Answer:
The required rate of return on the stock is 8.087%
Explanation:
The constant growth model of DDM is used to calculate the price of a stock whose dividends are expected to grow at a constant rate forever. The DDM values a stock based on the present value of the expected future dividends from the stock. The price of the stock under this model can be calculated as,
P0 = D0 * (1+g) / (r - g)
Where,
P0 is price of the stock todayD0 * (1+g) is the dividend expected from the stock for the next periodr is the required rate of returng is the constant growth rate in dividendsTo calculate the r or required rate of return, we first need to determine the dividend that was paid last year. Then we will apply the constant growth rate to that dividend to calculate the dividend today or D0. We will them input the value of stock price, the current dividend and the dividend growth rate in the formula above to calculate the required rate of return.
Dividend per share - Last year
Dividend yield = Dividend per share / Price per share
0.035 = Dividend per share / 28
0.035 * 28 = Dividend per share
Dividend per share = $0.98
The dividend per share today (D0) is,
D0 = 0.98 * (1+0.05)
D0 = $1.029
35 = 1.029 * (1+0.05) / (r - 0.05)
35 * (r - 0.05) = 1.08045
35r - 1.75 = 1.08045
35r = 1.08045 + 1.75
r = 2.83045 / 35
r = 0.08087 or 8.087%
Explain how the analysis of nonprofit and governmental financial statements differs from analysis of traditional financial statements
Answer with Explanation:
The analysis includes the assessment of Non profit organization's efficiency both in fundraising and spending, economy of operations and the effectiveness of the operations. This can be explained with an example. For example if the non profit organization has an objective to increase the book reading habit because it believes that the people who read more are not violent personalities and in this way they can reduce the crime rate. So it has established number of libraries in different communities. Now we will look at at what cost it has acquired these libraries (Economy), how much people have visited these libraries (Efficiency) and whether the crime rate in the community has sufficiently fallen or not (Effectiveness). So this helps in understanding whether the objective was met or not.
However when we analyze the financial statement of profit making organizations then we use many profit and efficiency ratios to assess the performance of the organization. These ratios can also be helpful if the NGO is in business as well. But most of the NGOs rely on grants and these grants are subjective to their previous performance.
The NGOs are also required to publish reports according to the grant provider's enforced accounting principles, rules and guidelines. Just take the example of US-AID program that requires the Non profit organization to publish financial reports in specific format and enforces different Generally Acceptable Principles to be used in preparing these financial reports. So yes it is much more different in analyzing the financial statements of Non profit organization and profit making organization.
Martha did not like her job as a receptionist, so she quit and is looking for one that better suits her artistic talents. Ting Pei would like to work, but employers are not willing to hire him because he does not speak English. Martha is ______ unemployed and Ting Pei is ______ unemployed.
Answer:
frictionally; structurally
Explanation:
Frictional unemployment is a type of unemployment which occurs when a person is unemployed between the period between which she leaves her job and finds another one.
Structural unemployment is a type of unemployment which occurs due to the difference in the skills of the workers available in the economy and the skills which are required by the employers.
The skill required here is the ability to speak English and Pei doesn't possess this skill.
Which of the following statements regarding multidomestic and global competition is false?
A) In global competition, rivals vie for worldwide market leadership and the leading competitors compete head-to-head in the markets of many different countries.
B) In globally competitive industries, a company's competitive position in one country both affects and is affected by its position in other countries.
C) One of the features of multidomestic competition is there is greater cross-country variation in market conditions and the nature of the competitive contest among rivals than tends to be the case in globally competitive markets.
D) With multidomestic competition, the competitive contest is localized, with rivals battling for national market leadership; moreover, winning in one country market does not necessarily signal that a company has the ability to fare well in the markets of other countries.
E) In global competition, the size of a firm's worldwide competitive advantage (or disadvantage) equals the sum of the competitive advantages (or disadvantages) it has in each country market where it competes.
Answer:
B
Explanation:
The statement regarding multidomestic and global competition which is false is in globally competitive industries a company's competitive position in one country affects and is affected by its position in other countries. The correct option is b.
What is a global competition in industries?Global competition is the services or products provided by competing companies that serve international customers. We can think about how we can have a pie-eating contest or a race. These are examples of competition on a local scale where people are competing against one another for one common goal, the best in their core competency.
Core competency is what a company does best. Global competition has allowed companies to buy and sell their services internationally, which opens the door to increased profits and flattens the playing field in business. Successful leaders recognize the need to adapt to the ever-rapidly changing ways to do business in the global environment.
These leaders seek to build competitive advantages around the core competencies of the organization, while also reducing costs to conduct their business.
Learn more about global, here:
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Kelley Company reports $960,000 of net income for 2015, and declares $120,000 of cash dividends on its preferred stock, for 2015. At the end of 2015, the company had 400,000 weighted-average shares of common stock. What amount of net income is available to common stockholders for 2015? What is the company's basic EPS for 2015?
Answer:
1. $840,000
2. 2.1
Explanation:
1. Net income available to shareholders
Net income. $960,000
Less : Preferred stock $120,000
Net income available. $840,000
to common stockholders
2. Basic earnings per share for 2015
Earnings per share = Net income available to common stockholders / weighted average shares of common stock
= $840,000 / $400,000
= 2.1
An investment project has annual cash inflows of $4,200, $5,300, $6,100, and $7,400, and a discount rate of 14 percent. If the initial cost is $7,000, the discounted payback period for these cash flows is ________ years. If the initial cost is $10,000, the discounted payback period for these cash flows is_______years. If the initial cost is $13,000, the discounted payback period for these cash flows is_______years. (Round your answers to 2 decimal places. (e.g., 32.16))
Answer:
An investment project has annual cash inflows of $4,200, $5,300, $6,100, and $7,400, and a discount rate of 14 percent. If the initial cost is $7,000, the discounted payback period for these cash flows is ___2_____ years. If the initial cost is $10,000, the discounted payback period for these cash flows is___3____years. If the initial cost is $13,000, the discounted payback period for these cash flows is__4_____years. (Round your answers to 2 decimal places. (e.g., 32.16))
Explanation:
a) Data and Calculations:
Annual cash inflows of
Cash Inflow Discount Factor PV Running Total
Year 1 $4,200 0.877 $3,683.40 $3,683.40
Year 2 $5,300 0.769 4,075.70 7,759.10
Year 3 $6,100 0.675 4,117.50 11,876.60
Year 4 $7,400 0.592 4,380.80 16,257.40
b) An investment project's discounted payback period is the number of years it takes for an investment to recover its costs. It is the period when the project's discounted cash inflows equals the project's discounted cash outflows. It is another version of the payback period that uses discounted cash flows.
If the risk-free interest rate is 8% per year, what must be the price of a 3-month put option on P.U.T.T. stock at an exercise price of $90
Answer:
(a) The price of a 3-month put option on P.U.T.T. stock at an exercise price of $90 is $5.28.
(b) The stock price will have to move in either direction by $12.24 for you to make a profit on your initial investment when time value of money is NOT taken into consideration. However, Therefore, the stock price will have to move in either direction by $12.52 for you to make a profit on your initial investment when time value of money is taken into consideration.
Explanation:
Note: This question is not complete. The complete question is therefore provided before answering the question as follows:
The explanations to the answers are now given as follows:
a. If the risk-free interest rate is 8% per year, what must be the price of a 3-month put option on P.U.T.T. stock at an exercise price of $90? (The stock pays no dividends.)
This can be computed using put-call parity theorem (PCPT) which is employed when we know the price of either put or call option as well as the current stock price, exercise price, interest rate, and the option period.
PCPT formula is given as follows:
VS + P – C = E / (1 + r)^t ……………………………….. (1)
Where, for this question;
VS = Current price of the stock = $90
P = Price of put option = ?
C = Price of call option = $7
E = Exercise price = $90
r = risk-free interest rate = 8%, or 0.08
t = period of option = 3 months / 12 months = 0.25
Substituting the values into equation (1) and solve P, we have:
$90 + P - $7 = $90 / (1 + 0.08)^0.25
$83 + P = $90 / 1.08^0.25
$83 + P = $90 / 1.01942654690827
$83 + P = $88.2849286914817
P = $88.2849286914817 - $83
P = $5.28
Therefore, the price of a 3-month put option on P.U.T.T. stock at an exercise price of $90 is $5.28.
b. A straddle would be a simple options strategy to exploit your conviction about the stock price’s future movements. How far would it have to move in either direction for you to make a profit on your initial investment?
To determine this, we have to compute the total cost of the straddle. Since a straddle option refers to the purchase of both a put and a call on the stock, the total cost of the straddle can be calculated as follows:
Total cost of the straddle = Price of the put option + Price of the call option ………….. (2)
Since Price of put option is $5.24 as computed in part a and the price of a call option is $7 as already given in the question, we substitute these into equation (2) and have:
Total cost of the straddle = $5.28 + $7 = $12.28
Therefore, the stock price will have to move in either direction by $12.24 for you to make a profit on your initial investment when time value of money is NOT taken into consideration.
To account for the time value of money, we compute the future value (FV) of the Total cost of the straddle as follows:
FV of the Total cost of the straddle = Total cost of the straddle / (1 + r)^t ………………….. (3)
Where;
Total cost of the straddle = $12.28
r = risk-free interest rate = 8%, or 0.08
t = time of the put option in a year = 3 months / 12 months = 0.25
Substituting the values into equation (3), we have:
PV of the Total cost of the straddle = $12.28 * (1 + 0.08)^0.25
PV of the Total cost of the straddle = $12.28 * 1.08^0.25
PV of the Total cost of the straddle = $12.28 *1.01942654690827
PV of the Total cost of the straddle = $12.52
Therefore, the stock price will have to move in either direction by $12.52 for you to make a profit on your initial investment when time value of money is taken into consideration.
Odeletta Corporation is considering an investment of in a land development project. The investment will yield cash inflows of per year for five years. The company uses a discount rate of 9%. What is the net present value of the investment?
Answer: $337,800
Explanation:
Cashflow is constant so is an annuity.
The Present value of the Investment;
= Present Value of Cashflow - Investment cost
= (220,000 * Present value interest factor of an annuity, 5 years, 9% ) - 518,000
= (220,000 * 3.89) - 518,000
= 855,800 - 518,000
= $337,800
Which of the following statements regarding Government National Mortgage Association (GNMA) securities are true EXCEPT:________. A) investors own an undivided interest in a pool of mortgages B) GNMAs are considered to be the riskiest of the agency issues C) the minimum initial investment is $25,000 D) investors receive a monthly check representing both interest and a return of principal
Answer: B) GNMAs are considered to be the riskiest of the agency issues
Explanation:
The Government National Mortgage Association (GNMA) or Ginnie Mae as they are popularly known, are a Federal agency that guarantee the payment of interest and principal on securities by lenders that are approved by the Agency.
As a result, these securities are backed, like Treasury Bills, by the full faith and credit of the United States Government which means that they are the safest of Agency issues.
Compute the annual dollar changes and percent changes for each of the following accounts. (Round percent change to one decimal place.)
2015 2014
Short-term investments $ 380,168 $ 239,377
Accounts receivable 102,276 105,903
Notes payable 0 93,973
Answer the table below.
Horizontal Analysis-Calculation of Percent Change
Choose Numerator: / Choose Denominator
Percent Change = /
2015 2014 Dollar Change Percent Change
Short-term investments $ 378,398 $237,313 %
Accounts receivable 100,704 104,650 %
Notes payable 0 91,913 %
Answer and Explanation:
The computation of annual dollar changes and percent changes for each of the following accounts is shown below:-
Particulars 2015 2014 Changes in dollar Percent change
a b c = (a - b) d = c ÷ b
Short term
investments $380,168 $239,377 $140,790 58.82%
Accounts
receivable $102,276 $105,903 -$3,627 -3.42%
Notes
payable 0 $93,973 -$93,973 -100%
feels energized coming to work and loves her office environment. She feels comfortable asking fellow workers for help, and they are more than happy to oblige. The team even has dinners together every Thursday after work. What aspect of the company is Kristin happy with
Answer:
a. Organization culture
Explanation:
Organization culture refers to the working culture in an organization in which the employees behavior, rules, regulations, procedures, policies, plans are applied
Other than this, it also involves incentive schemes, flexible time, cab service, medical insurance, and other perks
Since in the given situation, she feels energized and lover her office environment also they have team dinners on every Thursday after work
So this represents the organization culture
write a short position paper on what we should do to get all our employees to begave more safely at work
Explanation:
Safety at work is essential for an organization to operate safely. This concept can be translated as a set of actions that companies take to reduce any damage, such as accidents at work and occupational diseases, which put the integrity of the worker at risk.
Therefore, it is necessary that the organizational architecture is well thought out so that there is no risk to the worker while performing his job functions. For this, it is essential that the organization follows the safety regulations provided for in the current legislation, such as the presence of fire extinguishers, clear communication about areas and substances at risk, medical assistance, safety equipment for the worker, provide training on safety at work, constant monitoring of the company's security conditions and effectiveness.
Total quality management is a tool that actively helps to prevent risks inherent in the work environment, encouraging continuous improvement that will improve all organizational processes, to ensure total safety and integrity for the employee.
In an econometric model, the dependent variable is Group of answer choices unrelated to the independent variables. the behavior one is trying to explain. unchanging across subsamples. also known as the residual. always the wage.
Answer:
the behavior one is trying to explain
Explanation:
The dependent variable is the variable that is being explained by the independent variable.
For example
Di = x + x1 + x2 + x3
Di = demand for ice cream = dependent variable
where x1 = price
x2 = taste
x3 = income
Boss Enterprises currently sells its products for per unit. Management is contemplating a % increase in the selling price for the next year. Variable costs are currently % of sales revenue and are not expected to change next year. Fixed expenses are per year. What is the breakeven point in units at the current selling price?
Answer: 5,000 units
Explanation:
Break-even points in units is calculated by;
= Fixed Costs / Contribution Margin per unit
Contribution Margin
= Sales - Variable Costs
= $40 - ( 40 * 40%)
= 40 - 16
= $24 per unit
Breakeven point
= 120,000/24
= 5,000 units
Other things held constant, which of the following alternatives would increase a company's cash flow for the current year?
a. Increase the number of years over which fixed assets are depreciated for tax purposes.
b. Pay down the accounts payables.
c. Reduce the days' sales outstanding (DSO) without affecting sales or operating costs.
d. Pay workers more frequently to decrease the accrued wages balance.
e. Reduce the inventory turnover ratio without affecting sales or operating costs.
Answer:
The answer is C
Explanation:
Cash flow improves if days' sales outstanding is reduced without affecting sales or operating cost. This tells us that the number of days it takes to receive goods sold on credit is reduced. Cash flow will be immensely improved because customers are not defaulting and they are paying as soon as possible. The correct answer is option C.
Option B is wrong because paying payables down will not allow the money paid out to be used for other purposes. The firm is not utilizing the period of payable days.
Option D is wrong because paying workers more frequently reduces cash.
Green Toys is a regional manufacturer of baby toys produced from plastic derived from organic and nontoxic sources. Management budgeted onehalf hour of direct labor per toy at a standard rate of per hour. The most current production run produced toys and used labor hours at a total cost of . What is the direct labor rate variance for this production run?
Answer:
$11,400 unfavorable
Explanation:
some information was missing:
standard labor hours = 0.5 hours per toy
standard labor rate = $19
total production = 1,650 toys
total labor cost = $47,500
actual labor hours = 1,900
actual labor rate = $47,500 / 1,900 hours = $25
direct labor rate variance = (AR – SR) x AH = ($25 - $19) x 1,900 = $6 x 1,900 = $11,400 unfavorable (since actual labor costs were higher than standard labor costs)
In 1993, Novak Company completed the construction of a building at a cost of $2,500,000 and first occupied it in January 1994. It was estimated that the building will have a useful life of 40 years and a salvage value of $76,000 at the end of that time.
Early in 2004, an addition to the building was constructed at a cost of $625,000. At that time, it was estimated that the remaining life of the building would be, as originally estimated, an additional 30 years, and that the addition would have a life of 30 years and a salvage value of $25,000.
In 2022, it is determined that the probable life of the building and addition will extend to the end of 2053, or 20 years beyond the original estimate.
Required:
a. Using the straight-line method, compute the annual depreciation that would have been charged from 1994 through 2003.
b. Compute the annual depreciation that would have been charged from 2004 through 2022.
Answer:
A. $60,600
B. $80,600
Explanation:
Depreciation expense for the year can be calculated as follows
Requirement A
Cost =2,500,000
Less: Salvage value =76,000
Useful life = 40 years
Annual depreciation from 1994 through 2003
Depreciation expense = (cost - salvage value ) / useful life
Depreciation expense = (2,500,000 - 76,000) / 40
Depreciation expense = $60,600 per year
Requirement B
Cost = 2,500,000
Add: Addition = 625,000
Total cost = 3,125,000
Less: Accumulated depreciation = 606,000
Book value (3,125,000 - 606,000) =2519000
Less: Salvage value( 76000+25000 ) = 101,000
Useful life = 30 years
Annual depreciation = (cost - salvage value ) / useful life
Annual depreciation = (2519000 - 101000) / 30
Annual depreciation = $80,600
Which of the following policy actions do the authors propose to offset the negative consequences of rising income inequality? Choose one or more:________. A. modestly lower average tax rates B. modestly higher average tax rates C. a relatively modest boost in the historical growth rate of government redistributive transfers D. a relatively modest drop in the historical growth rate of government redistributive transfers
Answer: B. modestly higher average tax rates.
C. a relatively modest boost in the historical growth rate of government redistributive transfers.
Explanation:
The policy actions that authors propose to offset the negative consequences of rising income inequality are modestly higher average tax rates and the relatively modest boost in the historical growth rate of government redistributive transfers.
Which of the following could describe a point that lies on an input contract curve? a. An allocation of good X and good Y between two firms that makes the firms' isoquant curves tangent in an Edgeworth box b. An allocation of labor (L) and capital (K) between two firms that makes the firms' isocost curves tangent in an Edgeworth box c. An allocation of labor (L) and capital (K) between two firms that makes the firms' isoquant curves tangent in an Edgeworth box d. An allocation of good X and good Y between two firms that makes the firms' isocost curves tangent in an Edgeworth box
Answer:
An allocation of labor (L) and capital (K) between two firms that makes the firms' isoquant curves tangent in an Edgeworth box ( C )
Explanation:
A contract curve is a curve on which the various final allocations of two goods or service between two people are represented and this could be mutually beneficial as well. hence the best description of a point that lies on an input contract curve is An allocation of labor (L) and capital (K) between two firms that makes the firms' isoquant curves tangent in an Edgeworth box
Marigold Corp. has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Marigold incurs $5735000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%. The break-even point in dollars is
Answer:
Break-even point (dollars)= $15,500,000
Explanation:
Giving the following information:
The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Marigold incurs $5735000 in fixed costs.
The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%
To calculate the break-even point in dollars, we need to use the following formula:
Break-even point (dollars)= Total fixed costs / Weighted average contribution margin ratio
Break-even point (dollars)= 5,735,000 / (0.3*0.65 + 0.5*0.35)
Break-even point (dollars)= $15,500,000
Which one of the following situations is most likely to occur today for a stock that went down in price yesterday?
A) The stock has no predictable price-change pattern.
B) The stock has a 30% chance of decreasing in price.
C) The stock will decrease in price.
D) The stock will increase in price.
Delegating greater authority to subordinate managers and employees A. creates a more horizontal or flatter organization structure with fewer management layers and usually acts to shorten organizational response times. B. usually slows down decision-making because so many more people are involved and it takes longer to reach a consensus on what to do and when to do it. C. can be a de-motivating factor because it requires people to take responsibility for their decisions and actions without being financially compensated. D. is very, very risky and should be avoided at all costs. E. enhances greater cross-unit coordination and aids the capture of strategic fit benefits across unrelated businesses.
Answer:
A. creates a more horizontal or flatter organization structure with fewer management layers and usually acts to shorten organizational response times.
Explanation:
A horizontal organizational structure can be defined as the most flexible, where there is the greatest delegation of authority to manager and subordinate employees, that is, this is a less hierarchical and less bureaucratic structure, as employees have greater autonomy to make decisions.
The main advantages of the horizontal organizational structure are the formation of multifunctional teams, where a greater conception of innovative ideas can emerge to solve problems and achieve the company's goals and objectives, in addition to reducing organizational response time and employee motivation, which they feel more engaged at work due to the less bureaucracy of processes.
A project with an initial investment of $438,500 will generate equal annual cash flows over its 9-year life. The project has a required return of 8 percent. What is the minimum annual cash flow required to accept the project
Answer:
$70 194.95
Explanation:
The computation of the minimal annual cash flow needed for accepting the project is shown below:
As we know that
Present value of annuity = Annuity × [1 - (1 + interest rate)^ - time period] ÷ rate
$438,500 = Annuity × [1 - (1.08)^ - 9] ÷ 0.08
$438,500 = Annuity × 6.246887911
So,
Annuity = $438,500 ÷ 6.246887911
= $70 194.95
Given the following 2023 information for the Pinto Company: Increase in Wages Payable $ 400 Operating Expenses $5,000 Total Cash paid for expenses $4,100 12/31/23 Prepaid Insurance $1,200 Operating Expenses and cash paid for expenses consisted of amounts for insurance and wages only. The 1/1/23 balance of Prepaid Insurance was:
Answer: $1,800
Explanation:
Operating expenses comprise of only insurance and wages.
The total operating expenses were $5,000.
Out of that $5,000, $400 was for an increase in wages, $4,000 was paid off.
The rest is therefore for insurance.
= 5,000 - 400 - 4,000
= $600
If $600 is the insurance payment during the year then on 1/1/23, the balance was the current balance plus the payment;
= 1,200 + 600
= $1,800
"An unaffiliated investor wishes to sell a large amount of "144" shares. This person can do so, without being subject to the Rule 144 volume limitations, after holding the securities for:"
Answer: 6 months
Explanation:
The Securities and Exchange Commission (SEC) of the United States uses Rule 144 to control and regulate sales transactions involving restricted, unregistered, and control securities.
When an unaffiliated investor to a company whose stock falls under Rule 144 wishes to sell them, they are indeed not bound by volume limitations if they sell after the holding period requirement of 6 months has been met.
This means that from the day the unaffiliated investor purchases and fully pays for the shares, they cannot sell them until 6 months from that very day have elapsed.
On April 1, Larken Corp. pays $36,000 for 3 years of rent. The transaction is appropriately recorded as prepaid rent. The adjusting entry on December 31, of the same year, will require a (Select all that apply.)
Answer:
DR Prepaid rent
CR Rent expense
Explanation:
Based on the information given about Larken Corp in which we were been told that Larken Corp pays the rent amount of $36,000 for conservatively 3 years.
Hence since the transaction that occured is recorded as prepaid rent, this means that the adjusting entry on December 31 will be:
DR Prepaid rent
CR Rent expense
Bailey Hill Co. uses the indirect method to determine its net cash flows from operating activities. During the course of the year, the company's Accounts Receivable increased by $28,000 and its Accounts Payable decreased by $14,000. If these are the only two adjustments required to convert net income to net cash provided by operating activities, the combined effect will be a(n):
Answer: d. subtraction of $42,000.
Explanation:
An increase in Current Assets such as Accounts Receivable is considered to be a cash outflow because it means that more assets were not converted to actual cash.
A decrease in Current Liabilities is a cash outflow as well as it means that the company used cash to pay off these liabilities thereby reducing the cash balance.
Combined Effect is therefore = -28,000 - 14,000
= -$42,000
A contingent sale collapses because the buyer is unable to sell his own property. At this point, the parties should complete a:
Answer:
rescission agreement
Explanation:
A rescission agreement is a remedy in law that allows parties to cancel a contract.
Usually parties to a contract rescind if there is a misrepresentation, mistake, duress, or undue influence.
Mutual rescission is when there is an agreement between the two parties to cancel the contract before it's performance.
If a contingent sale fails because buyer is unable to meet his obligations bother parties can complete a rescission agreement.
Which of the following statements is true? A) Assets with lower levels of market risk will sell for higher prices. B) Assets with lower levels of market risk will have higher expected rates of return. C) Assets with higher levels of market risk will sell for higher prices. D) Assets with higher levels of market risk will have lower expected rates of return.
Answer:
C) Assets with higher levels of market risk will sell for higher prices.
Explanation:
The Capital Asset Pricing Model (CAPM) is a term that explains the connection between systematic risk and expected return for assets, specifically on stocks.
Thus, investors expect to be repaid for risk and the time value of money they put in. This is depicted with the formula = ERi = Rf + Bi (ERm - Rf)
Where ERi = expected return of investment
Ri = Risk-free rate
Bi = Beta of the investment
ERm - Rf = market risk premium
Hence, it is assumed that, Assets with higher levels of market risk will sell for higher prices.
Which of the following most closely approximates the conditions of monopolistic competition?
a. The market for Grade A sorghum (milo), which is characterized by many firms producing a homogeneous product.
b. The market for jumbo aircraft, where one major domestic firm competes with one major foreign firm.
c. A cable television service. where a licensed supplier competes with firms offering satelite service.
d. The restaurant industry, which is characterized by many firms producing differentiated products in an industry with free cntry and exit.
e. The tobacco market which is characterized by a few firms producing a differentiated product with difficult entry.
Answer:
d. The restaurant industry, which is characterized by many firms producing differentiated products in an industry with free entry and exit.
Explanation:
A monopolistic competition is when there are many firms selling differentiated products in an industry. A monopoly has characteristics of both a monopoly and a perfect competition. the demand curve is downward sloping. it sets the price for its goods and services. there are little to no barriers to entry or exit of firms into the industry
examples of monopolistic competition are restaurants.
a. The market for Grade A sorghum (milo), which is characterized by many firms producing a homogeneous product. this is an example of a pure competition
b. The market for jumbo aircraft, where one major domestic firm competes with one major foreign firm. This is an example of a duopoly
e. The tobacco market which is characterized by a few firms producing a differentiated product with difficult entry. this is an example of an oligopoly
The Sandhill Company issued $330,000 of 9% bonds on January 1, 2017. The bonds are due January 1, 2022, with interest payable each July 1 and January 1. The bonds were issued at 99. Prepare the journal entries for (a) January 1, (b) July 1, and (c) December 31. Assume The Sandhill Company records straight-line amortization semiannually.
Answer:
the journal entry to record the issuance:
January 1, 2017, bonds are issued at a discount
Dr Cash 326,700
Dr Discount on bonds payable 3,300
Cr Bonds payable 330,000
discount amortization per coupon payment = $3,300 / 10 payments = $330
the journal entry to record the first coupon payment:
July 1, 2017, first coupon payment
Dr Interest expense 15,180
Cr Cash 14,850
Cr Discount on bonds payable 330
the journal entry to record accrued interest:
December 31, 2017, accrued interest
Dr Interest expense 15,180
Cr Interest payable 14,850
Cr Discount on bonds payable 330