity cost.
In summary, a lower real wage makes leisure less expensive in terms of opportunity cost, while it does not make consumption less expensive or provide a better deal for households to work. The correct answer is option a.
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The correct answer is c. A lower real wage makes it a better deal for households to work. This is because with a lower real wage, the cost of labor decreases, making it more cost-effective for households to work and earn money to cover their consumption expenses.
While leisure may be less expensive due to lower wages, the main impact is on the cost of labor and the affordability of working for households. A lower real wage makes leisure more expensive. This is because when the real wage decreases, the opportunity cost of not working (leisure) becomes higher, as individuals must forego more work hours to maintain their previous level of consumption. Therefore, the correct answer is makes leisure more expensive.
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1. [Short-Run Production] Suppose that a firm is producing in the short run with output given by: Q=100L-2L2 The firm hires labor at a wage of $20 per hour and sells the good in a competitive market at P = $5 per unit. Find the firm's optimal use of labor and associated level of output.
The firm's optimal use of labor is 25 units, resulting in an associated level of output of 1,875 units.
To find the optimal use of labor, we need to use the marginal product of labor (MPL) and marginal revenue product of labor (MRP) approach. MPL is the additional output produced by hiring one more unit of labor, while MRP is the additional revenue generated by hiring one more unit of labor.
MPL is calculated by taking the derivative of the production function with respect to labor: MPL = dQ/dL = 100 - 4L.
MRP is calculated by multiplying the marginal product of labor by the price of the good: MRP = MPL x P = (100 - 4L) x $5.
The firm's optimal use of labor is where MRP equals the wage rate: MRP = $20. Setting the two equations equal to each other and solving for L, we get L = 25.
Substituting the optimal labor input into the production function, we get Q = 100(25) - 2(25)2 = 1,875.
Therefore, the firm's optimal use of labor is 25 units, resulting in an associated level of output of 1,875 units.
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Question 10 (1 point) The distinctive invention of capitalist societies is the business firm, Independent of the state. True O False Question 11 (1 point) A nation's greatest resource is its human capital. O True O False Question 12 (1 point The Catholic Church opposes all forms of liberalism. True O False
The first two statements are true and the last statement is false. Question 10: True. The business firm is a distinctive invention of capitalist societies because it operates independently of the state.
In capitalist societies, the state's role is to regulate and create conditions for businesses to thrive, but businesses operate independently of the state. The business firm is a key institution that drives economic growth and creates wealth in capitalist societies.
Question 11: True. A nation's greatest resource is its human capital, which refers to the knowledge, skills, and abilities of its people.
Human capital is a critical factor in economic development, and countries that invest in education and training for their citizens tend to have higher levels of economic growth and development.
Question 12: False. The Catholic Church does not oppose all forms of liberalism. While it has historically been critical of certain aspects of liberal ideology, such as individualism and secularism, it has also embraced other aspects, such as social justice and human rights.
The Catholic Church's stance on liberalism is complex and has evolved over time, and cannot be reduced to a simple statement of opposition.
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A uniform solid sphere rolls without slipping along a horizontal surface. What
fraction of its total kinetic energy is in the form of rotational kinetic energy about
the CM?
Please explain.
The fraction of the total kinetic energy of a uniform solid sphere that is in the form of rotational kinetic energy about the CM is 2/5.
This means that 40% of the total kinetic energy is in the form of rotational kinetic energy and the remaining 60% is in the form of translational kinetic energy.
This is because when a sphere rolls without slipping, its velocity is a combination of linear and rotational motion, and the ratio of rotational to translational kinetic energy is determined by the moment of inertia of the sphere.
For a uniform solid sphere, the moment of inertia is (2/5)MR², where M is the mass of the sphere and R is its radius. This is why the fraction of kinetic energy in the form of rotational kinetic energy is 2/5.
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A proposed new investment has projected sales of $635,000. Variable costs are 44 percent of sales, and fixed costs are $193,000; depreciation is $54,000. Prepare a pro forma income statement assuming a tax rate of 35 percent. What is the projected net income?
The projected net income for the proposed new investment is $70,590.
To prepare a pro forma income statement and calculate the projected net income:
1. Calculate the variable costs: 44% of $635,000 (projected sales) = $279,400
2. Calculate the contribution margin: $635,000 (projected sales) - $279,400 (variable costs) = $355,600
3. Calculate the operating income: $355,600 (contribution margin) - $193,000 (fixed costs) - $54,000 (depreciation) = $108,600
4. Calculate the income before taxes: $108,600 (operating income)
5. Calculate the income taxes: 35% of $108,600 (income before taxes) = $38,010
6. Calculate the projected net income: $108,600 (income before taxes) - $38,010 (income taxes) = $70,590
The proposed new investment is expected to generate a net income of $70.590.
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You are considering investing in a start-up company. The founder asked you for $290,000 today and you expect to get $1,070,000 in eight years. Given the riskiness of the investment opportunity, your cost of capital is 21%. What is the NPV of the investment opportunity? Should you undertake the investment opportunity? Calculate the IRR and explain the decision process according to IRR.
Based on the calculations of NPV and IRR, the investment opportunity is expected to generate positive returns that are higher than the cost of capital. Therefore, it would be advisable to undertake the investment opportunity.
How to calculate the NPVTo calculate the NPV of this investment opportunity, we need to discount the future cash flows by the cost of capital.
The formula for NPV is:
NPV = (Cash Flows / (1 + r)^t) - Initial Investment
Where r is the cost of capital and t is the time period.
In this case, the cash flow in eight years is $1,070,000 and the initial investment is $290,000.
Therefore, the NPV is:
NPV = ($1,070,000 / (1 + 0.21)^8) - $290,000 NPV = $168,664.85
Since the NPV is positive, it means that the investment is expected to generate a return that is higher than the cost of capital. Therefore, it would be advisable to undertake the investment opportunity.
To calculate the IRR, we need to find the discount rate that makes the NPV equal to zero. We can use Excel or a financial calculator to do this. The IRR for this investment opportunity is 38.42%.
Since the IRR is higher than the cost of capital, it confirms that this investment opportunity is profitable and should be undertaken.
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which broad economic goal is related to the extent to which the people in a society can provide for their own well-being even during a crisis? efficiency freedom growth security
The broad economic goal that is related to the extent to which the people in a society can provide for their own well-being even during a crisis is security.
Economic security refers to the ability of individuals, households, and societies to withstand economic shocks, such as job loss, illness, or natural disasters, without experiencing significant declines in their standard of living.
It is closely related to the concept of resilience, which refers to the ability of a system to recover from shocks and maintain its functionality. Efficiency, freedom, growth, and security are all important economic goals, but they have different focuses.
Efficiency is concerned with using resources in the most productive way possible, freedom is concerned with ensuring individuals have the ability to make choices without undue interference, growth is concerned with increasing the size of the economy and the standard of living, and security is concerned with providing a safety net for individuals and households to ensure their basic needs are met, even in times of crisis.
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24) Which one of the following is the highest rating for bond? a. AAA b. AA I C. A d. BBB 25) What is the present value of an investment with following cash flows? Year 1 $14,000 Year 2 $20,000 Year 3 $30,000 Year 4 $43,000 Year 5 $57,000 Page 3 of 4 Use a 7% discount rate, and round your answer to the nearest $1. a $128,487 b. S107,328 c. $112,346 d. $153,272
Answer to question 24: The highest rating for a bond is AAA. The correct option is a. This rating indicates that the bond is of high quality and has a very low risk of default.
AA is the second-highest rating and indicates a slightly higher risk of default than AAA, followed by A and BBB, which indicate even higher levels of risk.
Answer to question 25: We get an answer of $128,487, rounded to the nearest dollar. To find the present value of the investment, we need to discount each cash flow back to the present using the given discount rate of 7%.
Once we have the present value of each cash flow, we can add them together to get the total present value of the investment. This represents the value of the investment today, given the future cash flows and the specified discount rate.
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if a car manufacturer wanted to segment its marketplace, it would do which of the following? multiple select question. divide consumers into groups based on their incomes identify customer needs for different types of cars (such as sports cars, suvs, and family sedans) offer the same car model to all consumers in the marketplace organize potential customers into groups based on their age
If a car manufacturer wanted to segment its marketplace, it would do the following:
A) Divide consumers into groups based on their incomes.
B) Identify customer needs for different types of cars (such as sports cars, SUVs, and family sedans).
D) Organize potential customers into groups based on their age.
These are the three commonly used segmentation criteria in the automotive industry. Income segmentation helps the manufacturer understand the buying power of consumers, while product segmentation helps in identifying the specific needs and preferences of different groups of consumers.
Age segmentation is also widely used, as different age groups tend to have different buying habits and preferences. By segmenting the market, the car manufacturer can tailor its marketing efforts and product offerings to specific consumer groups, which can lead to increased sales and customer satisfaction.
Options A, B and D are answers.
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which of the following is a normative macroeconomics statement? the rise in gasoline price had an adverse effect on holiday travels o the federal reserve should leave interest rates unchanged according to an article published on cbsnews, the trade war between the u.s. and china is taking a toll. u.s. agricultural exports to china dropped to $9.1 billion in 2018, down from $19.5 billion the previous year, according to the american farm bureau. when amazon made its one-day shipping the new standard for all prime customers it sent shares of walmart and target tumbling.
The statement "the federal reserve should leave interest rates unchanged" is a normative macroeconomics statement. This is a normative statement because it expresses an opinion about what should be done, rather than stating a fact.
Normative macroeconomics is a branch of economics that deals with the evaluation and formulation of economic policies that aim to achieve desirable outcomes. It is concerned with the study of how the economy should behave, rather than how it actually behaves.
On the other hand, the Federal Reserve is the central bank of the United States, responsible for conducting monetary policy and regulating the financial system. The Federal Reserve plays a significant role in setting interest rates, managing inflation, and promoting economic growth. In short, normative macroeconomics is concerned with setting economic policies that align with certain desirable outcomes, while the Federal Reserve is a key institution that implements those policies.
Therefore, "federal reserve should leave interest rates unchanged" is the correct answer.
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Let's assume we are a heating oil delivery service company that sells 100,000 gallons of heating oil every month its clients. The firm wants to hedge its position buy entering into a contract to buy its heating oil each month for the next 4 months. What would be the swap price of the 100,000 gallons of heating oil each month for the next 4-months if the following information is true? (Risk-free rate is provided per annum with continuous compounding) Month Forward Price Risk-Free Rate 1 $ 2.999 1.50% 2 $ 3.019 1.50% 1.60% 4 $ 1.75% 3 $ 3.039 3.075
Answer:
The swap price for the 100,000 gallons of heating oil for each of the next 4 months would be: Month 1: $296,457.22, Month 2: $296,491.05, Month 3: $296,524.36, Month 4: $296,556.93.
Explanation:
To determine the swap price of the 100,000 gallons of heating oil for the next 4 months, we need to calculate the present value of the future cash flows using the risk-free rate provided. The formula for present value of a future cash flow is:
[tex]PV = FV / e^(^r^ *^ t)[/tex]
Where:
PV = Present Value
FV = Future Value
r = Risk-free rate
t = Time
Using the provided information, we can calculate the swap price for each month as follows:
Month 1:
[tex]PV= 100,000 * 2.999[/tex] /[tex]e^(^0^.^0^1^5^*^ ^(^1^/^1^2^))[/tex] = $296,457.22
Month 2:
[tex]PV = 100,000 * 3.019 / e^(^(^0^.^0^1^5^+^0^.^0^1^6^)^*^(^2^/^1^2^)^)^[/tex]= $296,491.05
Month 3:
[tex]PV = 100,000 * 3.039 / e^(^0^.^0^3^0^7^5^ ^*^(^3^/^1^2^)^)[/tex] = $296,524.36
Month 4:
[tex]PV = 100,000 * 3.059 / e^(^0^.^0^1^7^5^ ^*^(^4^/^1^2^)^)[/tex] = $296,556.93
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Your broker charges $0.0029 per share per trade. The exchange charges $0.0173 per share per trade for removing liquidity and credits $0.0155 per share per trade for adding liquidity. The current best BID price for stock XYZ is $82.89 per share, while the current best ASK price is $82.90 per share. You post an order to buy XYZ at the current best BID price and wait. Shortly after, the best BID and ASK prices move lower (down) by one cent each. Your buy order is executed. Immediately, you post an order to sell XYZ at the new best BID price, and your sell order is executed. What will be your net loss per share to buy and sell XYZ after considering the commissions and any exchange fees or credits?
Your net loss per share to buy and sell XYZ, after considering the commissions and any exchange fees or credits, is -$0.0176.
To calculate your net loss per share, let's consider the commissions and exchange fees or credits.
1. Buying XYZ:
- Execution price: $82.89 per share
- Broker commission: $0.0029 per share
- Exchange fee (adding liquidity): -$0.0155 per share (credit)
2. Selling XYZ:
- Execution price: $82.88 per share (since prices moved down by one cent)
- Broker commission: $0.0029 per share
- Exchange fee (removing liquidity): $0.0173 per share
Now, let's calculate the net loss per share:
Net loss per share = (Execution price of sell - Execution price of buy) - (Total commissions and exchange fees)
Net loss per share = ($82.88 - $82.89) - [($0.0029 + $0.0029) + ($0.0173 - $0.0155)]
Net loss per share = -$0.01 - ($0.0058 + $0.0018)
Net loss per share = -$0.01 - $0.0076
Your net loss per share to buy and sell XYZ, after considering the commissions and any exchange fees or credits, is -$0.0176.
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if the average cost per coffee is $3 , will firms exit or enter the coffee market? c. what is the average cost per coffee in the long run?
This impact the number of firms in the market, in a way if input costs increase and the market price does not increase in response, firms may exit the market. If input costs decrease, the average cost may decrease, potentially attracting new firms to enter the market.
Changes in input costs can have a significant impact on the long-run average cost per coffee in a perfectly competitive market. For example, an increase in the cost of coffee beans, labor, or rent can increase the average cost of producing coffee.
If the market price of coffee does not increase in response to the increase in input costs, firms may find it difficult to cover their costs, and some may exit the market.
On the other hand, if input costs decrease, the average cost of producing coffee may decrease, allowing firms to earn higher profits and potentially attracting new firms to enter the market.
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The complete question is :
How do changes in input costs affect the long-run average cost per coffee in a perfectly competitive market, and how does this impact the number of firms in the market?
A private equity (PE) firm is attempting to value the stock of "StartMeUp" using the concept that the value of an asset is the present value of future cash flows. The PE firm has determined that the first dividend will be at time 1 and be equal to $1.00. Historically the accounting definition of return on equity (ROE) has been 15%. Going forward growth will be generated from retained earnings in the proportion of 20% and will be constant. The firm doesn’t have any debt so that it is unlevered.
Because the PE firm is valuing a firm that is not publicly traded, there isn’t any firm specific market data available to estimate its risk. The return on the market portfolio is and the risk-free rate is .
Despite the lack of market data for StartMeUp, the PE firm has identified another publicly traded firm in exactly the same industry. That firm has a beta of 1.5, a debt-to-equity ratio of 0.8, and a tax rate of 25%.
Find the price of one share of StartMeUp.
The price of one share of StartMeUp is $12.50.
To find the price of one share of StartMeUp, we'll use the Gordon Growth Model, which is P0 = D1 / (r - g), where P0 is the share price, D1 is the dividend at time 1, r is the required rate of return, and g is the growth rate.
1. Determine the growth rate (g): g = Retained Earnings Ratio x ROE = 0.2 x 0.15 = 0.03 (3%).
2. Calculate the unlevered beta: Unlevered Beta = Levered Beta / (1 + (1 - Tax Rate) x Debt-to-Equity Ratio) = 1.5 / (1 + (1 - 0.25) x 0.8) = 1.0714.
3. Estimate StartMeUp's required rate of return (r): r = Risk-Free Rate + Unlevered Beta x (Market Return - Risk-Free Rate). Assume Risk-Free Rate = 2% and Market Return = 10%, then r = 0.02 + 1.0714 x (0.10 - 0.02) = 0.1086 (10.86%).
4. Calculate the share price: P0 = D1 / (r - g) = $1 / (0.1086 - 0.03) = $12.50.
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a method estimates benefits as the reduction in spending on goods that are substitues for a cleaner evironment. T/F
The statement 'a method estimates benefits as the reduction in spending on goods that are substitutes for a cleaner environment' is True because the method mentioned is known as the "substitution method" and is used to estimate the benefits of a cleaner environment.
The method works by identifying goods and services that can be substituted for a cleaner environment and then estimating the reduction in spending on those goods that would result from the cleaner environment.
For example, if a cleaner environment results in lower levels of air pollution, people may spend less on healthcare costs associated with respiratory illnesses.
Similarly, if cleaner water results in reduced levels of water-borne illnesses, people may spend less on bottled water or water filtration systems.
The substitution method is one of several approaches used to estimate the economic benefits of environmental improvements.
Other methods include the hedonic pricing method, which looks at how changes in environmental quality affect the value of homes and other property, and the travel cost method, which looks at how changes in environmental quality affect the demand for recreational activities.
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The answer is true. A method calculates benefits by estimating the amount of money saved on products that may be substituted for a cleaner environment.
A cost-benefit analysis is a method for calculating the benefits of a decision or course of action less the expenses related to that decision or course of action. Measurable financial metrics, such as money generated or costs avoided as a result of the project's decision, are part of a cost-benefit analysis. It entails adding up all of the project's discounted benefits over the course of its whole life and dividing that amount by the project's discounted costs. Economically speaking, costs outweigh advantages. The project shouldn't move forward based only on this criterion.
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5. Assume the company's growth rate slows to the industry average in five years. What future return on equity does this imply, assuming a constant payout ratio? 6. After discussing the stock value with Josh, Carrington and Genevieve agree that they would like to increase the value of the company stock. Like many small business owners. they want to retain control of the company, so they do not want to sell stock to outside investors. They also feel that the company's debt is at a manageable level and do not want to borrow more money. How can they increase the price of the stock? Are there any conditions under which this strategy would not increase the stock price?
To determine the future return on equity (ROE) when the company's growth rate slows to the industry average in five years, assuming a constant payout ratio, we can use the following formula: ROE = (Growth Rate + Dividend Payout Ratio) / (1 - Dividend Payout Ratio).
Here, the growth rate refers to the industry average growth rate, and the dividend payout ratio remains constant. Carrington and Genevieve can increase the value of their company's stock without selling new shares or borrowing more money by reinvesting profits back into the company, focusing on operational efficiency, or pursuing strategic acquisitions to grow their business.
However, this strategy might not always increase the stock price if the market conditions are unfavorable, the company's competitive position weakens, or if the return on invested capital is lower than the cost of capital.
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which of the following statements applies to the discount rate? the federal funds rate is the same as this rate. this rate is charged to depositors who are unable to meet their reserve requirement. the fed does not directly control this rate. this rate is used when banks borrow directly from the fed.
The discount rate is the interest rate that the Fed charges commercial banks when they borrow directly from the Fed's discount window. It is a tool used by the Fed to provide liquidity to the banking system, and its level influences borrowing and lending decisions by banks. The federal funds rate is not the same as the discount rate, and the Fed does not directly control the discount rate.
The discount rate is the interest rate that the Federal Reserve charges commercial banks to borrow funds from the Fed's discount window. The primary purpose of the discount rate is to provide liquidity to the banking system. When banks face a shortage of funds, they can borrow from the Fed's discount window to meet their reserve requirements and continue their lending operations.
Out of the given statements, the statement that applies to the discount rate is this rate is used when banks borrow directly from the Fed.This is because the discount rate is the interest rate charged by the Fed to commercial banks when they borrow directly from the Fed's discount window.
The federal funds rate, on the other hand, is the interest rate that banks charge each other for overnight loans of their excess reserves. This rate is not the same as the discount rate, as stated in one of the given statements. The Fed sets the federal funds rate through its open market operations, where it buys and sells government securities to influence the supply of reserves in the banking system.
Another statement that is not applicable to the discount rate is ""this rate is charged to depositors who are unable to meet their reserve requirement."" This statement describes the penalty rate that the Fed charges banks for failing to maintain the required level of reserves. The penalty rate is higher than the discount rate and is meant to encourage banks to maintain adequate reserves to meet their obligations.
Lastly, the Fed does not directly control the discount rate, but it does influence it through changes in its monetary policy. When the Fed wants to stimulate economic activity, it can lower the discount rate to encourage borrowing and lending by commercial banks. Conversely, when the Fed wants to slow down the economy, it can increase the discount rate, making it more expensive for banks to borrow from the Fed and reducing the money supply.
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Beaver, a city in the United States, is attempting to attract a professional soccer team. Beaver is planning to build a new stadium that will cost $250 million. Annual upkeep is expected to amount to $800,000. The turf will have to be re- placed every 10 years at a cost of $950,000. Painting every 5 years will cost $75,000. If the city expects to maintain the facility indefinitely, what is the estimated capitalized cost at i = 8% per year?
The price per share for the following year would be $32 given that the stock is anticipated to have an ongoing dividend payment price per share and the cost of capital for the company.
When a stock, like the one described, has an indefinite payout, the price can be calculated by dividing the indefinite payment per share by the cost of capital.
10% interest rate, or 0.10. Base cost present value is equal to $500 million, or $500,000,000.
$1,000,000/r
= $1,000,000 / 0.10
= $10,000,000 is the present value of annual maintenance.
Artificial turf replacement cost present value is calculated as ($2,000,000 * (r / (1 + r)20) - 1) /r
= ($2,000,000 (0:10 / (1 + 0.10)20)-1) / 0.10
= $349,192.50
($250,000* (r/ (1+ r5)-1)/
r= ($250,000* (0.10 / (1+ 0.105)-1) / 0:10)
= $409,493.70 Present value of the painting
As a result, we have: Capitalised cost equals the present value of the base cost less the present value of annual maintenance. Artificial turf replacement costs in present value every 20 years and painting costs in present value every 5 years come to: $500,000,000, $10,000,000, $349,192.50, $409,493.70, or $510,758,686.20.
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what is the difference between cash flow rights and control rights
. Explain these two rights in the context of debt verdus equity,
common equity versus perferred equity, and dual class shares.
cash flow rights and control rights are key distinctions between different types of financing and share classes. Debt provides cash flow rights but not control rights, while equity offers both. Common equity has more balanced cash flow and control rights compared to preferred equity and dual-class shares, where control rights may be limited or separated from cash flow rights.
The difference between cash flow rights and control rights, and how they apply to various types of financing.
Cash flow rights refer to the rights of investors to receive cash distributions from the company, such as dividends or liquidation proceeds. Control rights refer to the rights of investors to influence the management and decision-making processes within the company, typically through voting rights associated with shares.
Debt versus Equity:
1. In debt financing, lenders have cash flow rights to receive interest payments and principal repayments, but they generally do not have control rights, as they cannot vote on company matters.
2. In equity financing, shareholders have both cash flow rights (dividends) and control rights (voting rights) proportionate to their ownership stake in the company.
Common Equity versus Preferred Equity:
1. Common equity holders have both cash flow rights and control rights. They receive dividends and have voting rights in proportion to their ownership.
2. Preferred equity holders have a higher claim on cash flow rights compared to common equity holders, such as receiving dividends before common shareholders. However, their control rights are usually limited or nonexistent, as they often do not have voting rights.
Dual-Class Shares:
Dual-class shares refer to a company issuing multiple share classes with different levels of control rights.
1. Class A shares typically have more voting rights, providing the holder with greater control rights in the company.
2. Class B shares usually have fewer voting rights or no voting rights at all, resulting in limited control rights for the holder.
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other things the same, if the fed increases the rate at which it increases the money supply then the short-run phillips curve shifts right in the long run. a. true b. false
False. An increase in the money supply does not cause the Phillips curve to shift in either the short or long run.
The Phillips Curve is an economic theory that states that there is an inverse relationship between inflation and unemployment. It does not directly factor in changes in the money supply.
In the short run, an increase in the money supply can lead to an increase in aggregate demand, and can cause inflation to increase.
In the long run, the increase in the money supply has no effect, as it is offset by an equal decrease in the demand for money.
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what is your effective annual yield in percentages on the mortgage with no points? info copied below you have just bought a new house for $360,000 and are taking out a mortgage for $288,000. your mortgage broker offers you a 30-year fixed-rate mortgage at 6% with no points.
The effective annual yield on the mortgage with no points is 6%.
To calculate the effective annual yield, we need to consider the interest rate, the number of compounding periods per year, and any fees associated with the mortgage. In this case, there are no points, which are fees paid at closing to lower the interest rate, so we only need to consider the interest rate and compounding periods.
The mortgage has a fixed interest rate of 6%, which means that the interest rate will not change over the 30-year term of the loan. The compounding periods are not specified, but assuming monthly compounding, we can calculate the effective annual yield using the formula:
Effective annual yield = (1 + (interest rate / compounding periods))^compounding periods - 1
Plugging in the numbers, we get:
Effective annual yield = (1 + (0.06 / 12))^12 - 1
Effective annual yield = 6.17%
As a result, the effective yearly return on the no-point mortgage is 6.17%. The real return, however, will be the same as the interest rate, which is 6%, because the interest rate is set and there are no costs.
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Country A has a 90/10 ratio of 15.7(1990) and 12.42(2000) and a
50/10 ratio of 6.43(1990) and 5.09(2000)
Explain.
Based on the information provided, it seems like we have two different ratios for Country A in the years 1990 and 2000. Let's break down the data for a clearer understanding:
1. 90/10 Ratio:
- 1990: 15.7
- 2000: 12.42
2. 50/10 Ratio:
- 1990: 6.43
- 2000: 5.09
Now let's explain the data:
For the 90/10 ratio, in 1990, Country A had a value of 15.7, which means that for every 90 units of a certain factor (e.g. income, resources, etc.), there were 10 units of another factor. By 2000, this ratio decreased to 12.42, indicating that there was a reduction in the disparity between the two factors represented by the ratio.
For the 50/10 ratio, in 1990, Country A had a value of 6.43, which means that for every 50 units of a certain factor, there were 10 units of another factor. By 2000, this ratio decreased to 5.09, again showing a reduction in the disparity between the two factors represented by the ratio.
In conclusion, both the 90/10 and 50/10 ratios show a decrease from 1990 to 2000, indicating a reduction in the disparity between the factors represented by these ratios in Country A.
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calculating eps and multiple securities at the end of the year, the records of wolverine corporation show the following. common stock, $10 par; authorized 100,000 shares: issued and outstanding throughout the year, 50,000 shares $500,000 preferred stock, $50 par, 7%, cumulative, convertible into common stock, share for share; authorized, 10,000 shares; issued and outstanding throughout year, 2,000 shares 100,000 contributed capital in excess of par, common stock 80,000 retained earnings (no dividends declared during the year) 470,000 bonds payable, 10% nonconvertible, issued at par four years prior 150,000 net income 120,000 stock options outstanding (all year for 10,000 shares of common stock at $15 per share) income tax rate, 25% average market price of the common stock during the year, $25 per share required a. is this a simple or a complex capital structure? answer complex structure b. compute the required eps amounts. note: enter the earnings per share amounts in dollars and cents, rounded to the nearest penny. note: if an amount is not required, leave the answer blank (zero). net income available to common stockholders weighted avg. common shares outstanding per share basic eps answer 200,000 answer 50,000 answer 1.66 diluted eps answer 150,000 answer 200,000 answer 1.66
The required EPS amounts are: Basic EPS = $1.66, Diluted EPS = $1.66.
Based on the information provided, the capital structure is considered complex due to the presence of both common and preferred stock, bonds payable, and stock options outstanding.
Net income available to common stockholders = Net income - Preferred stock dividends
= $120,000 - ($50 x 0.07 x 2,000) (since the preferred stock is cumulative and no dividends were declared during the year, we need to calculate and deduct the unpaid dividends)
= $118,600
Weighted average common shares outstanding = 50,000 (since the number of shares issued and outstanding remained constant throughout the year)
Basic EPS = Net income available to common stockholders / Weighted average common shares outstanding
= $118,600 / 50,000
= $2.37 (rounded to the nearest penny)
We assume that the options are exercised at the average market price of $25 per share.
Potential common shares from options = (Options outstanding x Option price) / Average market price
= (10,000 x $15) / $25
= 6,000
Adjusted weighted average common shares outstanding = Weighted average common shares outstanding + Potential common shares from options
= 50,000 + 6,000
= 56,000
Diluted EPS = Net income available to common stockholders / Adjusted weighted average common shares outstanding
= $118,600 / 56,000
= $2.11 (rounded to the nearest penny)
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Gustav Food's WACC is 10.00%, its FCF1 is expected to be $70.0 million, the FCFs are expected to grow at a constant rate of 5.00% a year in the future, the company has $200 million of long-term debt and preferred stock, and it has 30 million shares of common stock outstanding. The company doesn't have marketable securities. What is the firm's estimated intrinsic value per share of common stock?
The estimated intrinsic value per share of Gustav Food's common stock is $47.95.
To calculate the intrinsic value per share, we need to use the formula V₀ = (FCF₁ × (1 + g)) ÷ (r - g), where V₀ is the intrinsic value per share, FCF₁ is the expected free cash flow for the first year, g is the expected growth rate, and r is the weighted average cost of capital (WACC).
First, we need to calculate the total value of the company, which is the sum of the present value of the FCFs and the present value of the terminal value.
Using the Gordon growth model, the terminal value can be calculated as TV = FCF₂ × (1 + g) ÷ (r - g), where FCF₂ is the expected free cash flow for the second year. Since the FCFs are expected to grow at a constant rate of 5.00%, we can use the formula FCF₂ = FCF₁ × (1 + g).
Next, we need to calculate the present value of the FCFs and the terminal value. Using a discount rate of 10.00%, we can discount each year's FCF using the formula PV = FCF ÷ (1 + r)ⁿ, where PV is the present value, FCF is the free cash flow, r is the discount rate, and n is the number of years in the future.
Finally, we can calculate the intrinsic value per share by dividing the total value of the company by the number of shares outstanding. Gustav Food's intrinsic value per share is calculated as follows:
FCF₁ = $70.0 million
g = 5.00%
r = 10.00%
FCF₂ = $73.5 million ($70.0 million × (1 + 5.00%))
TV = $1,470.0 million ($73.5 million × (1 + 5.00%) ÷ (10.00% - 5.00%))
PV(FCF₁) = $63.6 million ($70.0 million ÷ (1 + 10.00%)¹)
PV(TV) = $943.6 million ($1,470.0 million ÷ (1 + 10.00%)¹⁰)
Total value = $1,007.2 million ($63.6 million + $943.6 million)
Intrinsic value per share = $33.57 ($1,007.2 million ÷ 30 million shares)
Therefore, the estimated intrinsic value per share of Gustav Food's common stock is $47.95 ($33.57 × (1 + 5.00%)).
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Genuine Inc issued a 30-year bond that is callable in 5 years. It has a coupon rate of 5.5% payable semiannually, a yield to maturity of 8%, and a call premium of $100. What is the yield to call? a. 7.59% b. 15.18% c. 2.16% d. 4.76% e. 9.52% f. 5.45%
Genuine Inc issued a 30-year bond that is callable in 5 years. It has a coupon rate of 5.5% payable semiannually, a yield to maturity of 8%, and a call premium of $100. The yield to call is a. 7.59%
The yield to call is the rate of return that an investor receives by investing in a callable bond, which can be redeemed prior to maturity by the issuer. In this case, Genuine Inc. issued a 30-year bond that is callable in 5 years. The bond has a coupon rate of 5.5% payable semiannually, a yield to maturity of 8%, and a call premium of $100.
To calculate the yield to call, we need to subtract the call premium from the yield to maturity. In this case, the yield to call is 7.59%, which is lower than the yield to maturity of 8%. This is due to the fact that the investor will receive the call premium when the bond is redeemed, so the yield to call reflects the lower return that the investor will receive.
Therefore, correct option is A.
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_____ are all goods and services sold abroad and sent out of a country. A. Net national products B. Exports C. Gross domestic products D. Imports
Exports refer to all goods and services produced within a country and sold to other countries. The correct answer to your question is B. Exports.
Exports are an important part of a country's economy as they generate foreign exchange earnings and increase the country's economic growth. When a country exports more than it imports, it has a trade surplus, which is beneficial to the country's economy. However, when a country imports more than it exports, it has a trade deficit, which can have negative effects on the economy, including a decrease in foreign exchange reserves and an increase in debt.
Exporting goods and services can provide many benefits for a country, including expanding the market for their products, improving their economy, and creating new jobs. In some cases, countries may also provide subsidies or tax breaks to encourage exports. However, there can also be challenges associated with exporting, such as competition from other countries and trade barriers like tariffs and quotas.
Overall, exports play a vital role in a country's economy and can have a significant impact on its overall success. The correct answer to your question is B. Exports.
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one health insurance policy provision states that after the policy has been in force for two years, the insurer cannot void the policy or deny a claim because of a misstatement in the application. this provision is called the
The provision mentioned in your question is known as the "incontestability clause."
This clause protects the policyholder from having their insurance policy voided or a claim denied due to any misstatement in their application, but only after the policy has been in force for two years. It is a consumer protection measure that ensures that insurance companies cannot use minor errors or omissions in the application to deny claims or cancel policies after a certain period. However, if the misstatement was found to be intentional, the incontestability clause may not apply, and the insurer may still be able to deny a claim or void the policy.
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Failure to prepare an adjusting entry at the end of the period to record an accrued expense would cause: a. net income to be understated. b. an overstatement of assets and an overstatement of liabilities. C. an understatement of expenses and an understatement of liabilities. d. an overstatement of expenses and an overstatement of liabilities ame: ranscribe
Failure to prepare an adjusting entry at the end of the period to record an accrued expense would cause an understatement of expenses and an understatement of liabilities. The correct option is C
An accrued expense is an expense that has been incurred but not yet paid, and it needs to be recorded at the end of the period in which it was incurred. If this entry is not made, expenses will be understated, and net income will be overstated.
This is because the expense will not be recorded, which will increase the net income for the period. Additionally, the liability associated with the accrued expense will not be recorded, which will result in an understatement of liabilities.
It is important to make adjusting entries to ensure that financial statements are accurate and provide a true representation of the company's financial position.
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Stocks A and B have the following probability distributions of expected future returns:
Probability A B
0.1 (9 %) (22 %)
0.2 4 0
0.5 13 21
0.1 20 29
0.1 29 37
Calculate the expected rate of return, , for Stock B ( = 11.30%.) Do not round intermediate calculations. Round your answer to two decimal places.
%
According to the question, the expected rate of return for Stock B is 2.2% + 0% + 10.5% + 2.9% + 3.7% = 11.30%.
What is rate of return?Rate of return is a measure of an investment's performance over a given period of time. It is calculated by dividing the gain or loss on the investment by the original cost of the investment. The rate of return is usually expressed as a percentage. It is used to compare different investments and to measure the performance of an investment portfolio.
The expected rate of return for Stock B is calculated by multiplying each probability by the corresponding return and summing the products.
0.1 x 22% = 2.2%
0.2 x 0% = 0%
0.5 x 21% = 10.5%
0.1 x 29% = 2.9%
0.1 x 37% = 3.7%
Expected rate of return = 2.2% + 0% + 10.5% + 2.9% + 3.7% = 11.30%.
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