Goodwill would not be considered as an appropriate security for a loan.
Goodwill refers to the intangible value associated with a business, such as its reputation, customer relationships, and brand recognition. While goodwill can have value, it is not considered an appropriate security for a loan in the traditional sense.
In lending, security typically refers to tangible assets that can be used as collateral to secure the loan. Real property (land and buildings), motor vehicles, and plant and equipment are all tangible assets that can be pledged as security for a loan. These assets have clear market value and can be easily evaluated and seized by the lender in case of default.
Goodwill, being an intangible asset, is not easily quantifiable and may not have a direct market value. It is subjective and can vary over time. As a result, it is not considered a reliable form of collateral for a loan.
Therefore, option c. Goodwill would not be considered an appropriate security for a loan.
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While Mary Corens was a student at the University of Tennessee, she borrowed $12000 in student loans at an annual interest rate of 9%. If Mary repays $1500 per year, how long, to the nearest year, will it take her to repay the loan
If Mary Corens borrowed $12000 in student loans at an annual interest rate of 9% and repays $1500 per year it will take 8 years to repay the loan.
Given that Mary Corens borrowed $12,000 at an annual interest rate of 9% and is repaying $1,500 per year. The formula to find the number of years to repay a loan amount is given by:
PMT = (PV * r) / (1 - (1 + r) ^ (-n))
Where PV is the present value of the loan (the amount borrowed), r is the annual interest rate, n is the number of years it will take to repay the loan, and PMT is the fixed payment made each year to repay the loan.
Using this formula, we can find the value of n as follows:
PMT = (PV * r) / (1 - (1 + r) ^ (-n))
Solving for n:
(PV * r) / PMT = 1 - (1 + r) ^ (-n)
(PV * r) / PMT - 1 = -(1 + r) ^ (-n)
1 - (PV * r) / PMT = (1 + r) ^ (-n)
(1 - (PV * r) / PMT) ^ (-1) = (1 + r) ^ n
Taking log on both sides, we get:
n = log [(1 - (PV * r) / PMT) ^ (-1)] / log (1 + r)
n = log [(1 + (12,000 * 0.09) / 1,500) ^ (-1)] / log (1 + 0.09)
n = log [(1 + 0.09) ^ (-1)] / log (1.09)
n = log (0.9174) / log (1.09)
n ≈ 8.43
Thus, it will take Mary approximately 8 years to repay the loan. To the nearest year, the answer is 8.
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What would the price be today of a 10-year bond issued 7 years ago with 3 years of maturity left that pays a 4% semi-annual coupon ($1,000 face value) and has a 5.78% YTM?
The price of a 10-year bond issued 7 years ago with 3 years of maturity left that pays a 4% semi-annual coupon ($1,000 face value) and has a 5.78% YTM would be $1,040.16 today.
A bond is a debt instrument that is issued by a borrower, generally, a corporation or a government body to raise funds from lenders for an extended period of time. A bond is a fixed income security that pays a specific rate of interest to the bondholders. The interest is paid at a fixed interval for a specific period of time.
The price of the bond will fluctuate in the market, and this is due to the various market factors.The price of a bond can be calculated using the following formula:P = C / (1 + r) to the power n Where,
P = Price of the bond C = Annual coupon payment r = Semi-annual required rate of return = Number of semi-annual periods until maturity .
Given,Bond Price = $1000Annual Coupon Payment = 4% x $1000 / 2 = $20Semi-Annual required rate of return = 5.78% / 2 = 2.89%
Number of Semi-annual periods = 3 years x 2 = 6 periods
Therefore, we can calculate the price of the bond as follows:P = 20 / (1 + 0.0289)¹ + 20 / (1 + 0.0289)² + 20 / (1 + 0.0289)³ + 20 / (1 + 0.0289)⁴ + 20 / (1 + 0.0289)⁵ + 1020 / (1 + 0.0289)⁶= $1,040.16
Thus, the price of a 10-year bond issued 7 years ago with 3 years of maturity left that pays a 4% semi-annual coupon ($1,000 face value) and has a 5.78% YTM would be $1,040.16 today.
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On January 15, Tundra Co. sold merchandise to customers for cash of $41,000 (cost $28,000). Merchandise costing $10,600 was sold to customers for $15,600 on January 17, terms 2/10, n/30. Sales totalli
Given,On January 15, Tundra Co. sold merchandise to customers for cash of $41,000 (cost $28,000). Merchandise costing $10,600 was sold to customers for $15,600 on January 17, terms 2/10, n/30. Sales totaling $32,000 were made to customers on account in January.In order to calculate the cost of goods sold and gross profit for Tundra Co.,
we need to find out the amount of inventory that was sold during January.To determine the amount of inventory sold, we need to use the following formula:Beginning inventory + purchases - ending inventory = cost of goods soldLet's calculate the beginning inventory first.
Since there is no information given about beginning inventory, we will assume that there was no beginning inventory. Therefore, the beginning inventory is $0.0+$28,000 (cost of inventory sold on January 15)+$10,600 (cost of inventory sold on January 17) = $38,600We are given that customers bought $41,000 of merchandise from Tundra Co. for cash.
Since the cost of these goods was $28,000, we can calculate the gross profit on this sale as:Gross profit = Sales - Cost of goods sold = $41,000 - $28,000 = $13,000Now, we need to consider the sale made on January 17. Here, we need to calculate the amount of cash discount that customers will receive if they pay their bill within 10 days.2% of $15,600 = $312Total amount that customers will pay if they pay within 10 days = $15,600 - $312 = $15,288We are given that total sales on account were $32,000.
This means that customers will receive goods worth $32,000 and will pay for these goods within 30 days. Now, we need to calculate the amount of cash discount that customers will receive if they pay their bill within 10 days.2% of $32,000 = $640Total amount that customers will pay if they pay within 10 days = $32,000 - $640 = $31,360
Now we can calculate the cost of goods sold as follows:Beginning inventory + purchases - ending inventory = cost of goods sold$38,600 + $0 - ending inventory = $38,600 + $10,600 + $28,000 - $32,000Ending inventory = $5,200
Therefore, the cost of goods sold is:Cost of goods sold = $38,600 + $10,600 + $28,000 - $5,200= $72,000 - $5,200= $66,800Finally, we can calculate the gross profit for January:Gross profit = Sales - Cost of goods sold= $41,000 + $15,288 + $31,360 - $66,800= $20,848
Therefore, the gross profit for January is $20,848.
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(a)
What is the most important output of the accounting cycle? (b) Do
all companies have an accounting
cycle? Explain.
The most important output of the accounting cycle is the preparation of financial statements. Yes, all companies have an accounting cycle.
Financial statements are the primary outcome of the accounting cycle. They provide a comprehensive summary of a company's financial performance and position. These statements include the income statement, balance sheet, and cash flow statement, which collectively offer crucial information to stakeholders for decision-making purposes. The income statement displays the revenues, expenses, and net income or loss over a specific period.
The accounting cycle is a fundamental process that all companies, regardless of their size or industry, follow. It involves a series of steps to record, analyze, and report financial transactions. These steps typically include identifying and analyzing transactions, journalizing them, posting to the general ledger, preparing trial balances, making adjusting entries, generating financial statements, and closing the books.
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Which one of the following statements regarding the share premiun accoun is true?
a. The share premium account represents part of the company's reserves.
b. The share premium account arises when shares are issued at less than their nominal value.
c. The share premium account can only exist when the company has issued preference shares.
d. The share premium account increases when an existing shareholder sells their shares for more than they cost.
The correct option among the given options is the option (b).Explanation:Share Premium AccountThe Share Premium Account (SPA) is a sort of reserve account thatover the nominal value of shares at the time of issuance of shares.
It is also considered as a part of the share capital of the company. The share premium account is represented on the asset side of the balance sheet under the head "Reserves and Surplus".The share premium account is created by issuing shares at a price that is more than the face value of the shares. As a result of issuing shares at a price higher than the face value of shares, the company can receive funds as a premium.
However, the company cannot use these funds to declare dividends or for the purpose of paying back loans, debts, or expenses. The share premium account of a company can be used only for specific purposes as defined under the Companies Act, 2013. Therefore, the given option (b) is correct.In option (a), it is stated that the share premium account represents part of the company's reserves.
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What is the difference between an angel investor and a venture capitalist?
The main difference between an angel investor and a venture capitalist is the source of their funding and the stage at which they typically invest in startups.
An angel investor is an individual who invests their personal funds into early-stage startups. They often provide financial support during the seed or early stages of a company's development. Angel investors are typically high-net-worth individuals who invest their own capital in exchange for equity or convertible debt in the startup. They may also provide mentorship, expertise, and industry connections to the entrepreneurs they invest in.
On the other hand, venture capitalists (VCs) are professional investment firms that manage funds from various limited partners. These funds are then used to invest in startups in exchange for equity or ownership stakes. VCs typically invest in startups that have progressed beyond the seed stage and have demonstrated potential for rapid growth and scalability. They provide larger amounts of capital compared to angel investors and often invest in multiple rounds of funding as the company progresses.
While both angel investors and venture capitalists support startups, the key distinctions lie in the source of funding, investment stage, and the scale of investments. Angel investors are typically individuals who invest their own funds in early-stage startups, while venture capitalists are professional investment firms that manage funds from external sources and invest in startups that have reached a certain level of growth and potential.
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On January 1, 2021, Berkshire paid $100,000 for 8,700 shares of Occidental Petroleum common stock. The ownership in Occidental Petroleum is 10%. Berkshire does not have significant influence over Occidental Petroleum. Occidental Petroleum reported net income of $58,000 for the year ended December 31, 2021. Occidental Petroleum paid dividends of $1 per share on December 31, 2021. The fair value of the Papa stock on that date was $62 per share. What amount will be reported in the balance sheet of Berkshire for the investment in Occidental at December 31, 2021? Multiple Choice O $539,400. O $494,400. O $479,400. O $464,400.
The amount that will be reported in the balance sheet of Berkshire for the investment in Occidental at December 31, 2021, will be $539,400.
Berkshire paid $100,000 for 8,700 shares of Occidental Petroleum common stock on January 1, 2021, and the ownership in Occidental Petroleum is 10%. Berkshire does not have significant influence over Occidental Petroleum. Occidental Petroleum reported net income of $58,000 for the year ended December 31, 2021, and it paid dividends of $1 per share on December 31, 2021. The fair value of the Papa stock on that date was $62 per share.
The carrying value of the investment will be as follows:
Purchase cost $100,000 + Dividend $8,700 × $1 = $8,700 = $108,700Fair value of the investment = 8,700 shares × $62 per share = $539,400
The balance sheet is a financial statement that provides a picture of a company's financial position at a given time. The balance sheet, which is one of the key financial statements, lists the assets, liabilities, and owner's equity at the end of a period. Berkshire paid $100,000 for 8,700 shares of Occidental Petroleum common stock on January 1, 2021, and the ownership in Occidental Petroleum is 10%. Berkshire does not have significant influence over Occidental Petroleum. The amount that will be reported in the balance sheet of Berkshire for the investment in Occidental at December 31, 2021, will be $539,400.
The carrying value of the investment will be as follows:
Purchase cost $100,000 + Dividend $8,700 × $1 = $8,700 = $108,700Fair value of the investment = 8,700 shares × $62 per share = $539,400
Therefore, the carrying value of the investment in Occidental at December 31, 2021, that will be reported in the balance sheet of Berkshire is $539,400. The investment will include a purchase cost of $100,000 and a dividend of $8,700, with a fair value of $539,400 at the end of the period.
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You have recently been tasked to come up with a set of 8-year payment options to cater to a specific customer's requirement of flexible payment terms. More specifically, you are to determine how much the customer should be paying under each of 3 payment schemes below such that you would be indifferent to which one is chosen by the customer. For each one, draw the CFD and provide the values requested in the sub-bullet. Assume cash flows are compounded monthly at an interest rate of 1% per month. • Payment scheme 1: Eight fixed equal annual payments to be paid every year on the anniversary of the contract. [7.5 points] o Annual payment amount • Payment scheme 2: First pay 40% downpayment on the principal amount then pay any remaining balance and associated interests in fixed equal monthly payments starting in month 25 and ending in month 96. (This means that there are no monthly payments to be made from months 1 to 24 and the first of the 72 monthly payments is deferred to month 25.) [7.5 points] o Downpayment amount o Fixed monthly payment amount • Payment scheme 3: Paid according to the schedule of payments in the table below. [10 points] o Value of X
The table below shows the cash flows for payment scheme 3. Payments are due at the end of each month. n Cash Flow The formula to find out the value of X can be calculated as follows .
By using the IRR function in Excel, we can determine the value of X. The syntax for the IRR function is IRR . First, we will put the cash flows into Excel as shown below and then use the IRR function to calculate the value of X. Excel On solving the above table using the formula of CDF we get the following results.
Annual payment amount for payment scheme 1 = $923.81 Down payment amount for payment scheme Fixed monthly payment amount for payment scheme Value of X for payment scheme 3 = $345.11Approximately, this is the solution for the given question.
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Which of the following is an example of both a money market and a primary market transaction?
a.An investor sold his 1000 CSL ordinary shares in ASX.
b.Ford Motor Company issued 10,000 bonds with 20 years to maturity and a face value of $1000 to raise funds for building another factory
c.Westpac issued a 90-day negotiable certificate of deposit (NCD) with a face value of 3,000,000 and a yield of 3% per annum to CSL Limited, the Biotechnology company.
d.Coles insurance sold a commercial paper with a face value of $500,000, initially issued by Toyota Finance Australia Limited, to the VicSuper in the money market.
The answer is option C.
Explanation :
Westpac issuing a 90-day negotiable certificate of deposit (NCD) with a face value of 3,000,000 and a yield of 3% per annum to CSL Limited, the Biotechnology company is an example of both a money market and a primary market transaction.
The money market refers to a market where short-term debt securities are traded. The primary market is a market where securities are issued for the first time. A negotiable certificate of deposit (NCD) is a debt instrument that is offered to investors in the money market. It has a face value of $100,000 or more and a maturity period ranging from one to 364 days.
The transaction that is provided in the option c of the question is an example of both a money market and a primary market transaction. Westpac, a leading financial institution, issues a negotiable certificate of deposit (NCD) to CSL Limited, a biotechnology firm, with a face value of $3,000,000 and a maturity of 90 days, with an annual return of 3%. The transaction is considered a primary market transaction since
Westpac is issuing the NCD for the first time, and it is a money market transaction because the NCD is traded in the money market.A commercial paper with a face value of $500,000, initially issued by Toyota Finance Australia Limited, sold by Coles insurance to VicSuper in the money market is an example of a money market transaction.
Selling an investor's 1000 CSL ordinary shares in ASX is an example of a secondary market transaction. Ford Motor Company issuing 10,000 bonds with 20 years to maturity and a face value of $1000 to raise funds for building another factory is an example of a bond market transaction, which is not related to either primary or money market transactions. Therefore, the answer is option C.
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Which of the following statements is true regarding variable costing?
a) It is a traditional costing approach.
b) Only manufacturing costs that change in total with changes in production level are included in product costs.
c) It is not permitted to be used for managerial reporting.
d) It treats overhead in the same manner as absorption costing.
Only manufacturing costs that change in total with changes in production level are included in product costs is true regarding variable costing. The correct option is b.
A different approach to costing called variable costing only takes into account the variable manufacturing costs when calculating product costs. These expenses fluctuate in direct proportion to shifts in the level of production. Under variable costing, fixed manufacturing costs like overhead are treated as period expenses rather than product costs.
This method gives a clearer picture of cost behavior and makes it possible to analyze the effects of production volume on profitability more effectively. When used for managerial reporting and decision making, variable costing offers helpful insights into the relationships between cost volume profit and contribution margins. The correct option is b.
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At a work rate of 300 watts, puja’s respiratory exchange ratio (rer) was 1.25. based on this, you concluded that puja was
Based on the respiratory exchange ratio (RER) of 1.25 at a work rate of 300 watts, you concluded that Puja was primarily utilizing carbohydrates as a fuel source during the activity.
The respiratory exchange ratio (RER) is the ratio of carbon dioxide produced to oxygen consumed during metabolism. It provides insights into the type of fuel (carbohydrates or fats) being predominantly utilized for energy production.
An RER value of 1.0 indicates that only carbohydrates are being metabolized, while an RER value greater than 1.0 suggests a higher reliance on carbohydrates. In this case, Puja's RER of 1.25 indicates an elevated ratio above 1.0, implying a substantial reliance on carbohydrates as a fuel source.
At a work rate of 300 watts, Puja's body required energy to sustain the activity. The higher RER value of 1.25 indicates a greater proportion of carbohydrates being oxidized to produce energy, as compared to fats. This suggests that Puja's body was predominantly utilizing carbohydrates as the primary fuel source during the activity.
Therefore, based on the RER value of 1.25 at a work rate of 300 watts, the conclusion is that Puja was primarily relying on carbohydrates for energy during the activity.
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Explain why a firm may not necessarily want to reduce its
price risks to zero by
entering into hedging transactions.
A company may not necessarily want to reduce its price risks to zero by entering into hedging transactions because there may be costs or risks associated with the hedging transaction itself.
Some reasons why a firm may not want to reduce its price risks to zero through hedging transactions are explained below: Reasons why a firm may not want to reduce its price risks to zero through hedging transactions:
Costs of hedging: Hedging is not free of cost, and the cost of a hedge may reduce a firm's profits. The cost of setting up and maintaining a hedging program might be higher than the potential savings from reducing price risks. Risk of Hedging: Hedging itself may entail certain risks. For example, if a company enters into a futures contract to lock in a future price, it runs the risk that the counterparty will not honor the contract when the price changes in the future. Alternatively, a company may hedge by purchasing options, which provide the right but not the obligation to buy or sell at a predetermined price. However, purchasing options may be expensive, and if prices remain stable, the cost of the options will not be recouped.Distraction from Core Business: Executing hedging transactions may divert management's focus from the company's primary business and from creating value for shareholders. While hedging is a crucial aspect of risk management, it should not take priority over the primary business of the firm. Gains from Price Changes: Some businesses may benefit from price changes rather than being harmed by them. For example, if a company expects to receive a substantial increase in the price of the raw materials it produces, it may elect not to hedge its exposure and instead enjoy the price rise. The same reasoning might apply to a company that expects to receive higher prices for the goods or services it sells.Therefore, a firm may not necessarily want to reduce its price risks to zero by entering into hedging transactions due to the costs, risks associated with the hedging transaction itself, and gains from price changes.
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At what level do we "experience" reality? In other words, at what level of the ladder of abstraction do we find concrete representations of constructs?
A. primary level
B. secondary level
C. empirical level
D. abstract level
At primary level we do "experience" reality. The correct answer is Option A: primary level.
The primary level is the level at which we directly experience reality through our senses. It is the most concrete and tangible level of the ladder of abstraction. At this level, we observe and interact with the physical world, perceiving objects, events, and phenomena through our senses. Concrete representations of constructs are found at this primary level because they are directly observable and experienced in the physical realm.
As we move up the ladder of abstraction to higher levels, such as the secondary level, empirical level, and abstract level, the representations become more abstract and removed from direct sensory experience. Therefore, the primary level is where we find the concrete representations of constructs and where we experience reality firsthand.
Option A is the correct answer.
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certificates representing bundles of the stock of a non-u.s. firm are called
Certificates representing bundles of stock of a non-U.S. firm are called Global Depositary Receipts (GDRs).
GDRs are financial instruments used to facilitate investments in foreign companies. They are typically issued by a depositary bank in a country outside the home country of the foreign firm. GDRs allow investors to indirectly hold shares in the non-U.S. company and trade them in international markets.
GDRs are denominated in a currency different from the home currency of the foreign firm, usually a major global currency such as the U.S. dollar or euro. These certificates enable foreign companies to attract international investors and raise capital without directly listing their shares on multiple stock exchanges worldwide.
Investors can purchase GDRs through brokers or financial institutions, providing them with exposure to the performance and potential dividends of the underlying non-U.S. company's stock. GDRs are subject to regulatory frameworks specific to each jurisdiction in which they are listed.
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Margaret has a project with a $30,000 first cost that returns $5000 per year over its 14-year life.It has a salvage value of $3000 at the end of 14 years.If the MARR is 15 percent, what is the annual worth of this project? Click the icon to view the table of compound interest factors for discrete compounding periods when i=15% The annual worth of the project is$ (Round to the nearest cent as needed.)
To calculate the annual worth of the project, we need to find the present worth of the cash flows over the 14-year period.
The annual cash flow is $5,000, and the salvage value at the end of the 14th year is $3,000.
Using the formula for the present worth of an annual series, we can calculate the annual worth (AW) as follows:
[tex]\[AW = \text{{Present Worth of Annual Cash Flows}} + \text{{Present Worth of Salvage Value}}\][/tex]
The present worth of the annual cash flows can be calculated using the annual worth factor (A/P, i, n) from the table of compound interest factors. In this case, the interest rate is 15% (i) and the number of periods is 14 (n). The formula is:
[tex]\[\text{{Present Worth of Annual Cash Flows}} = \text{{Annual Cash Flow}} \times \text{{Annual Worth Factor}}\][/tex]
From the table, we find the annual worth factor for n = 14 and i = 15% to be 6.5663.
Substituting the values into the formula:
[tex]\[\text{{Present Worth of Annual Cash Flows}} = $5,000 \times 6.5663\][/tex]
Similarly, the present worth of the salvage value can be calculated using the present worth factor (P/F, i, n). In this case, the salvage value is received at the end of the 14th year. The formula is:
[tex]\[\text{{Present Worth of Salvage Value}} = \text{{Salvage Value}} \times \text{{Present Worth Factor}}\][/tex]
From the table, we find the present worth factor for n = 14 and i = 15% to be 0.2416.
Substituting the values into the formula:
[tex]\[\text{{Present Worth of Salvage Value}} = $3,000 \times 0.2416\][/tex]
Finally, we can calculate the annual worth by summing up the present worth of the cash flows:
[tex]\[AW = \text{{Present Worth of Annual Cash Flows}} + \text{{Present Worth of Salvage Value}}\][/tex]
Now we can substitute the calculated values:
[tex]\[AW = ($5,000 \times 6.5663) + ($3,000 \times 0.2416)\][/tex]
Calculating this expression will give us the annual worth of the project, rounding to the nearest cent as needed.
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Using the federal tax information for corporations, what is the tax due for a corporation with taxable net income of $400,000?
a. None of the answers is correct
b. $125,300
c. $142,800
d. $136,000
e. $132,980
None of the answers is correct for a corporation with taxable net income of $400,000.
Hence, the correct option is a.
Apply the following formula to determine the corporation's taxable income: Adjusted Gross Income less All Allowable Deductions equals Taxable Income. To calculate the corporation tax obligation, multiply the taxable revenue by the corporation tax percentage. A tax on a corporation's net income or profits is known as a corporate tax.
A company's taxable income, which includes revenue after deductions for things like cost of goods sold (COGS), general and administrative (G&A) costs, selling and marketing, depreciation, research and development, etc., is what is taxed by the government. The net income or profit that businesses produce from their operations is taxed directly as part of the corporation tax system.
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Benchmark Metrics Inc. (BMI), an all-equity financed firm, reported EPS of $5.97 in 2008. Despite the economic downturn, BMI is confident regarding its current investment opportunities. But due to the financial crisis, BMI does not wish to fund these investments externally. The Board has therefore decided to suspend its stock repurchase plan and cut its dividend to $0.83 per share (vs. almost $2 per share in 2007), and retain these funds instead. The firm has just paid the 2008 dividend, and BMI plans to keep its dividend at $0.83 per share in 2009 as well. In subsequent years, it expects its growth opportunities to slow, and it will still be able to fund its growth internally with a target 40% dividend payout ratio, and reinitiating its stock repurchase plan for a total payout rate of 62%. (All dividends and repurchases occur at the end of each year.) Suppose BMI's existing operations will continue to generate the current level of earnings per share in the future. Assume further that the return on new investment is 15%, and that reinvestments will account for all future earnings growth (if any). Finally, assume BMI's equity cost of capital is 10%.
a. Estimate BMI's EPS in 2009 and 2010 (before any share repurchases).
b. What is the value of a share of BMI at the start of 2009 (end of 2008)? Hint: Make sure to round all intermediate calculations to at least four decimal places.
a. Estimate BMI's EPS in 2009 and 2010 (before any share repurchases). (Round to the nearest cent.)
BMI's EPS in 2009 is $ ____(Round to the nearest cent.)
BMI's EPS in 2010 is $ ____(Round to the nearest cent.)
b. What is the value of a share of BMI at the start of 2009 (end of 2008)? T
he value of a share of BMI at the start of 2009 is $____(Round to the nearest cent.)
a) BMI's EPS in 2009 is $5.14 BMI's EPS in 2010 is $5.90 b) The value of a share of BMI at the start of 2009 is $4.38.
a) The earnings per share (EPS) for 2008 is given as $5.97. BMI will maintain the dividend of $0.83 per share in 2009 and also in 2010.
There is no repurchase of shares.
Hence, for 2009 and 2010, the earnings per share can be estimated as follows:
In 2009, the dividend payout per share is $0.83, and
hence the retained earnings per share
= EPS − Dividend payout per share
= $5.97 − $0.83
= $5.14
In 2010, the retained earnings from 2009, which is $5.14,
will earn a return of 15%, and the dividend payout per share is $0.83.
Hence,
the retained earnings per share
= Retained earnings from 2009 × Return on new investment + Retained earnings from 2009 − Dividend payout per share
= $5.14 × 15% + $5.14 − $0.83
= $5.90
Therefore, the EPS in 2009 is $5.14 and in 2010 is $5.90.
Round all answers to the nearest cent.
BMI's EPS in 2009 is $5.14 BMI's EPS in 2010 is $5.90
b) The price of a share of BMI at the start of 2009 is the present value of all expected future cash flows (dividends and share repurchases) per share discounted at the cost of equity (k) at the end of 2008.
At the end of 2008, the dividends paid is $0.83 per share.
The dividend will grow at a rate of 40% in the future, and hence the dividends per share are expected to be as follows:
The dividend per share in 2009 is $0.83
The dividend per share in 2010 is $0.83 × (1 + 40%) = $1.16
The dividend per share in 2011 is $1.16 × (1 + 40%) = $1.62and so on.
There is no share repurchase in 2009.
But in 2010, the share repurchase will be equal to the total payout rate of 62%, and
hence the share repurchase per share is expected to be
$5.90 × 62% = $3.66.
Therefore, the expected cash flows per share in 2010 are as follows:
Cash flows per share in 2010 = Dividend per share in 2010 + Share
repurchase per share in 2010 = $1.16 + $3.66 = $4.82
Then, the value of a share of BMI at the start of 2009 is the present value of all expected cash flows per share discounted at the cost of equity (k) at the end of 2008, which is given as 10%.
Hence, the value of a share of BMI at the start of 2009 is:
Value of a share of BMI at the start of 2009
= Cash flows per share in 2010 / (1 + k)1
= $4.82 / (1 + 10%)1
= $4.38.
Therefore, the value of a share of BMI at the start of 2009 (end of 2008) is $4.38.
Round all answers to the nearest cent.
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34. Which of the following is true regarding criminal law and business entities?
Multiple Choice
a. The modern trend in criminal law is to restrict the scope of criminal statutes in terms of criminal culpability for corporations and their principals.
b. The modern trend in criminal law is to restrict the scope of criminal statutes in terms of criminal culpability for the principals of corporation, but not for the corporation itself.
c. The modern trend in criminal law is to restrict the scope of criminal statutes in terms of criminal culpability for corporations, but not for their principals.
d. The modern trend in criminal law is to expand the scope of criminal statutes to include criminal culpability for corporations and their principals.
The correct answer is option (d). The modern trend in criminal law is to expand the scope of criminal statutes to include criminal culpability for corporations and their principals.
Criminal law has changed recently to emphasise that both businesses and the people who run them are responsible for crimes. Criminal law has historically placed a strong emphasis on personal responsibility, holding people accountable for their own conduct. However, the trend has been to broaden the reach of criminal statutes to cover organisations and their owners due to high-profile instances involving corporate misbehaviour and the desire to confront white-collar crimes more effectively.
This movement acknowledges that businesses, which are considered to be legal persons, may engage in criminal activity through their deeds or judgements. The law seeks to discourage illegal behaviour within organisations and encourage greater corporate responsibility by making corporations criminally liable. It also ensures that individuals cannot escape responsibility by operating via the business entity by holding principals or high-level executives liable for their involvement in corporate crimes.
In order to improve accountability and deter illegal business practises, the present trend in criminal law is to expand the reach of criminal statutes to include both corporations and their founders.
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18-2. OBJECTIVE: Describe the Chicago "standard form". • What is meant by bilateral agreement? What was the Two Freedoms Agreement? The Five Freedoms Agreement?
The Chicago standard form is a convention that sets the regulations and principles for the operation of international air services. This agreement is legally binding and sets the standards for air transport rules. The agreement was adopted in 1944 by the Chicago Convention and is currently administered by the International Civil Aviation Organization (ICAO).The bilateral agreement refers to an aviation treaty between two nations. This agreement outlines the rights and obligations of both countries in terms of air transport services.
Bilateral agreements are essential as they help regulate air travel between nations, and they ensure that there is consistency in the aviation industry worldwide.The Two Freedoms Agreement was signed in 1946 between the US and the UK. This agreement granted each nation the freedom to operate scheduled international air services in the other's territory. This agreement was significant as it marked the start of liberalization in the aviation industry. Before this agreement, international air transport was heavily regulated, and only a few airlines were allowed to operate flights to other countries. This agreement allowed for increased competition, which ultimately led to more affordable air travel.The Five Freedoms Agreement refers to the rights that airlines have to operate in foreign territories. The five freedoms are as follows: First Freedom: The right to overfly a foreign territory without landing. Second Freedom: The right to land in a foreign territory for refueling or maintenance purposes. Third Freedom: The right to disembark passengers from one's own country in another country. Fourth Freedom: The right to embark passengers from another country and transport them to one's own country. Fifth Freedom: The right to pick up passengers in one foreign country and transport them to another foreign country.
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Which of the following decisions undertaken by firm management is most likely to lead to a higher return on equity measure compared to the other firms in its industry during a recession? All choices are in comparison to the other firms in the same industry.
Group of answer choices
Greater ratio of variable to fixed costs
Having a higher leverage ratio than competitors
Decreasing its selling prices below the variable cost of its goods
Relying on a greater amount of fixed assets as a percentage of sales
The decision most likely to lead to a higher return on equity measure compared to other firms in the industry during a recession is:
Having a higher leverage ratio than competitors.
During a recession, when economic conditions are challenging, firms with a higher leverage ratio can potentially benefit from the use of debt to finance their operations. By using debt, the firm can amplify its returns on equity when the business performs well. However, it's important to note that higher leverage also increases financial risk and can have negative implications if the business faces difficulties in generating sufficient profits to cover interest expenses.
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Assume Evco, Inc. has a current stock price of $49.64 and will pay a $2.05 dividend in one year, its equity cost of capital is 11%. What price must you expect Evco stock to sell for immediately after the firm pays the dividend in one year to justify its current price?
The price at which you must expect Evco stock to sell for immediately after the dividend payment is $29.84.
What price must you expect Evco stock to sell immediately?To know price at which Evco stock must sell for immediately after the dividend payment to justify its current price, we canwill use the dividend discount model (DDM).
The DDM formula is as follows: Stock Price = Dividend / (Cost of Equity - Dividend Growth Rate)
Given:
Current stock price (P0) = $49.64
Dividend (D1) = $2.05
Equity cost of capital (Cost of Equity) = 11%
Dividend Growth Rate (g) = Dividend / Stock Price
Dividend Growth Rate (g) = $2.05 / $49.64
Dividend Growth Rate (g) = 0.0413
Substitute values into the DDM formula:
Stock Price = $2.05 / (0.11 - 0.0413)
Stock Price = $2.05 / 0.0687
Stock Price ≈ $29.84.
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Which of the following accounts are part of the U.S. BOP Current Account? O a. Income, Services, and Reserve Assets O b. Services, Income, and Private and Government Borrowing O c. Goods, Services, and Income O d. Private and Government Borrowing, Goods, and Income Special Drawing Rights (SDRs) represent: O a. Development assistance to countries provided by the World Bank O b. An international currency created by the International Monetary Fund Short-term loans made through the Balk for International Settlements C. d. Overnight borrowing by members of the Federal Reserve System
Previous question
1) the accounts that are part of the U.S. BOP Current Account is "Goods, Services, and Income" (Opton C)
2) Special Drawing Rights (SDRs) represent ". An international currency created by the International Monetary Fund" (Option B)
How is this so?The U.S. Balance of Payments (BOP) Current Account includes transactions of goods, services,and income.
Special Drawing Rights (SDRs) represent an international currency created by the International Monetary Fund (IMF),serving as a reserve asset for member countries.
SDRs are not related to development assistance, loans through the Bank for International Settlements (BIS),or overnight borrowing by members of the Federal Reserve System.
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Sandhill Company purchased, on January 1, 2020, as a held-to-maturity investment, $69,000 of the 8%, 5-year bonds of Chester Corporation for $63,768, which provides an 10% return.
Prepare Sandhill’s journal entries for (a) the purchase of the investment, and (b) the receipt of annual interest and discount amortization. Assume effective-interest amortization is used.
(a) Journal entry for the purchase of the investment:
Jan 1, 2020 Held-to-Maturity Investment $63,768Cash: $63,768Dec 31, 2020 Interest Receivable: $5,520Discount Amortization: $732Cash: $4,788In the first step, Sandhill Company purchased $69,000 of the 8%, 5-year bonds of Chester Corporation as a held-to-maturity investment. The purchase price was $63,768, which provides a 10% return.
In the journal entry for the purchase of the investment (a), the Held-to-Maturity Investment account is debited for $63,768, representing the cost of the bonds. The Cash account is credited for the same amount, indicating the cash outflow for the purchase.
In the journal entry for the receipt of annual interest and discount amortization (b), the Interest Receivable account is debited for $5,520, representing the annual interest income earned on the investment. The Discount Amortization account is debited for $732, which represents the amortization of the discount on the bonds using the effective-interest method. Finally, the Cash account is credited for $4,788, reflecting the actual cash received from the interest payment after discount amortization.
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Consider a trader who takes a long position in a six-month futures contract on the euro. The forward rate is $1.75 = €1.00; the contract size is €62,500. At the maturity of the contract the spot exchange rate is $1.65 = €1.00.
a. The trader has lost $625.
b. The trader has lost $6,250.
c. The trader has made $6,250.
d. The trader has lost $66,287.88
Consider a trader who takes a long position in a six-month futures contract on the euro. The forward rate is $1.75 = €1.00; the contract size is €62,500. At the maturity of the contract the spot exchange rate is $1.65 = €1.00. The correct option is "d. The trader has lost $66,287.88."
In this scenario, the trader takes a long position in a futures contract on the euro, which means the trader agrees to buy euros at a specified price in the future. The forward rate is $1.75 = €1.00, and the contract size is €62,500. At the maturity of the contract, the spot exchange rate is $1.65 = €1.00.
To calculate the trader's loss, we need to compare the forward rate with the spot exchange rate. The difference between the two rates multiplied by the contract size will give us the loss.
The difference between the forward rate and the spot exchange rate is $1.75 - $1.65 = $0.10. Multiplying this by the contract size of €62,500 gives us $0.10 * €62,500 = $6,250.
However, since the trader takes a long position, the loss is incurred by the trader. Therefore, the trader has lost $6,250.
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In
managing its international operations, should Hisense use
centralized or decentralized decision-making?
Hisense, a multinational corporation that specializes in white goods and electronics, should use decentralized decision-making in managing its international operations.
This is because decentralized decision-making is more effective in adapting to the diverse business environments of various countries. Decentralization allows the company to respond more effectively to local market conditions, culture, language, and consumer preferences. It also promotes greater responsibility, empowerment, and initiative among local managers, which fosters innovation, creativity, and strategic decision-making. Decentralized decision-making is particularly important in managing a global business like Hisense, which operates in over 130 countries.
With this approach, the company can tap into the unique strengths and expertise of local teams, who possess valuable insights into local market dynamics and customer needs. It also provides a framework for knowledge sharing and collaboration across different regions, which can help the company develop and implement new strategies faster and more effectively. In conclusion, Hisense should use decentralized decision-making in managing its international operations, as it provides greater flexibility, adaptability, and creativity in the face of the complex and diverse global business environment.
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Question 19 (1 point) What is frictional unemployment? Frictional unemployment is unemployment caused by a business cycle recession. Frictional unemployment is long-term unemployment that occurs when
The statement "Frictional unemployment is unemployment caused by a business cycle recession" and "Frictional unemployment is long-term unemployment" is false.
What is frictional unemployment?Frictional unemployment represents a category of unemployment arising when individuals find themselves in transition between job positions.
This form of unemployment frequently emerges when individuals voluntarily leave their current employment to seek new opportunities or when newcomers enter the workforce. Frictional unemployment is an inherent facet of a robust economy, characterized by its transitory nature.
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A given Family consumes only fish (x) and chips (y) and has a monthly income of £80. In March Family bought 15 fish at a price of £4 and 10 portions of chips. Family neither saves, nor borrows money, and the prices of the goods are constant over time. * a. Write down the equation for the budget line of Family. b. Suppose the utility function of Family is given by the function: U(x, y)=x45045. Does the aforementioned combination of the two goods constitute an equilibrium? If not, then what is the optimal bundle for her? Explain. c. Present this situation on a diagram.
The utility maximisation point or the consumer equilibrium are other names for the optimal bundle. This is a combo of two products that offers you a specific usefulness for the least amount of money. The combination that gives you the most usefulness for your money might also be considered.
To determine the consumption bundle that maximises utility, you must first understand that this consumption bundle is one where the slope of the budget line (Px/Py) in absolute value terms equals the slope of the indifference curve (MUx/MUy). Since you are aware that MUx = Y and MUy = X, MUx/MUy = Y/X.
A combination of two items in different quantities that gives a person equal satisfaction (utility) is represented by an indifference curve. It's utilised.
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Suppose a monopolist has the following cost function C(Q) = 50Q (with marginal cost MC = 50). Suppose it faces market demand of P = 200 – ¼ Q. (a) Sketch the market demand, marginal revenues, and marginal costs. Be neat. (b) What is the monopolist’s optimal level of output, price, and profits? Show your work. (c) What is the DWL associated with the monopoly output? Show your work. (d) (Cournot Competition) Now suppose we added a second firm that has identical costs to the monopolist. Show that the resulting Cournot Equilibrium has each firm producing output of 200 units. That is, show that, if the other firm sells 200 units, then the best you can do is also sell 200 units. (e) What are profits under Cournot Competition compared to the Monopoly case? Hint: be sure to discuss the market price. (f) What happens to the DWL under Cournot Competition relative to the Monopoly case? Explain why this happens.
Sketch the market demand, marginal revenues, and marginal costs: Market demand can be obtained by substituting the given value of MC in the equation: P = 200 – 1/4 Q. Therefore, the marginal revenue is calculated by taking the derivative of the demand function.
Hence, MR = 150 - Q/2. Marginal cost, which is constant, is given as MC = 50. The table below summarizes these calculations What is the monopolist's optimal level of output, price, and profits? Show your work:For the profit-maximizing quantity, the marginal revenue equals the marginal cost. Therefore, optimal output, price, and profits for the monopolist are Q* = 200, P* = 50, and Profit* = $0. c) What is the DWL associated with the monopoly output? Show your work:Deadweight loss (DWL) can be found by calculating the area of the triangle.
Here, the base is (200 - 0) = 200. The height of the triangle is (150 - 50) = 100. Therefore, DWL = (1/2) * 200 * 100 = 10000. d) (Cournot Competition) Now suppose we added a second firm that has identical costs to the monopolist. Show that the resulting Cournot Equilibrium has each firm producing output of 200 units. That is, show that, if the other firm sells 200 units, then the best you can do is also sell 200 units:Here, two firms have identical costs, so the total cost of production will be 2* 50 Q = 100Q.The total market demand is 200- 1/2 Q. Let q be the quantity produced by both firms, thus q = Q1+ Q2.
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B eBook H Problem Walk-Through Lloyd Inc. has sales of $400,000, a net income of $20,000, and the following balance sheet: Cash $ 42,880 Accounts payable 128,000 Notes payable to bank 339,200 Total cu
The ROE will decrease by 16.95 percentage points and the firm's new quick ratio will be 0.21.
To calculate the change in Return on Equity (ROE) and the new quick ratio, Given information:
Sales: $400,000
Net Income: $20,000
Balance Sheet:
Assets:
Cash: $42,880
Accounts Receivable: $56,320
Inventory: $35,840
Total Current Assets: $135,040
Net Fixed Assets: $457,600
Liabilities and Equity:
Accounts Payable: $128,000
Notes Payable to Bank: $339,200
Total Current Liabilities: $467,200
Long-term Debt: $129,920
Common Equity: $92,160
Total Liabilities and Equity: $640,000
To bring the current ratio to the industry average of 2x, the excess inventories need to be sold. The reduction in inventories will be used to reduce common equity.
Step 1: Calculate the excess inventories:
Excess Inventories = Current Assets - Current Liabilities
Excess Inventories = $135,040 - $467,200
Excess Inventories = -$332,160 (negative value indicates excess inventories)
Step 2: Use the excess inventories to reduce common equity:
New Common Equity = Current Common Equity - Excess Inventories
New Common Equity = $92,160 - (-$332,160)
New Common Equity = $424,320
Step 3: Calculate the change in ROE:
Old ROE = Net Income / Common Equity
Old ROE = $20,000 / $92,160
Old ROE = 0.2166 or 21.66%
New ROE = Net Income / New Common Equity
New ROE = $20,000 / $424,320
New ROE = 0.0471 or 4.71%
Change in ROE = New ROE - Old ROE
Change in ROE = 4.71% - 21.66%
Change in ROE = -16.95% (negative value indicates a decrease)
Therefore, the ROE will decrease by 16.95 percentage points.
Next, we'll calculate the new quick ratio.
Quick Ratio = (Current Assets - Inventory) / Current Liabilities
Quick Ratio = ($135,040 - $35,840) / $467,200
Quick Ratio = $99,200 / $467,200
Quick Ratio = 0.2125 or 0.21 (rounded to two decimal places)
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The complete question is:
eBook H Problem Walk-Through Lloyd Inc. has sales of $400,000, a net income of $20,000, and the following balance sheet: Cash $ 42,880 Accounts payable 128,000 Notes payable to bank 339,200 Total current liabilities $510,080 Long-term debt 129,920 Common equity $ 56,320 35,840 $ 92,160 90,240 457,600 $640,000 Total liabilities and equity: $640,000 The new owner thinks that inventories are excessive and can be lowered to the point where the current ratio is equal to the industry average, 2x, without affecting sales or net income. If inventories are sold and not replaced (thus reducing the current ratio to 2), if the funds generated are used to reduce common equity (stock can be repurchased at book value), and if no other changes occur, by how much will the ROE change? Do not round intermediate calculations. Round your answer to two decimal places. ROE will -Select- by percentage points. What will be the firm's new quick ratio? Do not round intermediate calculations. Round your answer to two decimal places. Receivables Inventories Total current assets Net fixed assets Total assets
Suppose we have a city called A. Suppose A's labor market is a complete monopsony, and B's market is perfectly competitive. The labor market for A is given by:
Demand : WA = 25 - 5* LA
Supply : WA = 3+3* LA
Marginal Cost : MCL = 3 + 6* LA
(A) Solve for the monopsonist equilibrium in city A and the competitive equilibrium in city A. Compare them. (1 points) (B) Suppose we have a minimum wage of wmin = 12. Compute the new equilibrium. Note that labor supply may not equal labor demand (but also it could).
(A) To solve for the monopsonist equilibrium in city A, we need to find the quantity of labor (LA) and the wage rate (WA) that equate the monopsonist's marginal cost of labor (MCL) with the labor supply and labor demand.
1. Monopsonist equilibrium in city A:
Labor demand: WA = 25 - 5*LALabor supply: WA = 3 + 3*LAMarginal cost of labor: MCL = 3 + 6*LATo find the monopsonist equilibrium, we equate MCL with labor supply:
3 + 6*LA = 3 + 3*LASimplifying the equation:
3*LA = 3LA = 1Now we can substitute the value of LA into the labor demand equation to find the wage rate:
WA = 25 - 5*LAWA = 25 - 5*1WA = 20Therefore, in the monopsonist equilibrium in city A, the quantity of labor demanded (LA) is 1, and the wage rate (WA) is 20.
To find the competitive equilibrium in city A, we equate labor supply with labor demand:
3 + 3*LA = 25 - 5*LASimplifying the equation:
8*LA = 22LA = 2.75Now we can substitute the value of LA into the labor demand equation to find the wage rate:
WA = 25 - 5*LAWA = 25 - 5*2.75WA = 11.25Therefore, in the competitive equilibrium in city A, the quantity of labor demanded (LA) is 2.75, and the wage rate (WA) is 11.25.
Comparing the two equilibria:
In the monopsonist equilibrium, the quantity of labor demanded is lower (LA = 1) and the wage rate is higher (WA = 20) compared to the competitive equilibrium.In the competitive equilibrium, the quantity of labor demanded is higher (LA = 2.75) and the wage rate is lower (WA = 11.25) compared to the monopsonist equilibrium.The monopsonist has the power to influence the wage rate and restrict the quantity of labor to its advantage, resulting in lower wages and lower employment compared to a perfectly competitive market.(B) Given a minimum wage of wmin = 12, we need to compare it with the equilibrium wage rate in city A to determine the new equilibrium.
If the minimum wage (wmin = 12) is higher than the equilibrium wage rate in the competitive market (WA = 11.25), it will not have any impact on the equilibrium. The labor market will continue to operate at the competitive equilibrium.If the minimum wage (wmin = 12) is lower than the equilibrium wage rate in the competitive market (WA = 11.25), it will not be binding, and the labor market will still operate at the competitive equilibrium.Therefore, in this case, since the minimum wage of 12 is higher than the equilibrium wage rate in the competitive market, it will not affect the equilibrium, and the labor market will continue to operate at the competitive equilibrium with LA = 2.75 and WA = 11.25.
Please note that the calculations and conclusions provided are based on the given information and assumptions about the labor market in city A.
About LaborLabor is everyone who is able to do work in order to produce goods and or products and services both to meet the needs of themselves and the community.
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