Answer:
Journal Entries
1. A corporation issued 8,000 shares of $20 par value common stock for $192,000 cash:
Debit Cash Account $192,000
Credit Common Stock $160,000
Credit Paid-in In Excess of Par $32,000
To record the issue of 8,000 shares of $20 par value.
2. A corporation issued 4,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $47,000. The stock has a $1 per share stated value:
Debit Retained Earnings $4,000
Credit Common Stock $4,000
To record the issue of 4,000 shares of $1 stated value.
3. A corporation issued 4,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $47,000. The stock has no stated value:
Debit Retained Earnings $47,000
Credit Common Stock $47,000
To record the issue of 4,000 shares of no stated value.
4. A corporation issued 2,000 shares of $100 par value preferred stock for $247,000 cash:
Debit Cash $247,000
Credit Preferred Stock $200,000
Credit Paid-in In Excess of Par $47,000
To record the issue of 2,000 shares of $100 par value.
Explanation:
Shares can be issued at par value, above, or below par value. When they are issued at par value, the Cash Account or Retained Accounts or Asset Account is debited, while the Stock account is credited. If they are above par value, the difference in at par and above is credited to the Paid-in In Excess of Par account or Additional Paid-in Capital account. When they are issued below the par value, the difference between cash received and the stock account is debited to Paid-in In Excess of Par account.
The stated value of a share is like the par value. Some shares have no stated value and are recorded at whichever value is prevailing at the time of the issue.
John, Paul, Mark, and Luke have been operating an LLC, and according to the operating agreement, the term of the LLC is set to expire in the near future. What options do the four partners have
Answer with its Explanation:
The partners of Limited Liability partnership are obliged to pass a resolution about the continuing of business or abandoning business. The resolution requires majority vote, which is three fourth majority.
If they want to revisit the terms and conditions for each partners of the business then they will have to form a new agreement on new terms and conditions for business purposes. The new terms might include the new deadline for expiration date of partnership or extension of partnership date.
Pinnacle Financial Services managers meet annually to create a list of potential future complications and plan how to respond to each possibility. Pinnacle is practicing _______ planning. single-use ad-hoc divisional-level contingency functional-level
Answer: contingency
Explanation:
Contingency planning is a form of planning that is used by an organization in order to plan ahead in case an event occurs. Contingency plans can also be called a 'Plan B' due to the fact that it's an alternative action in case things does not go as planned.
Therefore, based on the question, Pinnacle is practicing contingency planning.
Suppose a stock has an expected return of 12% and a standard deviation of 6%. What is the likelihood that this stock returns between 12% and 18%
Answer: 34.13%.
Explanation:
Given : Expected return : [tex]\mu=12\%=0.12[/tex]
Standard deviation: [tex]\sigma=6\%=0.06[/tex]
Let x be the stock returns.
Then, the probability that stock returns between 12% and 18%:
[tex]P(0.12<x<0.18)=P(\dfrac{0.12-0.12}{0.06}<\dfrac{x-\mu}{\sigma}<\dfrac{0.18-0.12}{0.06})\\\\=P(0<Z<1)\ \ \ [\because z=\dfrac{x-\mu}{\sigma}]\\\\=P(Z<1)-P(Z<0)\\\\=0.8413-0.5\ \ \ \text{[By z-table]}\\\\=0.3413[/tex]
Hence, the likelihood that this stock returns between 12% and 18% is 34.13%.
If the marginal propensity to consume (mpc) is 0.9, the spending multiplier is _____, the tax multiplier is ______, and the balanced budget multiplier is _______, respectively.
Answer:
If the marginal propensity to consume (mpc) is 0.9, the spending multiplier is 10, the tax multiplier is -9, and the balanced budget multiplier is 1, respectively.
Explanation:
These can be calculated as follows:
a) Calculation of spending multiplier
To calculate this, we use the formula for calculating the spending multiplier as follows:
Spending multiplier = 1 / (1 - mpc)
Since mpc = 0.9, we have:
Spending multiplier = 1 / (1 - mpc) = 1 / (1 - 0.9) = 1 / 0.1 = 10
b) Calculation of tax multiplier
To calculate this, we use the formula for calculating the tax multiplier as follows:
Tax multiplier = -mpc / mps
Note that the tax multiplier as given above is negative because increase in tax by the government makes the multiplier to work in reverse since the money is leaving the circular flow.
Since what is not consumed is saved, we have:
mps = 1 - mpc = 1 - 0.9 = 0.1
Therefore,
Tax multiplier = -0.9 / 0.1 = -9
c) Calculation of balanced budget multiplier
To calculate this, we use the formula for calculating the balanced budget multiplier as follows:
Balanced budget multiplier = Spending multiplier + Tax multiplier = 10 + (-9) = 10 - 9 = 1
Note that balanced budget multiplier is always equal to 1 as obtained above.
Conclusion
Therefore, if the marginal propensity to consume (mpc) is 0.9, the spending multiplier is 10, the tax multiplier is -9, and the balanced budget multiplier is 1, respectively.
Alpaca Corporation had revenues of $260,000 in its first year of operations. The company has not collected on $19,300 of its sales and still owes $26,300 on $90,000 of merchandise it purchased. The company had no inventory on hand at the end of the year. The company paid $13,000 in salaries. Owners invested $10,000 in the business and $10,000 was borrowed on a five-year note. The company paid $4,900 in interest that was the amount owed for the year, and paid $6,000 for a two-year insurance policy on the first day of business. Alpaca has an effective income tax rate of 40%. Compute net income for the first year for Alpaca Corporation.
Answer:
$89,460
Explanation:
The computation of the net income is shown below:
Sales $260,000
Less: Cost of goods sold -$90,000
Gross margin $170,000
Less:
Salaries -$13,000
Insurance payment -$3,000 ($6,000 ÷ 2 years)
Interest -$4,900
profit before tax $149,100
Less: tax expense -$59,640
Net income $89,460
We simply deducted all expenses from the revenues so that the net income could arrive and the same is to be considered
Talk to a 55-year-old (or older) business professional nearing retirement. This person can be a family member, friend, or mentor. List and describe the savings, investments, and risk management strategies for this phase of life. Describe how financial planning has changed from the earlier phase of life.
Answer:
The financial planning will differ for the person according to their age. A person who is 50 years older would have money only from his savings. The 55 year old person is retired and would only have money available for living from the saving he had made while he was working. He will not have any other source of income.
Explanation:
The risk management officer should consider the investments by considering his available savings. He should also consider the money required for living as there is no other source of income. The risk appetite for such an old aged individual will be low. He must be risk averse in the situation of retirement. The financial planning strategies changes for the person over the different phases of life. When a person is young and starts the job at age of 25 he might take excessive risks for getting extra returns. He is young and energetic, has ability to work part time along with his routine job to earn extra money.
Betty Harrington owns a floor covering firm. Her market research is telling her that she is taking business away from the large home improvement stores in her trade area. One thing that Betty is worried about is that the large stores might fight back by lowering their prices, which hurts everyone except the consumer. The day-to-day challenge of firm growth that this example is referring to is:
Answer:
price stability
Explanation:
In this scenario, the day-to-day challenge of firm growth that this example is referring to is price stability. Since the prices of the competing store are being changed (on purpose) Betty Harrington's firm will have a hard time adjusting in order to continue competing with the larger competing store, especially if the larger store lowers the price too much that Betty's store cannot actually lower theirs to that price. Thus ultimately forcing her out of the market.
Galaxy Corp. is considering opening a new division to make iToys that it expects to sell at a price of $15,250 each in the first year of the project. The company expects the cost of producing each iToy to be $6,700 in the first year; however, it expects the selling price and cost per iToy to increase by 3.00% each year.
Based on the preceding information and rounding dollar amounts to the nearest whole dollars, the company expects the selling price in the fourth year of the project to be_______ , and it expects the cost per unit in the fourth year of the project to be _______.
Answer:
Selling price= $17,164
Unitary variable cost= $7,541
Explanation:
Giving the following information:
Selling price in the first year= $15,250
Unitary variable cost on the first year= $6,700
Increase rate= 3%
To calculate the selling price and variable cost per unit in the fourth year, we need to use the following formula:
FV= PV*(1+i)^n
PV= current value
i= increase rate
n= number of years
Selling price= 15,250*(1.03^4)= $17,164
Unitary variable cost= 6,700*(1.03^4)= $7,541
rojects A and B are mutually exclusive and have an initial cost of $78,000 each. Project A provides cash inflows of $32,000 a year for three years while Project B produces a cash inflow of $44,400 a year for two years. Which project(s) should be accepted if the discount rate is 10 percent
Answer:
Project A should be accepted.
Explanation:
The initial investment of project A = $78000
The initial investment of project B = $78000
The cash inflows of project A = $32000
The time period for project A = 3 years
The cash inflow of project B = $44400
The time period for project B = 2 years.
Interest rate (r ) = 10%
Now find the net present value of both project and then decide which one has to accept.
The net present value of project A:
[tex]=\frac{A(1-(1+r)^{-n})}{r} - \text{initial investment} \\= \frac{32000(1-(1+0.1)^{-3})}{0.1} - 78000 \\= 79579.26 – 78000 \\= $1579.26[/tex]
The net present value of project B:
[tex]=\frac{A(1-(1+r)^{-n})}{r} - \text{initial investment} \\= \frac{44400(1-(1+0.1)^{-2})}{0.1} - 78000 \\= - 942.14[/tex]
Project A should be accepted because project B has a negative net present value.
Consider the corporate valuation model, if the WACC increases what happens to the present value of the firm. Group of answer choices It is indeterminant the present value will stay the the present value will decrease The corporate valuation model doesn't depend the WACC The present value will increase
Answer:
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Fixed Overhead Spending and Volume Variances, Columnar and Formula Approaches
Branch Company provided the following information:
Standard fixed overhead rate
(SFOR) per direct labor hour $5.00
Actual fixed overhead $305,000
BFOH $300,000
Actual production in units 16,000
Standard hours allowed for
actual units produced (SH) 64,000
Required
Enter amounts as positive numbers and select Favorable (F) or Unfavorable(U).
Using the columnar approach, calculate the fixed overhead spending and volume variances.
1 2 3
Spending Volume
Answer:
Fixed Overheads Spending Variance = $5,000 Unfavorable(U).
Fixed Overheads Spending Variance = $20,000 Favorable (F).
Explanation:
Fixed Overheads Spending Variance = Actual Fixed Overheads - Budgeted Fixed Overheads
= $305,000 - $300,000
= $5,000 Unfavorable(U).
Fixed Overheads Spending Variance = Fixed Overheads at Actual Production - Budgeted Fixed Overheads
= ($5.00 × 64,000) - $300,000
= $320,000 - $300,000
= $20,000 Favorable (F)
James is an agreeable and emotionally stable person. A _______ , he inspires his employees to believe in the changes he wants to make to the organization.
a) transformational leader
b) transactional leader
Answer:
transformational leader
On November 1, Bahama Cruise Lines borrows $3.5 million and issues a six-month, 9% note payable. Interest is payable at maturity. Record the issuance of the note and the appropriate adjustment for interest expense at December 31, the end of the reporting period.
Answer:
Bahama Cruise Lines
Journal Entries:
November 1:
Debit Cash Account $3,500,000
Credit 9% Notes Payable $3,500,000
To record the issue of a six-month note payable.
December 31:
Debit Interest Expense $52,500
Credit Interest Payable $52,500
To record the interest expense for the period.
Explanation:
a) With Bahama Cruise Lines borrowing $3.5 million on November 1 and issuing a six month, 9% note payable, the accounting entries are a debit to the Cash account for the cash received and a credit to the Note Payable account to establish the liability in the accounts.
b) Bahama Cruise Lines will accrue interest on the Note Payable for 2 months for the ending in order to comply with the accrual concept and the matching principle of generally accepted accounting principle. The accrual basis for accounting for transactions requires that expenses are recognized when incurred and not when cash is paid. The amount of the interest for the year is calculated as $52,500 ($3.5 million * 9%)/12 * 2. This also accords with the matching principle which requires that expenses are matched to the revenues of the same period.
Ecker Company reports $1,925,000 of net income for 2017 and declares $269,500 of cash dividends on its preferred stock for 2017. At the end of 2017, the company had 300,000 weighted-average shares of common stock.
1. What amount of net income is available to common stockholders for 2017?
2. What is the company's basic EPS for 2017?
Answer:
(A) $1,655,500
(B) $5.52 per share
Explanation:
Ecker company announced a net income of $1,925,000
They also declare a cash dividend of $269,500
The company has 300,000 weighted average shares of common stock
(A) The amount of net income available to common stockhloders for 2017 can be calculated as follows
Net income available to common stockhloders= Net income- Preferred Cash dividend
= $1,925,000-$269,500
= $1,655,500
(B) The common basic EPS for 2017 can be calculated as follows
Common basic EPS= Net income available to stockholders/weighted average outstanding shares
= $1,655,500/300,000
= $5.52 per share
Many Western European countries are giving monetary incentives to employees who have multiple children. Why would they do this? How would a baby boom change Japan's demographics?
Answer:
The incentive is to encourage more families to have more children.
A baby boom in Japan will ensure that there is enough workforce to maintain the growing economy in the future.
Explanation:
The western countries, especially Europe is battling with population decline, which is estimated to have an economic impact in the future, due to a potential decline in the labor force in the future. To counter this, many of these western nations have crated policies that encourages childbirth by providing incentive for families with multiple children, reducing tax for such families, and even as far as up to 12 to 16 months paid paternity and maternity leave, when a couple has a new baby. Couples are also given government paychecks when they go on childbirth leave.
Japan is one of the countries that has been experiencing a population decline in recent years. The number of death seem to be more than the number of births. The general effect is the fear of a dwindling work force of the future. This will lead to more people retiring later, and there would be a huge pressure on the pension schemes, and the economy as a whole due to this. A population boom will mean that a future workforce is guaranteed, and the retirement age lowered, and the call for dependency on automation due to a shrinking workforce can be reviewed.
Many of the western and developed nations are now giving incentives to those who produce more than one child or multiple children.
As their economy is getting old and is aging hence in order to company the problem of the aging of population monetary incentives are given. The baby boom is a condition related to the growth of babies. Japan is a greying nation that has a negatively declining trend of population. Due to the larger medical aid population is getting older and the birth rate is low. A baby boom may lead to an increase in youth and the young population. More children and more people.Learn more about the Western European countries that are giving monetary incentives.
brainly.com/question/20414870.
The city of Oak Ridge is considering the construction of a four kilometer (km) greenway walking trail. It will cost $1 comma 000 per km to build the trail and $340 per km per year to maintain it over its 22-year life. If the city's MARR is 11% per year, what is the equivalent uniform annual cost of this project? Assume the trail has no residual value at the end of 22 years.
Answer:
equivalent uniform annual cost = $1,849.25
Explanation:
Initial cost $4,000
then 22 cash outflows of $1,360
discount rate 11%
using a financial calculator, we determine the NPV = -$15,119.01
EAC = (NPV x r) / [1 - (1 + r)⁻ⁿ]
EAC = (-$15,119.01 x 11%) / [1 - (1 + 11%)⁻²²] = -$1,663.09 / 0.89933 = -$1,849.25
July 15 Declared a cash dividend payable to common stockholders of $163,000.
Aug. 15 Date of record is August 15 for the cash dividend declared on July 15.
Aug. 31 Paid the dividend declared on July 15.
Required:
Prepare journal entries to record the above transactions for Corporation.
Answer:
look up the anwser lol ....
App Holdings is expected to pay dividends of $1.50 every six months for the next three years. If the current price of App Holdings stock is $22.60, and App Holdings' equity cost of capital is 18%, what price would you expect App Holdings' stock to sell for at the end of three years
Answer:
The answer is $34.36
Explanation:
FV = PV x (1 + R x ((1 + r))^T = $22.6 x (1 + {($1.5 / $22.60) x [1 + (18% / 2)]}^6 = $34.36
Suppose you run a lawn mowing business. You charge $15 per lawn, you can mow five lawns in an eight hour day, and you work five days a week. You currently have more people asking you to mow their lawns than you can satisfy so you are considering hiring someone to help. Your other option is to rent a riding lawn mower that will enable you to mow seven lawns each day. Your friend Jim, a good worker, will work for $8 per hour and will be able to mow five lawns in an eight hour day also. If you rent a riding mower, it will cost you $100 per week plus $25 for gas and oil.
Required:
What is your best option? Explain why you believe this is your best choice.
Answer:
Option 2
Explanation:
Option 1 If we hire someone to help
Revenue = $15/lawn x 5 lawns per day
Revenue = $75 x 7 days = $525
Total cost = Rate per hour x No. of lawns per day x No, of hours worked
Total cost = $8 x 5 x $8
Total cost = $320 x 7days = 2,240
Profit/Loss = $525- $2,240
Profit/loss = $1,715 loss
Option 2 If we rent a riding mower
Revenue = 7 lawns per day x $15/lawn x 7 days
Revenue = $735
Cost = $100 + $25 for gas and oi
Cost = $125
Profit/loss = $610
The best option would be Option 2 because Firstly it is very much low in cost and provides us a great revenue secondly, it also increases our work efficiency.
On Jan 15th, Mr. White discovered that the net income for the previous year was understated by $60,000. Mr. Black tells Mr. White that this net income of $60,000 should be shared in the proportion of their current capital balances. (Mr. White = 150,000/$250,000 = 60% = $36,000; Mr. Black = $100,000/$250,000 = 40% = $24,000). But Mr. White feels that the additional income should be shared in the ratio of 2:1 ($60,000 x 2/3 = $40,000 Mr. White; $60,000 x 1/3 = $20,000 Mr. Black). Who is correct? Why?
Answer:
Mr. Black is correct. There is a basis established by their current capital balances. Mr. White's ratio of 2 : 1 has not discernible basis, unless that has been their profit sharing ratio.
Explanation:
In the absence of any contrary agreement, partners in a partnership business always share their net income based on their capital contributions. Sometimes, this may not be strictly followed, especially with changes effected over the years, it becomes necessary to adopt home-grown solutions. One of such is the current capital balances, instead of the original capital contributions. This approach takes care of changes and value contributions over a number of years that the business has been in operation, which the current capital accounts will always show.
From 1991 to 2000, the U.S. economy had an annual inflation rate of around 2.76%. The historical annual nominal risk-free rate for this same period was around 5.71%. Using the approximate nominal interest rate equation and the true nominal interest rate equation, compute the real interest rate for that decade. What is the estimated real interest rate using the approximate nominal interest rate equation for that decade?
Answer:
2.95% and 2.87%
Explanation:
The computation of the approximate real rate and the estimated real interest rate is shown below:
The Approximate real rate is
= Historic annual nominal risk free rate - Annual inflation rate
= 5.71% - 2.76%
= 2.95%
And, the estimated real interest rate is
= (1 + historical annual nominal risk free rate) ÷ (1 + annual inflation rate) - 1
= (1 + 0.0571) ÷ (1 + 0.0276) - 1
= 2.87%
We simply applied the above formulas so that each one could be determined
Suppose that you take $50 in currency out of your pocket and deposit it in your checking account. If the required reserve ratio is 8%, what is the largest amount (in dollars) by which the money supply can increase as a result of your action?
Answer:
The largest amount (in dollars) by which the money supply can increase as a result of the action is $625.
Explanation:
This is an example of money multiplier.
Money multiplier refers to the maximum amount of money that commercial bank can create or generate with each dollar of reserves.
Reserves or required reserves refer to the amount of money or portion of deposit that the central bank such as the Federal Reserve requires banks to hold and not lend.
In order to determine the largest amount (in dollars) by which the money supply can increase as a result of $50 deposit, money multiplier is used to multiply the $50 deposit.
The formula for the money multiplier is given as follows:
Money multiplier = 1/r
Where;
r = required reserve ratio = 8%, or 0.08.
Therefore, we have:
Money multiplier = 1 / 0.08 = 12.50
Largest amount of increase = Amount of deposit * Money multiplier = $50 * 12.50 = $625.
Therefore, the largest amount (in dollars) by which the money supply can increase as a result of the action is $625.
On April 29, Welllington Co. paid $1,760 to repair the transmission on one of its delivery vans. In addition, Welllington paid $52 to install a GPS system in its van.
Journalize the entries for the transmission and GPS system expenditures. Refer to the Chart of Accounts for exact wording of account titles.
CHART OF ACCOUNTSGarcia Associates Co.General Ledger
ASSETS
110 Cash
111 Petty Cash
112 Accounts Receivable
114 Interest Receivable
115 Notes Receivable
116 Merchandise Inventory
117 Supplies
119 Prepaid Insurance
120 Land
123 Delivery Van
124 Accumulated Depreciation-Delivery Van
125 Equipment
126 Accumulated Depreciation-Equipment
130 Mineral Rights
131 Accumulated Depletion
132 Goodwill
133 Patents
LIABILITIES
210 Accounts Payable
211 Salaries Payable
213 Sales Tax Payable
214 Interest Payable
215 Notes Payable
EQUITY
310 Owner, Capital
311 Owner, Drawing
312 Income Summary
REVENUE
410 Sales
610 Interest Revenue
620 Gain on Sale of Delivery Van
621 Gain on Sale of Equipment
EXPENSES
510 Cost of Merchandise Sold
520 Salaries Expense
521 Advertising Expense
522 Depreciation Expense-Delivery Van
523 Delivery Expense
524 Repairs and Maintenance Expense
529 Selling Expenses
531 Rent Expense
532 Depreciation Expense-Equipment
533 Depletion Expense
534 Amortization Expense-Patents
535 Insurance Expense
536 Supplies Expense
539 Miscellaneous Expense
710 Interest Expense
720 Loss on Sale of Delivery Van
721 Loss on Sale of Equipment
Answer:
April 29,
DR Accumulated Depreciation - Delivery Van $1,760
CR Cash $1,760
(To record repair of van)
April 29,
DR Delivery Van $52
CR Cash $52
(To record installation of GPS system in Van)
Explanation:
The transmission being faulty in the Van is part of the depreciation of the van and so when it is fixed, it reduces the depreciation of the van. The amount needs to be debited to the Accumulated Depreciation Account to signal that it is a reduction.
Installing a new GPS in a Van is an additional benefit to the van that will last for a period of more than a year hence it should be capitalised and added to the cost of the Delivery Van.
Kiley Corporation had these transactions during 2017.
Kiley Corporation had these transactions during 2017.Analyze the transactions and indicate whether each transaction is an operating activity, investing activity, financing activity, or noncash investing and financing activity.
A) Purchased a machine for $30,000, giving a long-term note in exchange.
B) Issued $50,000 par value common stock for cash.
C) Issued $200,000 par value common stock upon conversion of bonds having a face value of $200,000.
D) Declared and paid a cash dividend of $13,000.
E) Sold a long-term investment with a cost of $15,000 for $15,000 cash.
F) Collected $16,000 from sale of goods.
G) Paid $18,000 to suppliers.
Answer:
Operating Activities in the Cashflow statement refer to transactions involving the day to day running of the business in relation to the core business of the company such as revenue.
Investing Activities refer to capital transactions such as the purchase or disposal of fixed assets. It also includes the purchase or sale of securities belonging to other companies.
Financing Activities refer to the raising of money for the business and hence include Equity ( and dividends) and long term debt.
Non-cash investing and financing activity are Investing or Financing activities that were done without using cash but rather are exchanged.
A) Purchased a machine for $30,000, giving a long-term note in exchange. - Non-cash Investing and Financing activity
B) Issued $50,000 par value common stock for cash. - Financing Activities
C) Issued $200,000 par value common stock upon conversion of bonds having a face value of $200,000. - Non-cash Investing and Financing activity
D) Declared and paid a cash dividend of $13,000. - Financing Activities
E) Sold a long-term investment with a cost of $15,000 for $15,000 cash. - Investing Activities
F) Collected $16,000 from sale of goods. - Operating Activities
G) Paid $18,000 to suppliers. - Operating Activities
2. [5 pts] Consider the following events: Scientists reveal that eating oranges decreases the risk of diabetes, and at the same time, farmers use a new fertilizer that makes orange trees produce more oranges. Illustrate and explain what effect these changes have on the equilibrium price and quantity of oranges.
Answer:
there would be a rise in equilibrium quantity and an indeterminate effect on equilibrium price
Explanation:
as a result of the scientists revelation, the demand for oranges would increase and so would the price.
as a result of the new fertilisers been used, the supply of oranges would rise and price would fall.
taking these two occurrences together, there would be a rise in equilibrium quantity and an indeterminate effect on equilibrium price
Suppose Sally borrows $1,000 from Harry for one year and agrees to pay a nominal interest rate of 8%. When she borrows the money, both she and Harry expect an inflation rate of 6%.
1. The expected real interest rate on the loan is_______%.
2. Suppose that when Sally pays back the loan after one year, the actual inflation rate turns out to be 4%. The actual real interest rate on the loan is______%.
3A. If the inflation rate turned out to be higher than expected, then_______.
3B. But if inflation turned out to be lower than expected, then_______.
Answer:
1. 1,89%
2. 3,85%
3A. A Lower real rate will be obtained, and Harry is in worse off position
3A. A Higher real rate will be obtained, and Harry is in better off position
Explanation:
Real Interest Rate is the Nominal Return that has been adjusted with the Inflation rate.
The effect of the inflation is to reduce the value of money over time.
If Inflation rate was 6%
Real Interest Rate = ( 1 + nominal return) / (1 + Inflation rate) - 1
= ( 1 + 0.08) / ( 1 + 0.06) - 1
= 0.0189 or 1,89%
If Inflation rate was 4%
Real Interest Rate = ( 1 + nominal return) / (1 + Inflation rate) - 1
= ( 1 + 0.08) / ( 1 + 0.04) - 1
= 0.0385 or 3,85%
For a stock to be in equilibrium, that is, for there to be no long-term pressure for its price to depart from its current level, then a.the expected future return must be less than the most recent past realized return. b.the past realized return must be equal to the expected return during the same period. c.the expected future returns must be equal to the required return. d.the required return must equal the realized return in all periods. e.the expected return must be equal to both the required future return and the past realized return.
Answer:
c.the expected future returns must be equal to the required return.
Explanation:
When the stock is at equilibrium than the intrinsic value of the stock is equivalent to the market price of the stock that depicts that the expected returns which held in the future should be equivalent to the required return
Therefore the option c is correct
And, the other options that are mentioned in the question are incorrect
For a stock to be in equilibrium, the expected future returns must be equal to the required return.
The correct answer to this question is answer option c. At the equilibrium position there is a balance between the expected returns and the required returns.
At this point the intrinsic value is the same thing as the market value. Telling us that the rate the investor is expecting is the same as the actual required rate of return.
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A monopolist has four distinct groups of customers. Group A has an elasticity of demand of 0.2, B has an elasticity of demand of 0.8, C has an elasticity of demand of 1.0, and D has an elasticity of demand of 2.0. The group paying the highest price for the product will be
Answer: Group A
Explanation:
Price Elasticity of demand refers to the sensitivity of quantity demanded given a change in price. In other words, how much will quantity demanded change if price changes. Higher elastcities mean that when prices change, their quantity demanded changes more. For instance, an elasticity of demand of 2 means that when prices rise by 2%, demand will decrease by 4%.
The group that will be paying the most therefore will have to be the group that is least sensitive to paying that high price. That would be Group A. As they are not very sensitive to price changes with an elasticity of 0.2, the Monopoly can increase their price to a higher point than others knowing that they won't demand less goods.
A proposed project has fixed costs of $47,000 per year. The operating cash flow at 11,000 units is $69,000. a. Ignoring the effect of taxes, what is the degree of operating leverage
Answer: 1.68
Explanation:
From the question, we are informed that a proposed project has fixed costs of $47,000 per year and that the operating cash flow at 11,000 units is $69,000.
Ignoring the effect of taxes, the degree of operating leverage will be:
= 1 + ($47,000/$69,000)
= 1 + 0.68
= 1.68
A dry cleaner uses exponential smoothing to forecast equipment usage. The August forecast was 88% and the actual was 89.6%. Use a smoothing constant of 0.1.
A. Prepare a forecast for September.
B. Assuming actual September usuage of 92 %, prepare a forecast for October usage
Answer:
1. 88.16%
2. 88.54%
Explanation:
a. Prepare a forecast for September
Smoothing constant (a) is 0.1
Forecast for August (Ft) is 88%
Actual usage for August (At) is 89.6%
Forecast for September(Ft +1) will therefore be;
Using the formulae
= Ft+a (At-Ft)
= 88% + 0.1(89.6% - 88%)
= 88% + 0.16%
= 88.16%
b. Assuming actual September usage of 92% , prepare a forecast for October usage.
Since we have the following,
Smoothing constant(a) 0.1
Then forecast for September(Ft) is 88.16%
Also, actual usage for September (At) is 92%
Therefore, forecast for October (Ft + 1) will be,
Using the formula
= Ft+a(At - Ft)
= 88.16% + 0.1(92% - 88.16%)
= 88.16% + 0.384%
= 88.54%