Answer:
Beck Inc. and Bryant Inc.
Beck Inc. Bryant Inc.
a. Operating leverage 0.4 0.1
b. Increase in income $19,710 (27%) $35,100 (18%)
c. The difference in the INCREASE of income from operations is due to the difference in the operating leverages. Beck Inc.'s HIGHER operating leverage means that its fixed costs are a HIGHER percentage of contribution margin than are Bryant Inc.'s.
Explanation:
a) Data and Calculations:
Beck Inc. Bryant Inc.
Sales $219,400 $585,000
Variable costs 88,000 351,000
Contribution margin $131,400 $234,000
Fixed costs 58,400 39,000
Income from operations $73,000 $195,000
Total costs $146,400 $390,000
Operating leverage 1.8 1.2
Operating leverage = Contribution Margin/Income from operations
Increase in Sales by 15%
Beck Inc. Bryant Inc.
Sales $252,310 $672,750
Variable costs 101,200 403,650
Contribution margin $151,110 $269,100
Fixed costs 58,400 39,000
Income from operations $92,710 $230,100
Increase in income $19,710 (27%) $35,100 18%
Darby Company, operating at full capacity, sold 163,500 units at a price of $87 per unit during the current year. Its income statement is as follows:
Sales $14,224,500
Cost of goods sold 5,046,000
Gross profit $9,178,500
Expenses:
Selling expenses $2,523,000
Administrative expenses 1,508,000
Total expenses 4,031,000
Income from operations $5,147,500
The division of costs between variable and fixed is as follows:
Variable Fixed
Cost of goods sold 60% 40%
Selling expenses 50% 50%
Administrative expenses 30% 70%
Management is considering a plant expansion program for the following year that will permit an increase of $1,131,000 in yearly sales. The expansion will increase fixed costs by $150,800, but will not affect the relationship between sales and variable costs.
Required:
Determine the total variable costs and the total fixed costs for the current year.
Answer:
Variable costs in current year:
= Variable Cost of goods sold + Variable Selling expense + Variable Admin expenses
= (5,046,000 * 60%) + (2,523,000 * 50%) + (1,508,000 * 30%)
= 3,027,600 + 1,261,500 + 452,400
= $4,741,500
Fixed costs:
= (Total cost of goods sold + Total selling expenses + Total admin expenses) - Variable expenses
= (5,046,000 + 2,523,000 + 1,508,000) - 4,741,500
= $4,335,500
If there are 360 million people living in the U.S, but 1 million died of health issues leaving 289 million eligible workers, what is the unemployment rate if 170 million are in the labor force and 7 million are actively seeking work?
Answer: 4.12%
Explanation:
Unemployment rate only includes people who are actively looking for work and no discouraged workers or those who have retired:
Unemployment rate = Number of unemployed looking for work / Labor force
= 7,000,000 / 170,000,000
= 4.12%
1 if we want to fill the post, we'll have to........ ........ a qualified technician
2 our agent .... $500 .....the fire-damaged merchandise
3 the whole company is going to.....the south american order
4 the management and workers....each other...the strike.
5. all reports need to be carefully written and above all.........facts
6 the managing director was very satisfied; he approve of my recommendations.
account for advertise for apply to backlog of bid for blame for bring up benefit from
Answer:
1. hire
2. charges
3. get
4. support
5. mentioned
6. all
Explanation:
The company wants to hire a qualified technician for the vacant post. The management and workers both support the strike for common purpose. The reports need to be carefully written and all mentioned facts should be reported correctly.
Inc. has just now paid a dividend of $2.50 per share (Div0); its dividends are expected to grow at a constant rate of 4 percent per year forever. If the required rate of return on the stock is 14 percent, what is the current value of the stock, after paying the dividend?
a. $26
b. $25
c. $17.86
d. $21.33
Answer: a. $26
Explanation:
Given the details in the question, the value of the stock can be calculated by the Gordon Growth Model:
= Next dividend / (Required return - growth rate)
= (Current dividend * growth rate) / (Required return - growth rate)
= (2.50 * (1 + 4%)) / (14% - 4%)
= 2.625 / 10%
= $26.25
= $26
MC Qu. 97 The standard materials cost to produce... The standard materials cost to produce 1 unit of Product R is 7 pounds of material at a standard price of $47 per pound. In manufacturing 6,000 units, 41,000 pounds of material were used at a cost of $48 per pound. What is the total direct materials cost variance
Answer:
total direct materials cost variance is $6,000 Favourable
Explanation:
first we get here Standard cost to manufacture
Standard cost to manufacture 6,000 units is = 7 × $47 × 6,000
Standard cost = $1,974,000
and
now we get here Actual cost to manufacturing
Actual cost to manufacturing 6,000 units is = 41,000 × $48
Actual cost = $1,968,000
and
now we get here Direct material cost variance that is express as
Direct material cost variance = Standard cost - Actual cost ..........1
put here value
Direct material cost variance = $1,974,000 - $1,968,000
Direct material cost variance = $6,000 Favourable
The following monthly data are available for Bonita Industries. which produces only one product: Selling price per unit, $42; Unit variable expenses, $14; Total fixed expenses, $42000; Actual sales for the month of June, 5000 units. How much is the margin of safety for the company for June
Answer:
70%
Explanation:
Margin of safety is the amount of sales a company makes in excess of the breakeven point
Margin of safety = (actual sales - break-even sales) / actual sales
Breakeven quantity are the number of units produced and sold at which net income is zero
Breakeven quantity = fixed cost / price – variable cost per unit /
$42000 / (42 -14) = 1500
(5000 - 1500) / 5000 = 70%
Sheridan Industries reported actual sales of $2,125,000 and fixed costs of $562,275. The contribution margin ratio is 30%. Compute the margin of safety in dollars and the margin of safety ratio. (Round margin of safety ratio to 1 decimal place, e.g. 52.7.)
Answer:
Margin of safety $250,750
Margin of safety ratio 11.8%
Explanation:
Computation for the margin of safety in dollars and the margin of safety ratio
First step is calculate the Break even point in dollars
Break even point in dollars = Fixed costs / Contribution margin ratio
Break even point in dollars=$562,275/0.30
Break even point in dollars = $1,874,250
Now let determine the the margin of safety in dollars and the margin of safety ratio
Margin of safety = Actual Sales - Break even sales
Margin of safety= $2,125,000 -$1,874,250
Margin of safety=$250,750
Margin of safety ratio= Margin of safety/Actual Sales
Margin of safety ratio = $250,750/$2,125,000
Margin of safety ratio = 0.118*100
Margin of safety ratio = 11.8%
Thereforethe margin of safety in dollars and the margin of safety ratio will be:
Margin of safety $250,750
Margin of safety ratio 11.8%
Suppose a mutual fund qualifies as having moderate risk if the standard deviation of its monthly rate of return is less than 5%. A mutual-fund rating agency randomly selects 24 months and determines the rate of return for a certain fund. The standard deviation of the rate of return is computed to be 4.54%. Is there sufficient evidence to conclude that the fund has moderate risk at the α=0.05 level of significance? A normal probability plot indicates that the monthly rates of return are normally distributed. What are the correct hypotheses for this test? The null hypothesis is H0
Answer:
H0 : σ = 5
H1 : σ < 5
there is no sufficient evidence to conclude that fund has moderate risk.
Explanation:
The hypothesis :
H0 : σ = 5
H1 : σ < 5
The test statistic using the Chisquare variance test :
χ² = (n-1)*s²/σ²
The sample size, s = 4.54
The sample size, n = 24
α = 0.05
Test statistic ;
χ² = [(24 - 1) * 4.54²] / 5²
χ² = (23 * 20.6116) / 25
χ² = 18.962
The Pvalue :
df = n - 1 = 24 - 1 = 23
Pvalue(0.05, 23) = 0.7034
Since Pvalue > α ; we fail to reject the Null ;
Hence, there is no sufficient evidence to conclude that fund has moderate risk.
Variable Overhead Spending and Efficiency Variances, Columnar and Formula Approaches Rath Company provided the following information:
Standard variable overhead rate (SVOR) per direct labor hour $3.75
Actual variable overhead costs $222,816
Actual direct labor hours worked (AH) 57,200
Actual production in units 15,000
Standard hours (SH) allowed for actual units produced 60,000
Required:
Using the columnar approach, calculate the variable overhead spending and efficiency variances.
Answer and Explanation:
The computation of the variable overhead spending and efficiency variances is given below:
Actual VOH AH ×SVOR SH × SVOR
222816 57200 × 3.75 = 214500 60000 × 3.75 = 225000
8316 10500
Hence, 8316 is unfavorable
And, 10,500 should be favorable
A company buys equipment for $48,000, expects to use it for ten years, and then sell it for $6,000. Using the straight-line method, the company should report annual depreciation for the equipment of: A. $4,200. B. $8,400. C. $4,800. D. $9,600.
Answer:
A $4,200
Explanation:
Given the following information, a company buys equipment for $48,000 expects to use it for ten years, and then sell it for $6,000
We need to use the formula below
Annual depreciation = (Original cost - Salvage value) / Estimated life(years)
Annual depreciation = ($48,000 - $6,000) / 10
Annual depreciation = $4,200
Which of the following types of mortgages would be most advantageous to have on your house if you expected the annual rate of inflation would be higher than most people thought?
a. reverse annuity mortgage
b. interest-only mortgage
c. adjustable-rate mortgage
d. fixed-rate mortgage
Answer:
d. fixed-rate mortgage
Explanation:
Inflation can be defined as the persistent general rise in the price of goods and services in an economy at a specific period of time.
Generally, inflation usually causes the value of money to fall and as a result, it imposes more cost on an economy.
On a related note, when the level of inflation is low in a particular country; their current account balance would be high. However, when the level of inflation is high; it results in low growth and as such increases the home country's current account balance, other things being equal (ceteris paribus).
Hence, if you anticipate a higher annual rate of inflation than most people thought, the fixed-rate mortgage would be most advantageous to have on your house because the interest is fixed or constant over the life of the mortgage loan.
A fixed-rate mortgage can be defined as an installment or fully amortizing mortgage loan that has a fixed (constant) interest rate that doesn't change throughout the entire duration of the loan.
This ultimately implies that, an equal amount of money is paid as principal and interest throughout the life of the mortgage loan.
The straight-line depreciation method: A. reports an equal amount of depreciation expense each year. B. can be used only by small companies. C. reports a higher amount of depreciation expense in the early years of an asset's use. D. reports more depreciation expense in a year when an asset is heavily used and less in a year when the asset is hardly used at all.
Answer:
A
Explanation:
Depreciation is a method used in expensing the cost of an asset
Straight line depreciation expense = (Cost of asset - Salvage value) / useful life
The straight line depreciation method reports an equal amount of depreciation expense each year.
An example of the straight line depreciation method
cost of asset = 10,000
salvage value = 0
useful life = 5
straight line depreciation = (10,000 - 0) / 5 = 2000
depreciation expense each year would be 2000
A consol is a bond that: a. Pays a fixed annual coupon amount, and when originally issued, is set to mature in 30 years. b. Pays a fixed annual coupon amount, and when originally issued, is set to mature in 50 years. c. Does not pay an annual co
Complete Question:
A consol is a bond that:
a. Pays a fixed annual coupon amount, and when originally issued, is set to mature in 30 years.
b. Pays a fixed annual coupon amount, and when originally issued, is set to mature in 50 years.
c. Does not pay an annual coupon (i.e., the annual coupon payment is $0) but when it matures pays out the par value of the bond.
d. Does not pay an annual coupon (i.e., the annual coupon payment is $0) and never matures.
e. Pays a fixed annual coupon amount forever.
Answer:
A consol is a bond that:
e. Pays a fixed annual coupon amount forever.
Explanation:
This debt instrument issued by the government does not have any scheduled date for the return of principal, but it pays perpetual interest payments without any maturity date. It is a perpetual annuity. The government determines when to repay the principal if it so chooses. This implies that the holders continue to receive annual interests.
Labor data for making one gallon of finished product in Bing Company are as follows. (1) Price—hourly wage rate $16.70, payroll taxes $0.60, and fringe benefits $1.40. (2) Quantity—actual production time 1.60 hours, rest periods and cleanup 0.30 hours, and setup and downtime 0.20 hours. Compute the following. (Round answers to 2 decimal places, e.g. 1.25.)
(a) Standard direct labor rate per hour. $ ______
(b) Standard direct labor hours per gallon. hours
(c) Standard labor cost per gallon. $______
Answer:
a. Standard direct labor rate per hour = Hourly wage rate + Payroll taxes + Fringe benefits
Standard direct labor rate per hour = $16.70 + $0.60 + $1.40
Standard direct labor rate per hour = $18.70
b. Standard direct labor hours per gallon = Actual production time + Rest periods and cleanup + Setup and downtime
Standard direct labor hours per gallon = 1.60 hours + 0.30 hours + 0.20 hours
Standard direct labor hours per gallon = 2.1 hours
c. Standard labor cost per gallon = Standard direct hours per gallon * Standard direct labor rate per hour
Standard labor cost per gallon = 2.1 hours * $18.70
Standard labor cost per gallon = $39.27
Jeffrey Dean, a Master's Degree candidate at North State Central University, was awarded a $15,000 scholarship from North State Central in the current year. During the current year, he paid the following expenses: Tuition $12,000 Books 1,000 Fees 500 Room and Board 1,500 In addition, he received $6,000 for teaching two undergraduate accounting courses. What amount must be included in Dean's gross income
Answer: $7500
Explanation:
It should be noted that the gross income exclusion towards a scholarship will consist of the education related expense and the tuition only.
In this case, the income that was earned which is $6000 and the room and board expense of $1500 will be added which makes $7500. Therefore, the amount that must be included in Dean's gross income is $7500.
Cheers Corporation purchased for $500,000 5,000 shares of Beer Corporation common stock (less than 5% of the outstanding Beer stock) at the beginning of the current year. It used $400,000 of borrowed money and $100,000 of its own cash to make this purchase. Cheers paid $50,000 of interest on the debt this year. Cheers received a $40,000 cash dividend on the Beer stock on September 1 of the current year. Cheers has $5 million of taxable income before any dividends-received deduction. a. What amount can Cheers deduct for the interest paid on the loan
Answer:
Cheers Corporation
The amount that Cheers can deduct for the interest paid on the loan is:
= $50,000.
Explanation:
a) Data:
Investment in Beer Corporation = $500,000
Number of Beer shares purchased = 5,000
Percentage shareholding in Beer Corporation < 5%
Amount borrowed for the investment = $400,000
Own cash used for the purchase = $100,000
Interest paid on the debt for this year = $50,000 = 12.5%
Cash dividend received for the year = $40,000
Cheers taxable income before dividends = $5 million
The amount of interest deductible = $50,000
b) Since the interest was made for the purpose of the investment in Beers Corporation, the whole amount of interest expense for the year is deductible.
Denny works for Engineers, P.A. While working on an Engineers project, Denny is injured. Under state workers' compensation laws, he will be compensated only if the injury was:________.
a. incidental
b. material
c. accidental
d. intentional
Answer:
c. Accidental
Explanation:
Since in the given situation it is mentioned that denny worked for enginners and at the time of working on an engineer project denny is injured so as per the state worker compensation loan he would be compensated only when the injury is to be considered as an accidental as the compensation is only to be provided when there is an accidental injuries
Therefore the option c is correct
of $3.00 per unit. The variable cost to manufacture is $2.00 per unit. The monthly fixed costs are $8000. Its current sales are 29,000 units per month. If the company wants to increase its operating income by 20%, how many additional units must it sell
Answer: 33,200 units
Explanation:
Current operating income = Sales - Variable costs - fixed costs
= (29,000 * 3) - (29,000 * 2) - 8,000
= $21,000
An increase of 20% would be:
= 21,000 * 1.20
= $25,200
The number of units that must be sold is:
= (Fixed costs + Required profit) / Contribution margin
Contribution margin = Selling price - Variable cost
= 3 - 2
= $1
Number of units to be sold is:
= (8,000 + 25,200) / 1
= 33,200 units
When real GDP grows more slowly than potential GDP, labor productivity falls. the unemployment rate rises. nominal GDP rises. the unemployment rate falls.
Answer:
the unemployment rate rises.
Explanation:
Gross domestic product is the total sum of final goods and services produced in an economy within a given period which is usually a year
GDP calculated using the expenditure approach = Consumption spending by households + Investment spending by businesses + Government spending + Net export
Potential GDP is the GDP of an economy when labour and capital are employed at their sustainable rate.
Real GDP has been adjusted for inflation. It reflects the value of goods and services produced in an economy.
When the real GDP of an economy grows more slowly than potential GDP, it means that the resources in the economy, labour and capital are not employed at their sustainable rate. This is referred to as output gap. As a result of the output gap, the unemployment level rises
Penn Corp. is analyzing the possible acquisition of Teller Company. Both firms have no debt. Penn believes the acquisition will increase its total aftertax annual cash flow by $2 million indefinitely. The current market value of Teller is $54 million, and that of Penn is $84 million. The appropriate discount rate for the incremental cash flows is 10 percent. Penn is trying to decide whether it should offer 45 percent of its stock or $72 million in cash to Teller’s shareholders.
a. What is the cost of each alternative? (Do not round intermediate calculations. Enter your answers in dollars, not millions of dollars, i.e. 1,234,567.)
Cash cost $
Equity cost $
b. What is the NPV of each alternative? (Do not round intermediate calculations. Enter your answers in dollars, not millions of dollars, i.e. 1,234,567.)
NPV cash $
NPV stock $
c. Which alternative should Penn choose?
Stock
Cash
Answer:
Penn Corp.
a. Cost of each alternative:
Cash cost $72 million
Equity cost $37.8 million
b) The NPV of each alternative:
NPV cash -$52 million ($20 - $72)
NPV stock $20 million ($20 - $0)
c. The alternative to choose:
Stock.
There is no cash flow with the offer of 45% of Penn's stock to the shareholders of Teller. Actually, there is no NPV with stock offer, except the administrative costs of issuing the shares to Teller's shareholders.
Explanation:
a) Data and Calculations:
After-tax annual cash flow = $2 million
Discount rate for the incremental cash flows = 10%
Present value of the perpetuity = $20 million ($2 m/10%)
Current market value of Teller = $54 million
Current market value of Penn = $84 million
Possible settlement options:
45% of stock = $37.8 million ($84 million * 45%)
Cash $72 million
You own a portfolio that is invested 15 percent in Stock X, 35 percent in Stock Y, and 50 percent in Stock Z. The expected returns on these three stocks are 9 percent, 15 percent, and 12 percent, respectively. What is the expected return on the portfolio
Answer:
12.60%
Explanation:
The expected return on the portfolio is the sum of the weighted expected return of each stock in the portfolio
(0.15 x 9) + (0.35 x 15) + (0.5 x 12)
= 1.35 + 5.25 + 6
= 12.6%
Bonita Industries uses flexible budgets. At normal capacity of 21000 units, budgeted manufacturing overhead is $168000 variable and $360000 fixed. If Bonita had actual overhead costs of $546000 for 26000 units produced, what is the difference between actual and budgeted costs
Answer:
$22,000 Favorable
Explanation:
The computation of the difference between actual and budgeted cost is given below:
Budgeted Variable Manufacturing Overhead Per Unit is
= $168,000 ÷ 21,000 units
= $8
The Fixed Overhead = $360,000
Now
For 26,000 Units, total Overhead Should be:
Variable = 26,000 × 8 = $208,000
Fixed = $360,000
Total = $568,000
And,
Actual Overhead Cost = $546,000
So,
Difference between Actual and Budgeted Cost is
= $568,000 - $546,000
= $22,000 Favorable
A standard cost is: Group of answer choices The actual cost of a unit of production. A budget for the production of one unit of a product or service. Useful in calculating equivalent units. The average cost within the industry. The cost from prior years.
Answer:
A budget for the production of one unit of a product or service.
Explanation:
A standard cost is an expected cost where the company normally created at the starting of the year for the prices that are paid and the amount that are applied. It is an expected amount that should be paid for material and labor cost
So it is a budget where the production of one unit with respect to the product or service could be done
Storrer Co. identifies the following activities that pertain to manufacturing overhead, for each activity, identify an appropriate cost driver.
Activity Cost Driver
Materials handling Storrer Co. identifies the following activities th Number of Purchase OrdersMachine Hours UsedNumber of SetupsSquare Footage OccupiedNumber of RequisitionsDirect Labor HoursNumber of InspectionsNumber of Parts or AssembliesNumber of Employees
Machine setups Storrer Co. identifies the following activities th Number of Purchase OrdersNumber of EmployeesNumber of SetupsNumber of InspectionsDirect Labor HoursNumber of Parts or AssembliesSquare Footage OccupiedNumber of RequisitionsMachine Hours Used
Factory machine maintenance Storrer Co. identifies the following activities th Direct Labor HoursNumber of InspectionsNumber of EmployeesNumber of RequisitionsNumber of SetupsNumber of Purchase OrdersNumber of Parts or AssembliesSquare Footage OccupiedMachine Hours Used
Factory supervision Storrer Co. identifies the following activities th Machine Hours UsedNumber of InspectionsNumber of EmployeesNumber of Parts or AssembliesNumber of Purchase OrdersNumber of RequisitionsSquare Footage OccupiedNumber of SetupsDirect Labor Hours
Quality control Storrer Co. identifies the following activities th Number of EmployeesDirect Labor HoursNumber of InspectionsSquare Footage OccupiedNumber of RequisitionsNumber of Purchase OrdersNumber of SetupsNumber of Parts or AssembliesMachine Hours Used
Answer:
Activity
1. Material Handling
2. Machine Setups
3. Factory Machine Maintenance
4. Factory Supervision
5. Quality Control
Cost Driver
1. Number of Requisitions
2. Number of Setups
3. Machine Hours Used
4. Number of Employees
5. Number of Inspections
Explanation:
The following are the activities with their cost drivers:
Activity
1. Material Handling
2. Machine Setups
3. Factory Machine Maintenance
4. Factory Supervision
5. Quality Control
Cost Driver
1. Number of Requisitions
2. Number of Setups
3. Machine Hours Used
4. Number of Employees
5. Number of Inspections
Hart Corporation owns machinery with a book value of $600,000. It is estimated that the machinery will generate future cash flows of $570,000. The machinery has a fair value of $420,000. Hart should recognize a loss on impairment of
Answer: $180,000
Explanation:
An asset is said to be impaired when the future cashflows that it will bring in are less than the book value and when the fair value of the asset is also less than the book value.
Impairment loss = Book value of asset - Fair value
= 600,000 - 420,000
= $180,000
Klein Company issues a four-year note in exchange for a license agreement with fair value of $100,000. The contract requires payment of $27,956 at the beginning of each of the four years. The approximate effective interest rate associated with the notes payable is:_____.
a. 10%.
b. 8%.
c. 6%.
d. 7%.
Answer:
b. 8%.
Explanation:
The effective interest rate can be determined using the rate function in excel as shown below:
=rate(nper,pmt,-pv,fv,type)
nper=period of license=4 years
pmt=27956
pv=-100000(the initial value of the license)
fv=0
type=1(1 for beginning payments, 0 for end of the period payments)
=rate(4,27956,-100000,0,1)
rate=8.00%
How would you need to shift the supply and demand curves in a market to result in a situation where equilibrium quantity increases while the equilibrium price change is indeterminate?
a. Supply must increase while demand decreases.
b. Either supply or demand must increase.
c. Both supply and demand must increase.
Answer:
C
Explanation:
An increase in supply would lead to a rightward shift of the supply curve. As a result price decreases and quantity increases.
An increase in demand leads to a rightward shift of the demand curve. As a result, equilibrium price and quantity increases.
Taking these two effects together, there is an increase in equilibrium quantity and an indeterminate change in equilibrium price
A foreign company has offered to buy 85 units for a reduced sales price of $350 per unit. The marketing manager says the sale will not affect the company's regular sales. The sales manager says that this sale will require variable selling and administrative costs. The production manager reports that it would require an additional $30,000 of fixed manufacturing costs to accommodate the specifications of the buyer. If Belfry accepts the deal, how will this impact operating income? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.)
Answer:
Option b is correct
Explanation:
The computation of the impact in the operating income is given below:
Sale price per unit 350
Less: variable cost per unit -94.49
Contribution margin per unit 255.51
multiplied by units 85
Total contribution margin 21718
Less fixed cost -$30,000
Increase or decrease in operating income $8,282
The variable cost should be
Manufacturing 900,000
Add: selling & admin 300,000
Total 1,200,000
Divided by no of units 127
Variable cost per unit 94.49
Marconi Co. has the following information available for the current year:
Net Sales (all on credit) $1,125,000
Bad Debt Expense 90,000
Accounts Receivable, Beginning of Year 180,000
Accounts Receivable, End of Year 82,500
Allowance For Doubtful Accounts, Beginning of Year 57,000
Allowance For Doubtful Accounts, End of Year 77,000
Required:
What was the amount of write-offs during the year?
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World-Tour Co. has just now paid a dividend of $2.83 per share (Div0); its dividends are expected to grow at a constant rate of 6 percent per year forever. If the required rate of return on the stock is 16 percent, what is the current value of the stock, after paying the dividend
Answer:
the current value of the stock is $30
Explanation:
The computation of the current value of the stock is given below:
Price of stock today is
= Dividend per share × (1 + growth rate) ÷ (required rate of return - growth rate)
= $2.83 × (1 + 0.06) ÷ (0.16 - 0.06)
= $2.9998 ÷ 0.10
= $29.9980
= $30
Hence, the current value of the stock is $30
