Answer:
$35 million
Explanation:
The computation of the total paid-in capital declined is shown below:
= Number of reacquired shares × per share price
= 5 million shares × $7
= $35 million
We simply multiplied the number of acquired shares with the price of each share so that the correct amount can come.
All other information which is given is not relevant. Hence, ignored it
Banco Industries expect sales to grow at a rapid rate over the next three years, but settle to anindustry growth rate of 5% in year 4. The spreadsheet above shows a simplified pro forma forBanco Industries. If Banco industries has a weighted average cost of capital of 11%, $50 millionin cash, $80 million in debt, and 18 million shares outstanding, which of the following is the bestestimate of Bancoʹs stock price at the start of year 1?A) $6.52B) $11.74C) $13.04D) $23.48
The best estimate of Banco's stock price at the start of year 1, taking into account future earnings, the weighted average cost of capital, debt, and cash, and dividing by the number of outstanding shares, would be approximately $1.29. Therefore, none of the given options (A, B, C, and D) are correct.
Explanation:In order to calculate the stock price at the start of year 1 for Banco Industries, you need to use the concept of the 'Present Discounted Value' of the earning expectations. The Present Discounted Value helps calculate the value of future earnings in today's dollars, taking into account the time value of money and the associated risk. In this scenario, Banco has projected earnings of $15 million present, $20 million in one year, $25 million in two years. First, we would discount the future earnings to reflect current prices. The formula is as follows:
Present Value = Future Value /
[tex](1 + r) ^t[/tex]Here, 'r' is the discount rate which is the company’s cost of capital. 't' is the number of periods until the future cash flow. The cost of capital (or WACC) for Banco is 11% or 0.11. So,
PV in Year 1 = $20 million /(1+0.11) = $18.018 million
PV in Year 2 = $25 million / ((1+0.11)²) = $20.256 million
Next, add up all the present values of future earnings ($15 million + $18.018 million + $20.256 million) to get the total value of the company from its earnings or its Equity Value. Equity Value = Total Value of the Company - Its outside liabilities + Its unused assets.
Equity Value = ($15 mill + $18.018 mill + $20.256 mill) - $80 mill (debt) + $50 mill (cash) = $23.274 million.
Finally, to get the stock price you would divide the Equity Value by the number of outstanding stocks: $23.274 million / 18 million shares = $1.293 per share.
So none of the available options A), B), C), D) are correct and the most accurate approximation in this case would be approximately $1.29.
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Bacchus, Inc. is a large, multinational corporation with various business units around the world. After a fire destroyed the corporation headquarters and largest manufacturing site, plans for which of the following would help Bacchus ensure a timely recovery?
(A) Backup power.
(B) Daily backup.
(C) Business continuity.
(D) Network security.
Answer:
The correct answer is (C)
Explanation:
Business coherence or continuity is an association's capacity to guarantee tasks and centre business capacities are not seriously affected by a disaster or spontaneous occurrence that takes basic frameworks disconnected. Business continuity arranging is the interdepartmental procedure regularly drove by data innovation, of actualising the strategies used to re-establish ordinary business in a set measure of time, characterise the measure of information misfortune worthy to the business, and impart basic data to authoritative partners during and following occurrences.
Suppose there is an increase in the wage and the demand for the consumption good falls, what can you say about the supply of labor? Group of answer choices
A. The supply of labor will definitely increase.
B. The supply of labor will definitely decrease.
C. Either A or B could be true depending upon the consumer’s preferences.
Answer:
A. The supply of labor will definitely increase.
Explanation:
If wages rise, there would be an increase in supply according to the law of supply. The law of supply says the higher the price, the higher the quantity supplied and the lower the price, the lower the quantity supplied.
If demand for consumer good decreases, the demand for Labour falls.
Wember Catering uses two measures of activity, jobs and meals, in the cost formulas in its budgets and performance reports. The cost formula for catering supplies is $450 per month plus $75 per job plus $10 per meal. A typical job involves serving a number of meals to guests at a corporate function or at a host's home. The company expected its activity in September to be 27 jobs and 146 meals, but the actual activity was 23 jobs and 143 meals. The actual cost for catering supplies in September was $3,435. The catering supplies in the planning budget for September would be closest to:
Answer:
$3,935
Explanation:
The computation of the catering supplies are shown below:
= Catering supplies + monthly cost for each job × number of jobs + monthly cost for per meal × number of meals
= $450 + $75 × 27 jobs + $10 × 146 meals
= $450 + $2,025 + $1,460
= $3,935
We simply added the catering supplies cost, meal cost, and the job cost so that the accurate value can come
All other information which is given is not relevant. Hence, ignored it
Fred is a new employee who has been assigned to your team. This is the first time Fred has worked in your country. Aware that he might have some difficulty adjusting, you want to help him get off to a good start. Which of the following would be MOST EFFECTIVE in helping Fred adjust to his new team and build his cultural competence? Select:
1 Ask Fred to run team meetings in order to get to know people more quickly.
2.Make sure Fred knows that your door is always open if he needs some advice or help of any kind.
3.Periodically check with Fred to make sure he is adjusting properly.
4.Teach Fred about how decisions are made and communicated, as well as how conflict is handled.
Answer:
4.Teach Fred about how decisions are made and communicated, as well as how conflict is handled.
Explanation:
Cultural differences are an important topic when it comes to adjusting to a new workplace. However, no matter how much the new employee knows about a specific culture, it is up to the manager or team leader to help him adjust.
The most effective way to help him is by teaching him how decisions are made and conflict is handled, in a straightforward manner. Since Fred is working in a team and not individually, it is essential for him to learn the basics of conflict management, as conflict handling varies immensely from country to country.
The same is applicable for decision making. He could not know the decision making practice in his new environment upfront. Some environments may encourage a more liberal way of making decisions, while some propose a strict protocol when it comes to making even the most trivial decisions.
Of course, checking him periodically and making sure he knows you're there for him are practices that can do only good. However, they are not critical for the issue.
Suppose a bank customer with €1,000,000 wishes to trade out of euro and into Japanese yen. The dollar-euro exchange rate is quoted as $1.60 = €1.00 and the dollar-yen exchange rate is quoted at $1.00 = ¥120. How many yen will the customer get?
Answer:
192,000,000 yen
Explanation:
Please see attachment
Dillon Corporation splits its common stock 2 for 1, when the market value is $40 per share. Prior to the split, Dillon had 50,000 shares of $10 par value common stock issued and outstanding. After the split, the par value of the stock A. is reduced to $2 per share B. is increased to $20 per share C. remains the same. D. is reduced to $5 per share
Answer:
D. is reduced to $5 per share
Explanation:
Please see attachment.
Which of the following is NOT an investment in human capital?
A) A computer science student takes a course on programming a laptop computer.
B) A student purchases a laptop computer.
C) A business student takes a seminar in using a laptop comput er.
D) A computer science student learns how to repair a laptop computer.
Answer:
c is if not I'm sorry but I'm pretty sure
A student who purchases a laptop computer is not an example of an investment in human capital.
Human capital entails human knowledge, skills, and health which are used to generate economic value and can be invested on throughout their lives.
The purpose of human capital investment is to improve human and make them productive so as to contribute to the nation and society.Taking a course on programming a laptop computer improves human skills.Student who takes a seminar using a laptop has learnt knowledge and skill and helps to equips him to generate economic value.Learning how to repair a computer is a skill. Such skills will create value for him by repairing others computer.In conclusion, when a student purchases a laptop computer, he does not invest in human capital because such computer might be used for gaming or homework which does not improve human skills.
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If other factors are held constant, what happens to a confidence interval if the sample variance increases?
A. The standard error increases and the width of the interval increases.
B. The range of t scores increases and the width of the interval increases.
C. The standard error decreases and the width of the interval decreases.
D. The range of t scores decreases and the width of the interval decreases.
Answer:
Someon
Explanation:
Know the answer
Lakeside Components wishes to purchase parts in one month for sale in the next. On June 1, the company has 11,000 parts in stock, although sales for June are estimated to total 11,000 parts. Total sales of parts are expected to be 12,000 in July and 15,000 in August.
Parts are purchased at a wholesale price of $20. The supplier has a financing arrangement by which Lakeside Components pays 60 percent of the purchase price in the month when the parts are delivered and 40 percent in the following month. Lakeside purchased 14,000 parts in May.
Required:
a. Estimate purchases (in units) for June and July.
b. Estimate the cash required to make purchases in June and July.
Answer:
Instructions are listed below.
Explanation:
Giving the following information:
On June 1, the company has 11,000 parts in stock, although sales for June are estimated to total 11,000 parts. Total sales of parts are expected to be 12,000 in July and 15,000 in August.
Parts are purchased at a wholesale price of $20. The supplier has a financing arrangement by which Lakeside Components pays 60 percent of the purchase price in the month when the parts are delivered and 40 percent in the following month.
1) Purchase in units:
June:
Sales in June= 11,000
Ending inventory= 12,000
Beginning inventory= (11,000)
Total= 12,000
July:
Sales in June= 12,000
Ending inventory= 15,000
Beginning inventory= (12,000)
Total= 15,000
2) Cash budget:
June:
Purchase in June= (12,000*20)*0.6= 144,000
From May= (14,000*20)*0.4= 112,000
Total= 256,000
July:
Purchase in July= (15,000*20*0.6)= 180,000
From June= (12,000*20*0.4)= 96,000
Total= 276,000
Blossom Company was organized on January 1. During the first year of operations, the following plant asset expenditures and receipts were recorded in random order.
Debit
1. Excavation costs for new building $13,100
2. Architect’s fees on building plans 32,100
3. Full payment to building contractor 640,100
4. Cost of real estate purchased as a plant site (land $255,100 and building $25,100) 280,200
5. Cost of parking lots and driveways 28,100
6. Accrued real estate taxes paid at time of purchase of real estate 2,180
7. Installation cost of fences around property 5,810
8. Cost of demolishing building to make land suitable for construction of new building 24,100
9. Real estate taxes paid for the current year on land 5,810 $1,031,500
Credit
10. Proceeds from salvage of demolished building $ 11,000
Analyze the transactions using the following table column headings. Enter the number of each transaction in the Item column, and enter the amounts in the appropriate columns. For amounts in the Other Accounts column, also indicate the account title.
Answer:
Building:
cost of bulding 25,100
write-off demolished building (25,100)
Balance: 0
Building under construction:
exacavation cost 13,100
architect's fees 32,100
contractor 640,100
Balance: 685,300
Land:
acquisition cost 255,100
property taxes paid at purchase 2,180
Balance: 257,280
Land improvements:
parking lot and driveways 28,100
fences 5,810
balance 33,910
period cost:
demolition expense 24,100
salvage from demolition (11,000)
property taxes expense 5810
loss at disposal (building) 25,100
balance: 44,010
Explanation:
For building and land we should follow the accounting procedure of include all the incurred or assumed cost to contruct and leave it ready to use.
As there is no indication that construction was completed we should assume the building is under construction.
As we demolish the old building we should write-off and recognize the loss and the demolition expense.
The property taxes after the purcahse are cost of the period.
Before the taxes were a necessary cost to acquire the land.
The salvage from the demolition decrease the expense are not considered revenue.
The given transactions are analyzed using table column headings to record the debit and credit amounts for each. Each transaction is appropriately categorized based on the account title and entered in the respective columns. The total debit amount is $1,031,500, with various expenditures on plant assets.
Explanation:To analyze the transactions, we can use the table column headings. In the Item column, enter the number of each transaction. Then, enter the amounts in the appropriate columns. For amounts in the Other Accounts column, indicate the account title. Here is the breakdown of each transaction:
Excavation costs for new building: Debit $13,100 in the Buildings column.Architect’s fees on building plans: Debit $32,100 in the Buildings column.Full payment to building contractor: Debit $640,100 in the Buildings column.Cost of real estate purchased as a plant site: Debit $280,200 in the Land column.Cost of parking lots and driveways: Debit $28,100 in the Buildings column.Accrued real estate taxes paid at time of purchase of real estate: Debit $2,180 in the Land column.Installation cost of fences around property: Debit $5,810 in the Buildings column.Cost of demolishing building to make land suitable for construction of new building: Debit $24,100 in the Buildings column.Real estate taxes paid for the current year on land: Debit $5,810 in the Land column.Proceeds from salvage of demolished building: Credit $11,000 in the Buildings column.Learn more about Analyzing plant asset transactions here:https://brainly.com/question/31699236
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The double-entry system requires that each transaction must be recorded a. in two sets of books. b. in a journal and in a ledger c. in at least two different accounts. d. first as a revenue and then as an expense. 11. An accountant has debited an asset account for $1,500 and credited a liability What can be done to complete the recording of the transaction? a. Credit another asset account for S700. b. Credit another liability account for $800. c. Dredit an equity accont for $700. d. Dredit an equity accont for $800. account for $700.
Answer:
Credit an equity account for $800
Explanation:
We assume that the accountant has debited an asset account for $1,500 and credited a liability account for $700 so we have to credit the equity account for $800 to balance the accounting equation
In every balance sheet, the accounting equation has used that means
Total assets = Total liabilities + Shareholder equity
In mathematically,
$1,500 = $700 + $800
$1,500 = $1,500
Balanced both sides of the balance sheet.
Wexpro, Inc., produces several products from processing 1 ton of clypton, a rare mineral. Material and processing costs total $60,000 per ton, one-fourth of which is allocated to product X15. Seven thousand units of product X15 are produced from each ton of clypton. The units can either be sold at the split-off point for $9 each, or processed further at a total cost of $9,500 and then sold for $12 each. Required:Should product X15 be processed further or sold at the split-off point?
Answer:
Processed further
Explanation:
For taking the decision, first we have to determine the increase or decrease cost which is shown below:
Sales revenue if processed further (7,000 units × $12 per unit) $84,000
Less: Sales revenue at the split-off point (7,000 units × $9 per unit) -$63,000
Increase in revenue $21,000
Less: total cost for processing further -$9,500
Financial advantage $11,500
Since the amount is comes in positive, so it would be processed further rather sold at the split-off point
Simpson Sign Company based in Frostbite Falls, Minnesota has a 6-month C$100,000 contract to complete sign work in Winnipeg, Manitoba, Canada. The current spot rate is $1.01/C$ and the forward rate is $1.02/C$. Under conditions of equilibrium, management would use ________ today when preparing operating budgets.A) $102,000B) $101,000C) $100,000D) none of the above
Answer:
A) $102,000
Explanation:
The computation of the amount used today for preparing the operating budget is shown below:
= Contract value × forward rate
= $100,000 × $1.02
= $102,000
For computing this, we consider the forward rate and the same is multiplied with the contract value so that the correct amount can come.
All other information which is given is not relevant. Hence, ignored it
North Company has other operating expenses of $360,000. There has been a decrease in prepaid expenses of $16,000 during the year, and accrued liabilities are $24,000 larger than in the prior period. Using the direct method of reporting cash flows from operating activities, what were North's cash payments for operating expenses?
Answer:$344,000 which is ($360,000-$16,000)
Explanation:
Cash flow from operating activities refers to cash inflow and outflow in ordinary course of business as it relates to sales, purchases, wages, salaries etc. The direct method of cash flow it's strictly concerned with actual cash inflow and outflow for the period. The decrease in prepaid expenses is deducted since it's an outflow, while the accrued liability is of no effect since it's not a cash movement.
North Company's cash payments for operating expenses, calculated using the direct method, are $400,000. This includes other operating expenses of $360,000, an adjustment for a decrease in prepaid expenses of $16,000, and an increase in accrued liabilities of $24,000.
Using the direct method of reporting cash flows from operating activities, we need to take into account North Company's reported other operating expenses, as well as changes in balances of prepaid expenses and accrued liabilities to calculate cash payments for operating expenses.
The operating expenses reported are $360,000. An important adjustment is the decrease in prepaid expenses of $16,000, which means that this amount was expensed and thus part of the cash payments for the year, and an increase in accrued liabilities of $24,000, representing expenses incurred but not yet paid. These increases in liabilities represent cash that was not expended this year but will be in the future.
Therefore, the calculation of cash payments for operating expenses is as follows:
Other operating expenses: $360,000
Plus: Decrease in prepaid expenses: $16,000
Plus: Increase in accrued liabilities: $24,000
This sums up to a total cash payment of $400,000 ($360,000 + $16,000 + $24,000) for North Company's operating expenses using the direct method.
The Graber Corporation’s common stock has a beta of 1.8. If the risk-free rate is 5.8 percent and the expected return on the market is 12 percent, what is the company’s cost of equity capital? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Answer:
16.96%
Explanation:
In this question, we apply the Capital Asset Pricing Model (CAPM) formula which is shown below
Expected rate of return = Risk-free rate of return + Beta × (Market rate of return - Risk-free rate of return)
= 5.8% + 1.8 × (12% - 5.8%)
= 5.8% + 1.8 × 6.2%
= 5.8% + 11.16%
= 16.96%
The (Market rate of return - Risk-free rate of return) is also called market risk premium
What does it mean to adopt a maturity matching approach to financing assets, including current assets? How would a more aggressive or a more conservative approach differ from the maturity matching approach, and how would each affect expected profits and risk? In general, is one approach better than the others? Use your industry for illustration.
Answer:
Check the following definitions
Explanation:
a. Maturity matching simply means that long term funds should be used to finance long term assets and short term funds should be used to finance short term assets.
That means, long terms funds will finance fixed assets and permanent working capital while short term funds will finance temporary working capital.
If permanent assets are financed with short term funds, then refinancing risk arises, i.e. borrower has to refinance the loan at its maturity date which is of a shorter period. On the other hand if long term funds are used to finance short term assets, then interest has to be paid for the longer period when funds are not even used.
b.
Aggressive approach :
Under the aggressive approach, the firm finances all temporary current assets and some of its permanent current assets with short-term sources of financing. This approach relies more heavily on short-term financing than the other approaches. This brings a little refinancing risk and decrease in profits as short term funds are costlier than long term funds.
Conservative approach:
Under the conservative approach, the firm finances long-term assets, all permanent current assets, and some temporary current assets with long-term sources of funds. This approach relies more heavily on long-term financing than the other approaches. This involves higher pay back period which involves more interest outflow.
c. Generally, all the approahes have their own advantages and disadvantages. The decision of chosing the approach depends on the circumstances of the entity as to requirement of funds, pay back period etc. But the maturity matching approach can be said to be better as it maintains balance between inflow and outflow of funds.
Final answer:
To adopt a maturity matching approach to financing assets means to align the maturity of the financing with the expected life span of the assets being financed. A more aggressive approach involves using short-term financing for long-term assets, while a more conservative approach involves using long-term financing. The choice between these approaches depends on the specific circumstances of the company and its industry.
Explanation:
To adopt a maturity matching approach to financing assets, including current assets, means to align the maturity (or repayment period) of the financing with the expected life span of the assets being financed. This approach ensures that the cash flows from the assets are matched with the cash flows from the financing. By using a maturity matching approach, a company can minimize the risk of having to refinance its assets before they generate sufficient cash flow to cover the cost of the financing.
A more aggressive approach to financing assets involves using short-term financing (such as bank loans or lines of credit) to finance long-term assets. This can result in lower interest costs in the short term, but it also exposes the company to the risk of being unable to refinance the assets when the short-term financing matures, especially if the company's cash flows are insufficient. On the other hand, a more conservative approach involves using long-term financing (such as issuing bonds) to finance long-term assets. This approach provides stability and reduces the risk of refinancing difficulties, but it can result in higher interest costs in the long term.
Choosing between a more aggressive or more conservative approach, or adopting a maturity matching approach, depends on the specific circumstances of the company and its industry. For example, in the airline industry, where long-term assets (such as aircraft) have a specific lifespan, it would be prudent to adopt a maturity matching approach to finance these assets. This would involve using long-term financing (such as lease agreements or bonds) to match the expected life of the assets. This approach reduces the risk of having to refinance the assets before they generate sufficient cash flow to cover the cost of the financing.
Benton Company's sales budget shows the following expected total sales: Month Sales January $ 25,000 February $ 30,000 March $ 35,000 April $ 40,000 The company expects 80% of its sales to be on account (credit sales). Credit sales are collected as follows: 25% in the month of sale, 72% in the month following the sale with the remainder being uncollectible and written off.
The total cash receipts during April would be:
Answer:
Total Cash inflows from sales = $36640
Explanation:
given data
Month Sales
January $25,000
February $30,000
March $35,000
April $40,000
to find out
The total cash receipts during April
solution
first we get here Cash sales of April month that is express as
Cash sales of April month = $40,000 × 30%
Cash sales of April month = $40,000 × 0.30
Cash sales of April month = $12000
and
now we get collection from credit sale of April that is
collection from credit sale = ( $40000× 70% ) × 25%
collection from credit sale = ( $40000× 0.70 ) × 0.25
collection from credit sale = $7000
and
Collection from Credit sales of March that is
Collection from Credit sales = ( $35000× 70% ) × 72%
Collection from Credit sales = ( $35000× 0.70 ) × 0.72
Collection from Credit sales = $17640
so
Total Cash inflows from sales will be
Total Cash inflows from sales = $12000 + $7000 + $17640
Total Cash inflows from sales = $36640
Oriole Company lost most of its inventory in a fire in December just before the year-end physical inventory was taken. The corporation’s books disclosed the following. Beginning inventory $173,200 Sales revenue $672,900 Purchases for the year 424,200 Sales returns 24,600 Purchase returns 28,000 Rate of gross profit on net sales 30 % Merchandise with a selling price of $21,000 remained undamaged after the fire. Damaged merchandise with an original selling price of $16,100 had a net realizable value of $5,700. Compute the amount of the loss as a result of the fire, assuming that the corporation had no insurance coverage.
Answer:$95,190
Explanation:. $
Opening stock. . 1 73,200
Add purchase less return
(424200-28,000). 396,200
------------
569400
Less cost of goods sold
Salers- return * 70/100
(672900-24600)*70/100=. (453,810)
-----------
Stock balance. 115,590
Less stock salvage
21000*70/100 (14,700)
Damaged realisable value ( 5700)
--------
Stock damaged by fire
95,190
Final answer:
The loss as a result of the fire is $168,857.14.
Explanation:
To compute the loss as a result of the fire, we need to calculate the cost of the damaged inventory and subtract it from the original inventory value.
The cost of the damaged inventory can be determined by multiplying the net realizable value ($5,700) by the ratio of the original selling price of the damaged merchandise to the original selling price of the undamaged merchandise ($16,100/$21,000).
This gives us a cost of $4,342.86 for the damaged inventory.
Subtracting this from the beginning inventory value of $173,200, we find that the loss as a result of the fire is $168,857.14.
Ace Construction Company contracts to build a retirement community on land owned by Smith. Jones, an adjoining landowner, expects the value of his land to increase greatly once the retirement community is built. Ace Construction Company then breaches the contract to build the retirement community. In this case:
A.Jones can recover against Smith because he was a party to the contract with the construction company
B. Jones cannot recover against the construction company as an incidental beneficiary of the company's contract with Smith.
C. A and B are both true.
D. None of the above is true.
Answer:
d.) Jones is an incidental beneficiary and has no right to sue for Ace Construction's breach of the contract.
Explanation:
Jones was not a direct party to the contract, in fact, any profit which he was supposed to receive was incidental in nature and thus he cannot sue Ace Construction's breach of the contract.
The following information pertains to Marsh Company for the current year: Average total assets, $400,000 Average common stockholders’ equity, $200,000 Sales, $120,000 Net income, $24,000 Dividends on common stock, $9,000 Dividends on preferred stock, $6,000 What is the company’s return on common stockholders’ equity for the current year
A. 7.5%.
B. 60%.
C. 9%.
D. 4.5%
E. 12%.
Answer:
Return on common stockholder equity = 9%
so correct option is C. 9%
Explanation:
given data
total assets = $400,000
common stockholders equity = $200,000
Sales = $120,000
Net income = $24,000
Dividends common stock = $9,000
Dividends preferred stock = $6,000
to find out
company’s return on common stockholders’ equity
solution
we get here Return on common stockholder equity is here as
Return on common stockholder equity = Net income - Preferred dividends ÷ common stockholder equity .......................1
put here value we get
Return on common stockholder equity = [tex]\frac{$24000 - $6000}{$200000}[/tex]
Return on common stockholder equity = 9%
so correct option is C. 9%
The S&P 500 index delivered a return of 25%, 15%, -35%, and -5% over four successive years.
What is the arithmetic average annual return for four years?
A) -5%
B) 0%
C) 5%
D) 3%
Answer:
arithmetic average annual return is 0
correct option is B) 0%
Explanation:
given data
return r1 = 25%
return r2 = 15%
return r3 = -35%
return r4 = -5%
to find out
What is the arithmetic average annual return for four years
solution
we know that arithmetic average annual return is express as
[tex]\bar{X} = \frac{\sum x}{N}[/tex] .........................1
here [tex]\bar{X}[/tex] is arithmetic mean and ∑x is sum of return and N is number of observation i.e 4
so put here value in equation 1 we get
[tex]\bar{X} = \frac{25+15-35-5}{4}[/tex]
[tex]\bar{X}[/tex] = 0
so arithmetic average annual return is 0
correct option is B) 0%
A stock can earn a return of 2%, 20%, or 8%. The stock’s distribution is known, and states that there is a 30% probability of the stock earning a return of 2%, a 36% probability of the stock earning a return of 20%, and a 34% probability of stock earning a return of 8%. What is the variance of the stock’s return?Select one: a. .0056 b. .0923 c. .0061 d. .078 e. .0748
Answer:
option (a) 0.0056
Explanation:
Data provided in the question:
Return that can be earned : 2% 20% 8%
Probability of returns : 30% 36% 34%
Now,
Average return, m = [tex]\frac{2\% + 20\% + 8\%}{3}[/tex] = 10%
Return (X) P(X) X - m ( X - m )² ( X - m )² × P(X)
2% 30% -8% = -0.08 0.0064 0.00192
20% 36% 10% = -0.10 0.01 0.0036
8% 34% -2% = -0.02 0.0004 0.000136
Thus,
Variance of the stock’s return = ∑ ( ( X - m )² × P(X) )
= 0.00192 + 0.0036 + 0.000136
= 0.005656 ≈ 0.0056
Hence,
The correct answer is option (a) 0.0056
Final answer:
The variance of the stock's return is found by calculating the expected return and then summing the squared deviations of each return from the expected return, multiplied by their respective probabilities. The right answer is option (b) .0923.
Explanation:
To calculate the variance of the stock's return, we need to first find the expected value (mean return) of the stock, and then use this to calculate the variance. The expected return is calculated as the sum of the products of each return and its associated probability:
Expected return (E) = (2% * 30%) + (20% * 36%) + (8% * 34%)Next, we calculate the variance by finding the squared deviation of each return from the expected return, multiplying by the probability of that return, and summing these values:
Variance = (30% * (2% - E)^2) + (36% * (20% - E)^2) + (34% * (8% - E)²)After calculating, we will see that the correct option from the provided list is (b) .0923, assuming there are no calculation errors.
You had your first child recently. You would like to set aside some funds so that your child will be able to attend the University of Texas as an undergraduate without taking on any student loans. Total costs of attendance for undergraduate students currently amount to $28,000 per year and are expected to continue to grow at a 2.5% growth rate per year. Assume that the four-year college expenses for the first year of college need to be paid exactly 18 years from today and that the subsequent costs need to be paid at an annual frequency 19, 20, and 21 years from today. You would like to make 18 equal annual payments starting today to your child’s college savings account to be able to cover the expected college costs. The savings are invested in risk-free Treasury securities that offer a return of 2%. How large are the equal annual contributions to the college savings account over the next 18 years?
Answer:
Equal annual contributions to the college savings account over the next 18 years is : $4,745.6
Explanation:
Suppose the time the child was born is the Beginning of Year 0 (Y0). So, 18 equal contributions need to be made at the beginning of each year from Y0 to Year 17. Denote these cash flow as Annuity 1 which equal: ( C/ 2%) x ( 1.02^18 -1) = 21.4123 x C with C is the equal annual contribution
The tuition fee starting from the beginning of Year 18 end at the Beginning of Year 21 is a growing annuity at 2.5% growth rate. The Value of this annuity ( Annuity 2) discounted to the Beginning of Year 17 calculated as followed:
(28,000 / (2% - 2.5% ) x ( 1 - [( 1+2.5%)/(1+2%)]^4 ) = $110,614
To save enough for college fee, The future value of Annuity 2 must equal the present value of Annuity 2 calculated above.
Thus, we have: 21.4123 x C = 110,614 <=> C = $4,745.6
"Lluvia Manufacturing and Paraguas Products both seek funding at the lowest possible cost. Lluvia would prefer the flexibility of floating rate borrowing, while Paraguas wants the security of fixed rate borrowing. Lluvia is the more credit-worthy company. With the better credit rating, Lluvia has lower borrowing costs in both types of borrowing. Assumptions Lluvia Paraguas Credit rating AAA BBB Prefers to borrow Floating Fixed Fixed-rate cost of borrowing 6.000% 12.000% Floating-rate cost of borrowing: LIBOR (current=4%) 4.000% 4.000% Spread 1.000% 4.000% Total floating-rate 5.000%
8.000%"However, it could borrow at LIBOR + 2.000% and swap for fixed rate debt. What should they do? (LIBOR is 5.500%)
Answer:
Paraguas should borrow at LIBOR + 2.000% and swap for fixed rate debt.
Lluvia should choose funding in floating rate
Explanation:
Paraguas wants the security of fixed rate borrowing; thus it should borrow at LIBOR + 2.000% and swap for fixed rate debt, in which Libor is 5.500%; their total cost at 7.5% is still lower than Fixed rate 12.0%
Lluvia prefer the flexibility of floating rate borrowing, and its rating is better; then it can enjoy lower cost of borrowing at 5%. However it may face the increase if LIBOR increase later; vice versa if LIBOR decrease, its cost of borrowing is able to reduce also.
"If the option will cost the investor an additional $10,000, should the investor purchase the option? Enter your answer in thousands dollars. For example, an answer of $200 thousands should be entered as 200,000."
Answer:
“Should” or “should not” depend on the cost rate of the option and the risk appetite of investors.
Explanation:
An option is a contract that allows investors to buy or sell instruments such as security, Exchanged Traded Fund or an index at a pre-determined price over a certain period of time.
If the option will cost the investor an additional $10,000 and it is the cost for an option of $10 million investment, then it cost only 0.1% additionally, but it can secure the position of this investment; then the investor should buy this option.
Vice versa, if the additional $10,000 is much more than expected profit, and even lower but significantly drop down the total profit of an investment; and the investor always wish to have a high profit regardless high risk; then he shouldn’t buy this option.
Final answer:
Whether an investor should purchase an option depends on potential ROI and factors such as strike price, market trends, and the stock's value. The decision must be based on a detailed analysis of the option's cost, expiration date, and market conditions, while considering the investor's risk tolerance.
Explanation:
Deciding whether an investor should purchase an option for an additional $10,000 requires evaluating the potential return on investment (ROI) and comparing it to the initial cost. To assess the value of an option, one must consider factors such as the strike price, the premium of the option, market trends, and potential changes in the stock's value. In the case of the Call Option example, where 100 Call Options to purchase Apple stock at $250 per share cost a total of $200, the value of these options could significantly increase if Apple's stock price rises above $250, providing a leveraged position compared to owning the stock outright. However, if the stock price does not rise above the strike price by the expiration date, the option could expire worthless, leading to a loss of the initial investment.
Given the complexities surrounding options trading, an investor should perform a thorough analysis that includes the option's cost, the expiration date, and market conditions. Furthermore, it is essential to consider one's risk tolerance and the potential impact on an investment portfolio before making such a financial decision.
what is the importance of timely leadership action and communication in shaping group culture?
Answer:
Timely leadership and communication are important in shaping group culture.
Explanation:
Communication is important in building a culture it helps leader and pioneers to build up a culture of trust and can without much of a stretch form relationship with workers and different business channels that encourage associations to develop. Timely leadership and communication are two important pillars, that can work together to start a culture that will help an organisation to grow. Interaction with employees, starting group conversations and meetings can help employees to gain confidence, that will lead to a health group culture within an organisation.
Proper segregation of functional responsibilities calls for separation of:
A. custody, execution, and reporting.
B. authorization, recording, and custody.
C. authorization, payment, and recording.
D. authorization, execution, and payment.
Answer:
C. authorization, payment, and recording.
Explanation:
This is on the principle of segregation of duties as a measure of internal controls. This principle requires that duties are properly separated to ensure that the risk of misstatement and misrepresentations due to fraud or error are mitigated.
For a good system of internal control for which the principle of segregation of duties is applied, one person should not be allowed to initiate, authorize, pay and record transactions. This is to ensure that errors or acts of fraud made by one party involved in the process is prevent, or detected by another and is corrected.
As such, the right option is C. authorization, payment, and recording.
Beverly Company has determined a standard variable overhead rate of $1.25 per direct labor hour and expects to incur 1 labor hour per unit produced. Last month, Beverly incurred 1,900 actual direct labor hours in the production of 2,000 units. The company has also determined that its actual variable overhead rate is $1.20 per direct labor hour. Calculate the variable overhead rate and efficiency variances also indicate if the variable are favorable or unfavorable the total amount of over- or underapplied variable overhead.
Answer:
(i) 95 (F)
(ii) 125 (F)
(iii) 220 (Overapplied)
Explanation:
Variable Overhead Rate Variance:
= Actual Hours × (Actual Rate - Standard Rate)
= 1,900 × ($1.20 - $1.25)
= 95 (F)
Variable Overhead Efficiency Variance:
= Standard Rate × (Actual Hours - Standard Hours)
= $1.25 × (1,900 - 1 × 2,000)
= 125 (F)
Over- or Underapplied Variable Overhead:
= Actual Overhead Incurred - Overhead Applied
= (1,900 × $1.20) - (2,000 × $1.25)
= 220 (Overapplied)
How would each of the following affect the U.S. money supply? Explain. 1. Banks decide to hold more excess reserves. (Excess reserves are reserves over and above what banks are legally required to hold against deposits.) 2. People withdraw cash from their bank accounts for Christmas shopping. 3. The Federal Reserve sells gold to the public. 4. The Federal Reserve reduces the interest rate it pays on deposits of depository institutions held at the Fed.
Answer:
1. This will reduce the U.S. money supply because more excess reserves to be hold which means that less amount of money lend to the public.
2. This will not affect U.S. money supply because savings account is also a part of money supply.
3. This will reduce the U.S. money supply because there is a flow of money from public to Fed.
4. This will increase the money supply because it will be less profitable for the depository institutions to deposit at the fed. So, they start lending to the public which increases the money supply in the U.S. economy.