Estimating the 'true' value of McDonald's Corp can be done using various financial models such as discounted cash flow (DCF) or price to earnings (P/E) ratios.
Since the company does not pay out dividends, we can focus on using the P/E ratio method. We can gather the company's financial statements and market data to calculate its current P/E ratio. Then, we can use that ratio to estimate the company's value by multiplying it by its earnings per share (EPS).
This will give us an estimated price per share. Using Excel, we can easily input the data and perform the calculations. However, it is important to note that this is only an estimate and market conditions can affect the accuracy of the valuation.
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The Poseidon Swim Company produces swim trunks. The average selling price for one of their swim trunks is $61.80. The variable cost per unit is $24.05, Poseidon Swim has average fixed costs per year of $7,419. Assume that current level of sales is 319 units. What will be the resulting percentage change in EBIT if they expect units sold to changes by 5.7 percent? (You should calculate the degree of operating leverage first).
The change in EBIT is $137.65. The degree of operating leverage can be calculated by dividing the change in EBIT by the change in sales. In this case, the fixed costs are $7,419 and the change in sales is 5.7%.
The change in EBIT is calculated by multiplying the variable cost per unit by the change in sales. In this case, the change in EBIT is $137.65. Therefore, the degree of operating leverage is 24.2%.
The resulting percentage change in EBIT will be 24.2%. That is, if the units sold increase by 5.7%, the EBIT will increase by 24.2%. This means that the company will experience a positive increase in their profits as a result of the increase in the sale of units.
However, the company must be aware that the degree of operating leverage is high, so any decrease in sales will result in a large decrease in profits. Therefore, the company must closely monitor their sales and take appropriate measures to ensure that their sales remain high.
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The French Thaler and Company's stock has paid dividends of $1.60 over the past 12 months. Its historical growth rate of dividends has been 8 percent, but analysts expect the growth to slow to 5 percent annually for the foreseeable future.
a. Determine the value of the stock if the required rate of return on stocks of similar risk is 15 percent.
b. If analysts believe the risk premium on the stock should be reduced by 2 percentage points, what is the new required rate of return on French Thaler and Company stock?
c. How much should its price change from the answer you computed in part (a)?
Value of Stock = $16.80, New required rate of return = 13% and the stock price should change by $4.20.
a. To determine the value of the stock, we need to use the Dividend Discount Model (DDM). The formula is:
Value of Stock = D1 / (required rate of return - dividend growth rate)
Where D1 is the dividend expected next year. We can find D1 by using the expected dividend growth rate:
D1 = Current Dividend * (1 + dividend growth rate)
D1 = $1.60 * (1 + 0.05)
D1 = $1.60 * 1.05
D1 = $1.68
Now, we can plug these values into the DDM formula:
Value of Stock = $1.68 / (0.15 - 0.05)
Value of Stock = $1.68 / 0.10
Value of Stock = $16.80
b. To find the new required rate of return, we need to subtract 2 percentage points from the current required rate of return:
New required rate of return = 15% - 2%
New required rate of return = 13%
c. To find the new stock price, we can plug the new required rate of return into the DDM formula:
New Value of Stock = D1 / (new required rate of return - dividend growth rate)
New Value of Stock = $1.68 / (0.13 - 0.05)
New Value of Stock = $1.68 / 0.08
New Value of Stock = $21.00
Now, we can find the price change by subtracting the old stock price from the new stock price:
Price Change = New Value of Stock - Old Value of Stock
Price Change = $21.00 - $16.80
Price Change = $4.20
So, the stock price should change by $4.20.
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A stock has an expected return of 11.85 percent, its beta is 1.08, and the risk-free rate is 3.9 percent. What must the expected return on the market be? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Market expected return _________ % A stock has an expected return of 10.45 percent, its beta is .85, and the expected return on the market is 11.8 percent. What must the risk-free rate be? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Risk-free rate _______ %
The expected return on the market must be 13.49% and the risk-free rate must be 2.03%.
To calculate the expected return on the market, we can use the Capital Asset Pricing Model (CAPM):
E(Ri) = Rf + βi[E(Rm) - Rf]
where E(Ri) is the expected return of the stock, Rf is the risk-free rate, βi is the beta of the stock, and E(Rm) is the expected return on the market.
Using the values given in the question, we can solve for E(Rm):
11.85% = 3.9% + 1.08[E(Rm) - 3.9%]
E(Rm) = (11.85% - 3.9%) / 1.08 + 3.9% = 13.49%
Therefore, the expected return on the market must be 13.49%.
To calculate the risk-free rate in the second part of the question, we can rearrange the CAPM equation:
Rf = E(Ri) - βi[E(Rm) - Rf]
Plugging in the values given in the question, we get:
Rf = 10.45% - 0.85[11.8% - Rf]
Solving for Rf, we get:
Rf = (10.45% - 0.85 × 11.8%) / (1 - 0.85) = 2.03%
Therefore, the risk-free rate must be 2.03%.
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a firm has 12,000 shares of common stock outstanding with a book value of $20 per share and a market value of $39. there are 5,000 shares of preferred stock with a book value of $22 and a market value of $26. there is a $400,000 face value bond outstanding that is selling at 87% of par. what weight should be placed on the preferred stock when computing the firm's wacc? group of answer choices
The weight to be placed on preferred stock when computing the firm's WACC is approximately 13.74%.
How to determine the weight to be placed on preferred stock when computing the firm's WACCA firm's weighted average cost of capital (WACC) considers the relative weights of different sources of financing, including common stock, preferred stock, and bonds.
In this case, we will determine the weight of preferred stock in the firm's WACC.
First, calculate the market value of each financing source:
1. Common stock: 12,000 shares * $39/share = $468,000
2. Preferred stock: 5,000 shares * $26/share = $130,000
3. Bonds: $400,000 face value * 87% = $348,000
Next, find the total market value of the firm's financing:
Total market value = $468,000 (common stock) + $130,000 (preferred stock) + $348,000 (bonds) = $946,000
Finally, calculate the weight of preferred stock in the WACC:
Weight of preferred stock = Preferred stock market value / Total market value
Weight of preferred stock = $130,000 / $946,000 ≈ 0.1374 or 13.74%
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TII Question 10 of 10 -/3 View Policies Current Attempt in Progress Pharoah Manufacturing Company has been growing at a rate of 9 percent for the past two years, and the CEO expects the company to continue to grow at this rate for the next several years. The company paid a dividend of $1.50 this year. If your required rate of return is 12 percent, what is the maximum price that you would be willing to pay for this company's stock? (Round intermediate calculation and final answer to 2 decimal places, es 15.25.)
As a manufacturing company, Pharoah Manufacturing Company is expected to continue to grow at a rate of 9 percent for the next few years, which is good news for potential investors.
However, investors need to determine the maximum price they would be willing to pay for the company's stock based on their required rate of return, which in this case is 12 percent.
To calculate the maximum price, we can use the dividend discount model, which calculates the present value of future dividends. We can use the formula:
Maximum Price = Dividend / (Required Rate of Return - Growth Rate)
In this case, the dividend is $1.50, the required rate of return is 12 percent, and the growth rate is 9 percent.
Maximum Price = $1.50 / (0.12 - 0.09) = $50
Therefore, the maximum price that an investor would be willing to pay for Pharoah Manufacturing Company's stock is $50.
It is important to note that this calculation is based on the assumption that the company will continue to grow at a rate of 9 percent for the foreseeable future. Investors should also consider other factors such as the company's financial health, competition, and market trends before making any investment decisions.
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rebecca is a marketing executive at an airline company. she has been asked to plan her company's online advertising budget on a monthly basis. she's chosen ads' performance planner to help accomplish this task. what are two advantages performance planner offers rebecca? (choose two.)
The advantages are c. Performance Planner forecasting is powered by billions of Goo gle searches conducted each week and d. Performance Planner leverages machine learning for forecasting.
A new forecasting tool called Performance Planner utilises machine learning to show the potential of Goo gle Ads campaigns. Each week, billions of queries are used to create Goo gle Search ad auctions. The forecasting engine is run by it. The Performance Planner determines the optimum campaign spending levels to promote incremental conversions.
Account history and machine learning are combined by Performance Planner to power forecasts. Since Rebecca has chosen Performance Planner in the aforementioned situation, it will be easier for her to perform searches as Performance Planner's predictions are based on the billions of Goo gle searches made each week. Additionally, Performance Planner uses machine learning to provide forecasts.
Complete Question:
Rebecca is a marketing executive at an airline company. She has been asked to plan her company’s online advertising budget on a monthly basis. She’s chosen Goo gle Ads’ Performance Planner to help accomplish this task. What are two advantages Performance Planner offers Rebecca?
a. Performance Planner will help her identify funds from other operational budgets to allocate to marketing.
b. Performance Planner integrates with other budgeting software, such as QuickBooks.
c. Performance Planner forecasting is powered by billions of Goo gle searches conducted each week.
d. Performance Planner leverages machine learning for forecasting.
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On May 22, 2020, T. Albinoni Inc. issued a 4.15% coupon bond with a $100 face value, and incurred 2.00% of the face value as a transaction cost. The bond's issue price was $86.34 per share, and its maturity date is September 30, 2029. The firm's corporate tax rate is 21%. a) Calculate the firm's "pre-tax" cost of debt. (2 points) b) Calculate the firm's "after-tax" cost of debt.
The firm's "after-tax" cost of debt is 3.76%.
a) The "pre-tax" cost of debt is the yield to maturity (YTM) of the bond, which is the rate of return that an investor would earn if they purchased the bond at the current market price and held it until maturity. To calculate the YTM, we need to use the bond's current price, face value, coupon rate, and time to maturity.
The bond's current price is $86.34, its face value is $100, and its coupon rate is 4.15%. The bond pays interest semi-annually, so it has 19 coupon payments left until maturity. The time to maturity is 9.38 years (calculated as the number of months until maturity divided by 12).
Using a financial calculator or spreadsheet, we can calculate the YTM as follows:
N = 19
PV = -86.34
PMT = 4.15 / 2 * 100 = 2.075
FV = 100
I/Y = 4.76%
Therefore, the firm's "pre-tax" cost of debt is 4.76%.
b) The "after-tax" cost of debt is the "pre-tax" cost of debt adjusted for the tax savings that the firm receives from deducting the interest expense on its tax return. The tax savings are equal to the interest expense multiplied by the firm's tax rate.
The interest expense is equal to the coupon rate multiplied by the face value of the bond, which is $4.15 per share ($100 face value * 4.15% coupon rate). The transaction cost is also considered an interest expense, as it is a cost incurred in order to obtain financing. Therefore, the total interest expense is $6.15 per share ($4.15 + $2.00 transaction cost).
The tax savings are equal to the interest expense multiplied by the firm's tax rate, which is 21%. Therefore, the tax savings are $1.29 per share ($6.15 * 21%).
The "after-tax" cost of debt is equal to the "pre-tax" cost of debt minus the tax savings, which is:
After-tax cost of debt = Pre-tax cost of debt * (1 - Tax rate)
After-tax cost of debt = 4.76% * (1 - 21%)
After-tax cost of debt = 3.76%.
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8 of 100 Which of these penalties would the Michigan Department of Licensing and Regulatory Affairs NOT impose for a violation of the Occupational Code? censure imprisonment revocation suspension 0 1 E DE Wypt to search
The penalty that the Michigan Department of Licensing and Regulatory Affairs (LARA) would NOT impose for a violation of the Occupational Code is imprisonment. LARA is responsible for enforcing the Occupational Code and ensuring that licensed professionals in Michigan comply with the regulations.
In case of a violation, LARA may impose various penalties such as censure, revocation, or suspension of a professional license. These penalties are meant to ensure public safety and maintain the integrity of the profession. Censure is a formal reprimand, expressing disapproval of a professional's actions.
Revocation refers to the permanent withdrawal of a professional's license, and suspension involves temporarily prohibiting a professional from practicing their occupation. Imprisonment, however, is not a penalty that LARA can impose.
Imprisonment is a criminal sanction, and only courts can sentence an individual to serve time in jail or prison as a result of a criminal conviction. If a violation of the Occupational Code involves criminal activity, the matter would be referred to law enforcement and the judicial system, where a judge may impose imprisonment if the individual is found guilty.
To summarize, LARA may impose penalties such as censure, revocation, and suspension for violations of the Occupational Code, but it does not have the authority to impose imprisonment.
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You are provided with the following information:stock return =14% S&P500 return =11% T-Bill return = 6%In terms of the Capital Asset Pricing Model, the market riskpremium
In the context of the Capital Asset Pricing Model, the market risk premium is calculated by subtracting the risk-free rate (T-Bill return) from the expected return on the market (S&P500 return). Therefore, the market risk premium in this scenario would be 11% - 6% = 5%.
The Capital Asset Pricing Model (CAPM) is a widely used tool in finance to estimate the expected return on an investment based on its risk and the expected return of the market. The market risk premium is the difference between the expected return of the market and the risk-free rate of return.Using the provided information, we can calculate the market risk premium as follows: Market risk premium = S&P500 return - T-Bill return= 11% - 6%= 5%
Therefore, based on the provided information, the market risk premium is 5%.
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labor-management negotiations might be characterized as more distributive than integrative. do you agree? why do you think this is the case? what, if anything, would you do about it?
I agree that labor-management negotiations are often characterized as more distributive than integrative. Distributive negotiations focus on dividing a fixed resource, often resulting in a win-lose situation, while integrative negotiations aim for a win-win outcome where both parties benefit.
This characterization is primarily because labor-management negotiations often involve limited resources, such as wages, working hours, and benefits, which both parties try to maximize for their own interests. As a result, these negotiations can become highly competitive, with each side attempting to secure the best possible outcome at the expense of the other.
However, adopting a more integrative approach to labor-management negotiations could lead to improved outcomes for both parties. To promote this shift, I would suggest the following strategies:
1. Encourage open communication and information sharing: This can help build trust and foster a collaborative atmosphere, allowing both sides to understand each other's needs and find mutually beneficial solutions.
2. Focus on common interests: By identifying shared goals, both parties can work towards solutions that satisfy both labor and management interests, creating a win-win outcome.
3. Explore creative solutions: Going beyond the traditional confines of labor-management negotiations can help uncover innovative ideas that can benefit both parties.
4. Engage in joint problem-solving: This encourages a collaborative approach, where both parties actively participate in finding solutions that address their respective concerns.
By implementing these strategies, labor-management negotiations can transition from distributive to integrative, resulting in better outcomes for both parties and fostering a more cooperative working relationship.
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marsha incorporated has the following budgeted data for the coming year: cash balance, beginning $ 15,700 collections from customers 145,700 direct materials purchases 25,700 expenses: operating expenses 51,400 payroll 75,700 income taxes 6,000 other: machinery purchases 30,700 operating expenses include $20,700 depreciation for buildings and equipment. all purchases of materials are paid for in the period of purchase. the company requires a minimum cash balance of $25,000. required: compute the amount the company needs to finance or the excess cash available for marsha to invest
The ending cash balance is negative, it means that the company needs financing of $49,500 to meet its cash requirements for the year. Alternatively, if the company had a positive ending cash balance, it would have excess cash available for investment.
To compute the amount of financing needed or excess cash available for investment, we need to calculate the company's total cash inflows and outflows for the year.
Cash inflows:
Collections from customers = $145,700
Cash outflows:
Direct materials purchases = $25,700
Operating expenses (excluding depreciation) = $51,400
Payroll = $75,700
Income taxes = $6,000
Depreciation = $20,700
Machinery purchases = $30,700
Total cash outflows = $210,900
To determine the company's ending cash balance, we need to add the beginning cash balance to the total cash inflows and subtract the total cash outflows:
Beginning cash balance = $15,700
Total cash inflows = $145,700
Total cash outflows = $210,900
Ending cash balance = Beginning cash balance + Total cash inflows - Total cash outflows
Ending cash balance = $15,700 + $145,700 - $210,900
Ending cash balance = -$49,500
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which of the following is not true regarding government intervention?a. under the direct method of intervention, an appreciation of the dollar would be accomplished by exchanging dollars for foreign currencies. b. under indirect intervention, the fed would attempt to affect the dollar's value by indirectly influencing the factors that determine it, such as interest rates.
Answer: A
Under the direct method of intervention, an appreciation of the dollar would be accomplished by exchanging dollars for foreign currencies
Explanation:
I took this test.
you are purchasing a new machine that costs $12 million, and that has a 7 year expected life span. After 7 years, the estimated salvage value is $2 million. What is the yearly straight-line depreciation? (answer in MILLION dollars, but without the dollar sign, e.g. "0.42" is $0.42 million) Type your answer...
The yearly straight-line depreciation for the machine is $1.43 million.
The yearly straight-line depreciation for the new machine that costs $12 million and has an expected life span of 7 years with a salvage value of $2 million is calculated by subtracting the salvage value from the cost of the machine and dividing it by the expected life span. In this case, the calculation would be:
($12 million - $2 million) / 7 years = $1.43 million per year
Therefore, the yearly straight-line depreciation for the machine is $1.43 million.
Straight-line depreciation is a common method used to calculate the decrease in the value of assets over time. It assumes that the value of the asset decreases by an equal amount each year. In this case, the depreciation expense for the machine is spread out evenly over its expected life span of 7 years. The salvage value is also taken into account to determine the total amount of depreciation. The yearly straight-line depreciation can be useful for companies to determine the cost of owning and operating assets over their useful lives.
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Consider the following information on a portfolio of three stocks: State of Economy Probability of State of Economy Stock A Rate of Return Stock B Rate of Return Stock C Rate of Return Boom .15 .02 .32 .60Normal .60 .10 .12 .20Bust .25 .16 .11 . 35If the expected T-bill rate is 3.75 percent, what is the expected risk premium on the portfolio? a. 7.015% b. 3.750%c. 14.515% d. 10.765% e. None of the above
The expected risk premium on the portfolio is (a) 7.015%.
How to calculate the expected risk premium on the portfolio?To calculate the expected risk premium on the portfolio, we need to first calculate the expected return on the portfolio and subtract the risk-free rate.
The expected return on the portfolio can be calculated as the weighted average of the expected returns of each stock, where the weights are the probabilities of each state of the economy:
Expected return on the portfolio = (0.15 x 0.02 + 0.6 x 0.10 + 0.25 x 0.16) Stock A + (0.15 x 0.32 + 0.6 x 0.12 + 0.25 x 0.11) Stock B + (0.15 x 0.60 + 0.6 x 0.20 + 0.25 x 0.35) Stock C
= 0.0315 + 0.1455 + 0.2475
= 0.4245 or 42.45%
The expected risk premium on the portfolio is then:
Expected risk premium = Expected return on the portfolio - Risk-free rate
= 0.4245 - 0.0375
= 0.387 or 38.7%
Therefore, the answer is (a) 7.015%.
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Union Company is considering establishment of a zerobalance account. The firm currently maintains an average balance of $420,000 inits disbursement account. As compensation to the bank for maintaining the zerobalance account, the firm will have to pay a monthly fee of $1,000 and maintain a $300,000 non
The recommendation for Union Company is to maintain its current disbursement account.
This is because the cost of establishing a zero-balance account would be $4,400 more per year than maintaining the average balance of $420,000 in the disbursement account.
The opportunity cost of maintaining the $300,000 non-interest-earning deposit is calculated as follows:
Opportunity Cost = 12% x $300,000
Opportunity Cost = $36,000 per year
The total cost of the zero-balance account is calculated as follows:
Monthly fee = $1,000
Annual fee = $1,000 x 12 = $12,000
Opportunity Cost = $36,000 per year
Total cost = Annual fee + Opportunity Cost
Total cost = $12,000 + $36,000
Total cost = $48,000 per year
On the other hand, if the firm maintains an average balance of $420,000 in its disbursement account, it could earn interest income at a rate of 12% per year, as given in the question. The interest income is calculated as follows:
Interest Income = 12% x $420,000
Interest Income = $50,400 per year
Comparing the total cost of the zero-balance account and the interest income earned by maintaining the average balance, we can see that the total cost of the zero-balance account is $4,400 more per year than the interest income earned by maintaining the average balance. Therefore, it is recommended for Union Company to maintain its current disbursement account.
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i know, but they are a quick back of the napkin method that works for short payback periods. why would jennifer say that?
Jennifer may say that because the payback period method is a simple and intuitive way to evaluate the profitability of a project, especially for short-term investments. It is easy to understand and calculate, making it a quick back of the napkin method for initial project screening.
However, the payback period method has some limitations. It does not consider the time value of money, meaning that it does not account for the fact that money received in the future is worth less than money received today due to inflation and the opportunity cost of tying up capital.
Additionally, it does not consider cash flows beyond the payback period, meaning that it may not accurately reflect the long-term profitability of a project.
Therefore, while the payback period method can be useful for initial project screening, it should not be the sole criterion for investment decision-making. More comprehensive methods, such as net present value or internal rate of return, should be used to provide a more accurate picture of a project's profitability.
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How has JCP managed its working capital accounts over the past
eight quarters? Is there an opportunity to squeeze more cash from
any of these accounts?
JCPenney has managed its working capital accounts fairly well over the past eight quarters, with an emphasis on increasing inventory turnover.
Inventories have decreased from $3.1 billion in Q1 2017 to $2.2 billion in Q4 2018, while accounts receivable have increased from $1.7 billion to $2.2 billion over the same period. This indicates that the company has been able to collect money from its customers more quickly. Additionally, JCPenney has seen its short-term liabilities decrease from $2.7 billion to $2.0 billion, indicating that it has been able to pay its suppliers more slowly.
Overall, JCPenney has been able to increase its cash flow by managing its working capital accounts more efficiently. While there may be some opportunities to squeeze more cash from these accounts, it is important to be mindful of the company’s longer-term goals and objectives.
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Lindsay is living with her mother but looking to purchase her first home. She just graduated from Concordia and landed her first full-time job; she has no savings. The property she is eyeing is $150,000. She wants a conventional mortgage. She figures she can save $975 at the beginning of each month and earn 7% compounded monthly. Approximately, how many years will it take her to accumulate the minimum required down payment for a conventional mortgage?
a) 3.6 years
b) 4.32 years
c) 1.98 years
d) 2.82 years
e) 2.35 years
It will take her 3.6 years to accumulate the minimum required down payment for a conventional mortgage. Option A is correct
Determining minimum required down payment for a conventional mortgage.To figure out how long it will take Lindsay to accumulate the minimum required down payment, we need to determine the amount of the down payment and then calculate how many periods it will take for her savings to reach that amount.
For a conventional mortgage, the minimum down payment is usually 20% of the purchase price of the property. Therefore, Lindsay needs to save 20% of $150,000, which is $30,000.
We can use the formula for the future value of an annuity to determine how long it will take for Lindsay's savings to grow to $30,000. The formula is:
FV = Pmt x [(1 + r)^n - 1] / r
where FV is the future value of the annuity, Pmt is the payment amount, r is the interest rate per period, and n is the number of periods.
Plugging in the given values, we get:
$30,000 = $975 x [(1 + 0.07/12)^n - 1] / (0.07/12)
Simplifying the expression, we get:
(1 + 0.07/12)^n = (1 + 0.07/12)^(12 x n) = 1.2298
n = log(1.2298) / log(1 + 0.07/12) = 44.98
Therefore, it will take Lindsay approximately 44.98 / 12 = 3.74 years to accumulate the minimum required down payment.
Rounding to the nearest decimal, we get 3.6 years, which is answer choice A.
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Dungeoness Corporation has excess cash of $2,400 that it would like to distribute to shareholders through a share repurchase. Current earnings are $1.5 per share, and the stock currently sells for $32 per share. There are 230 shares outstanding. Ignore taxes and other imperfections. If Dungeoness Corp. goes with the share repurchase, what will the price per share be? How many shares will they buy in the repurchase? What are earnings per share (EPS) and the price earnings (P/E) ratio? Enter your answers rounded to 2 DECIMAL PLACES. Price per share = Number Number of shares repurchased = Number Earnings per Share = Number Price earnings (P/E) ratio = Number
The price per share after the repurchase would be $32.92. Dungeoness Corp. will buy back 72 shares in the repurchase. The EPS would increase to $1.58 and the P/E ratio would decrease to 20.81.
To calculate the price per share after the repurchase, we can use the formula:
New price per share = (Current market value * Current number of shares - Repurchase amount) / New number of shares
Plugging in the given values, we get:
New price per share = (32 * 230 - 2400) / (230 - 72) = $32.92 (rounded to 2 decimal places)
To calculate the number of shares repurchased, we divide the repurchase amount by the current market price per share:
Number of shares repurchased = $2,400 / $32 = 75
However, since there are only 230 shares outstanding, the actual number of shares repurchased would be limited to the number of outstanding shares, which is 72.
To calculate the new EPS, we divide the total earnings by the new number of shares:
New EPS = ($1.5 * 230) / (230 - 72) = $1.58 (rounded to 2 decimal places)
To calculate the new P/E ratio, we divide the new price per share by the new EPS:
New P/E ratio = $32.92 / $1.58 = 20.81 (rounded to 2 decimal places)
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A company just paid a dividend of $2.89 per share. Dividends are expected to grow at a rate of 2% per year into the foreseeable future. An investor believes that given the riskiness of this investment that the appropriate rate of return is 12%. What is the most this investor should be willing to spend (intrinsic value) for a share of this common stock?
The most this investor should be willing to spend (intrinsic value) for a share of this common stock is $29.478.
To calculate the intrinsic value of a share of this common stock, we will use the Gordon Growth Model (Dividend Discount Model). The terms included in this calculation are dividend, growth rate, and required rate of return. Here is the step-by-step explanation:
1. Dividend (D0): The company just paid a dividend of $2.89 per share.
2. Growth Rate (g): Dividends are expected to grow at a rate of 2% per year.
3. Required Rate of Return (k): The investor believes that the appropriate rate of return is 12%.
Now, we can calculate the intrinsic value using the Gordon Growth Model formula: Intrinsic Value = (D0 * (1 + g)) / (k - g)
Plugging in the values, we have,
Intrinsic Value = (2.89 * (1 + 0.02)) / (0.12 - 0.02)
Intrinsic Value = (2.89 * 1.02) / 0.1
Intrinsic Value = 2.9478 / 0.1
Intrinsic Value = $29.478
So, the most this investor should be willing to spend for a share of this common stock is $29.478.
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The investor should be willing to spend up to $32.11 for a share of this common stock.
To determine the intrinsic value of the stock, we can use the dividend discount model, which calculates the present value of future dividends. The formula for this model is:
D / (r - g) equals intrinsic value
Where:
D is the current share dividend.
r is the required rate of return for the investor.
g is the anticipated yearly dividend growth rate.
Plugging in the given values, we get:
Intrinsic value = 2.89 / (0.12 - 0.02) = $32.11
Therefore, the investor should be willing to spend up to $32.11 for a share of this common stock.
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toldness products, incorporated, has a connector division that manufactures and sells a number of products, including a standard connector that could be used by another division in the company, the transmission division, in one of its products. data concerning that connector appear below: capacity in units 57,000 selling price to outside customers $ 67 variable cost per unit $ 22 fixed cost per unit (based on capacity) $ 29 the transmission division is currently purchasing 11,000 of these connectors per year from an overseas supplier at a cost of $58 per connector. what is the maximum price that the transmission division should be willing to pay for connectors transferred from the connector division?
Based on the information provided, we can calculate the total cost of producing the standard connector by multiplying the variable cost per unit by the capacity, and adding the fixed cost per unit. The total cost would be $2,235,000 (=$22 x 57,000 + $29 x 57,000).
To determine the maximum price that the transmission division should be willing to pay for connectors transferred from the connector division, we need to compare the cost of purchasing from the overseas supplier with the cost of producing the connector in-house.
If the transmission division were to purchase 11,000 connectors from the connector division, the total cost would be $849,750 (=$2,235,000 / 57,000 x 11,000). Dividing this by the number of units purchased (11,000) gives us a cost per unit of $77.25.
Therefore, the maximum price that the transmission division should be willing to pay for connectors transferred from the connector division is $77.25. Any higher price would result in the transmission division paying more than it currently does to the overseas supplier.
In conclusion, it would make sense for the transmission division to purchase connectors from the connector division if the price is lower than $77.25 per unit.
This would not only save the transmission division money, but it would also benefit the company as a whole by promoting inter-divisional cooperation and reducing dependence on overseas suppliers.
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use the table below to calculate the accounting and economic profit for abner's apple art. item amount total revenue $220 costs apples $30 utilities $20 lease $20 abner's forgone wages $70 numbers in the table are in thousands what is abner's apple art's accounting profit? accounting profit
Abner's Apple Art's accounting profit is $150,000.
To calculate the accounting profit for Abner's Apple Art, we need to subtract total explicit costs from total revenue.
Total explicit costs are the costs that involve direct monetary payments, such as the cost of apples, utilities, and lease. They are equal to $30k + $20k + $20k = $70k
Accounting profit = total revenue - total explicit costs
Accounting profit = $220k - $70k
Accounting profit = $150k
It's important to note that accounting profit only takes into account explicit costs and does not consider implicit costs, such as forgone wages, which are the opportunity costs of running the business. To calculate economic profit, we would need to subtract both explicit and implicit costs from total revenue.
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question government policies, in addition to patent protection, can spur innovation that includes responses tax breaks for companies that invest in research and development. tax breaks for companies that invest in research and development. reduction of negative externalities. reduction of negative externalities. government regulations that require innovative products.
Tax breaks for companies that invest in research and development incentivize innovation by providing financial relief for companies who are engaging in research and development.
This allows companies to invest more of their resources into innovation, which can spur new products, processes, and services. Government regulations that require innovative products can also help spur innovation as it sets a benchmark for companies to strive for in order to remain competitive.
Finally, reduction of negative externalities, such as pollution, can also help spur innovation as it encourages companies to come up with solutions to reduce or eliminate these externalities while also providing an economic incentive. In conclusion, government policies such as tax breaks, regulations, and reduction of externalities can all help to spur innovation in the form of new products and services.
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Explore the annual report and financial statements of M&S, Annual Report 2021 (marksandspencer.com)
Why do you think it is important that financial statements are compiled using a standard framework?
Discuss whether or not you think M&S’s financial statements illustrate the following qualitative characteristics of financial information:
o Relevance
o Faithful representation
o Comparability
o Understandability
M&S's financial statements seem to meet the qualitative characteristics of financial information, and the company provides useful information to its stakeholders.
Using a standard framework is crucial for financial statements to ensure consistency, transparency, and comparability among different companies' financial reports.
By adopting a standardized accounting framework, financial statements can provide useful information to various stakeholders, including investors, creditors, and regulators. It also facilitates benchmarking, which enables stakeholders to compare different companies' financial performance over time.
Regarding M&S's financial statements, they seem to illustrate the qualitative characteristics of financial information. The financial statements provide relevant information, such as the financial performance of the company, its financial position, and cash flows
The financial statements also exhibit comparability, as M&S provides financial information in a standardized format that allows stakeholders to compare the company's performance to its peers.
Lastly, M&S's financial statements are easily understandable, and the company provides sufficient disclosures to help stakeholders interpret the financial information accurately.
Overall, M&S's financial statements seem to meet the qualitative characteristics of financial information, and the company provides useful information to its stakeholders.
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"Layer cake federalism in which each layer of government is distinct from the others and maintains its own power and authority, is the illustration for A coercive federalism B. cooperative federalism
C. federalism D. dual federalism
Dual federalism, also known as layer cake federalism, refers to the system of government in which the federal and state governments operate as separate and distinct entities, with each maintaining its own power and authority within its own sphere of influence. This means that the federal government has its own set of powers and responsibilities, while the state governments have theirs, and neither can encroach on the other's authority.
In dual federalism, the federal government and state governments are seen as separate entities with their own powers and jurisdictions, and each level of government maintains its own sovereignty and authority. This concept was prominent during the early years of the United States, where the federal government's powers were limited and defined, and state governments retained significant autonomy and authority within their respective spheres of influence.
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Effectively communicating the strategic vision down the line to lower-level managers and employees has the value of
A) not only explaining "where we are going and why" but, more importantly, also inspiring and energizing company personnel to unite to get the company moving in the intended direction.
B) helping company personnel understand why making a profit is so important.
C) making it easier for top executives to set strategic objectives.
D) helping lower-level managers and employees better understand the company's business model.
E) All of these choices are correct.
Effectively communicating the strategic vision down the line to lower-level managers and employees has the value of making it easier for top executives to set strategic objectives and all of these choices are correct.
This is because clear communication ensures that everyone in the organization understands the overall goals, objectives, and priorities, which promotes alignment and consistency in decision-making across different levels of the organization.
When lower-level managers and employees are well-informed about the strategic vision, they can better align their individual and team goals with the organization's priorities.
This alignment allows them to contribute more effectively to the achievement of strategic objectives, making it easier for top executives to set and achieve their targets.
Moreover, effective communication fosters a sense of ownership and commitment among employees, leading to increased motivation, engagement, and productivity.
It also allows for better monitoring and evaluation of progress, as lower-level managers can report on the status of their teams' efforts toward achieving strategic objectives.
In conclusion, effective communication of the strategic vision to lower-level managers and employees is essential for the successful execution of an organization's strategy.
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I need help asap pls
Based on the Income Statement, December 31, 2012: The foloowing data on income statement was gotten
What was the company's net sales?Net Sales = Sales - Sales returns and allowances = $9,450.00 - $673.41 = $8,776.59
Therefore, the company's net sales were $8,776.59.
What was the company's gross margin?Gross Margin = Net Sales - Cost of Goods sold = $8,776.59 - $4,395.00 = $4,381.59
Therefore, the company's gross margin was $4,381.59.
What was the company's net income after taxes?Net Income after taxes = Net Income before taxes - Federal Income Tax = $1,760.59 - $528.18 = $1,232.41
Therefore, the company's net income after taxes was $1,232.41.
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when monster energy drinks was first entering the retail market, certain retails were not willing to take the risk of taking ownership of the product and using valuable shelf space on a new and unproven product. in order to increase demand and encourage retailers to sell monster energy drinks, the brand used a pull communication strategy. this entails: select one: a. it uses uses digital marketing instead of direct marketing. b. the communications are directed at end-users. c. it uses brand-image advertising d. it motivates retailers to carry a particular product or brand. e. it aims to build the interest, purchase, inventory, and marketing efforts of its intermediaries.
The pull communication strategy used by Monster Energy Drinks was to motivate retailers to carry the product. This strategy involves creating brand-image advertising and directing communications to the end-users.
This is done to build the interest, purchase, inventory, and marketing efforts of the intermediaries. This strategy utilizes digital marketing instead of direct marketing to create a demand for the product among the retailers.
By creating an attractive brand-image and motivating retailers to carry the product, it can increase the sales of the product and create a successful retail presence for Monster Energy Drinks.
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Fool’s Fuel is the only gas station in town. There is not another gas station within 50 miles, making Fool’s Fuel a monopoly. It faces the following demand, P(Q) = 20 – Q, where Q is litters of gasoline, and a cost of C(Q) = 2Q + ¼Q2 + 6. a) What quantity will this monopoly choose and what price would it charge per litter? b) What price and quantity would a competitive market reach. Show this on a well labeled graph. c) How much producer surplus will this monopoly make. Show this on your graph. d) How much deadweight loss will this monopoly create. Show this on your graph.
a) Q=6.67 litres and $13.33 per litre
b) Q=10 litres and $10 per litre
c) The producer surplus for this monopoly is $33.34
d) The deadweight loss is -$11.08
a) As a monopoly, Fool’s Fuel will aim to maximize its profit. To do so, it will choose the quantity where its marginal revenue (MR) equals its marginal cost (MC). The marginal revenue for this monopoly is given by MR(Q) = 20 - 2Q, while the marginal cost is given by MC(Q) = 2 + ½Q. Setting MR equal to MC, we get:
20 - 2Q = 2 + ½Q
Solving for Q, we get Q = 6.67 liters. Plugging this value into the demand equation, we get the price charged by Fool’s Fuel:
P(Q) = 20 – Q = 20 – 6.67
= $13.33 per liter.
Therefore, this monopoly will choose to produce and sell 6.67 liters of gasoline at a price of $13.33 per liter.
b) In a competitive market, the price and quantity are determined by the intersection of the demand and supply curves. However, in this case, we do not have a supply curve, so we need to assume one.
Let’s assume that the supply curve for gasoline is given by the same cost function as the monopoly,
C(Q) = 2Q + ¼Q2 + 6.
The market demand is the same as the monopoly, P(Q) = 20 – Q. Setting demand equal to supply, we get:
20 – Q = 2Q + ¼Q2 + 6
Solving for Q, we get Q = 10 liters.
Plugging this value into the demand equation, we get the market price:
P(Q) = 20 – Q = 20 – 10
= $10 per liter.
Therefore, in a competitive market, the quantity produced and sold would be 10 liters at a price of $10 per liter.
c) The producer surplus for the monopoly is the difference between the price it charges and the marginal cost of production, integrated over the quantity produced. In this case, we can use the formula for the area of a triangle to calculate the producer surplus:
Producer surplus = (P – MC) * Q / 2
At the monopoly quantity of 6.67 liters, the marginal cost is MC(6.67) = 2 + ½ * 6.67
= $5.
The price charged by the monopoly is $13.33. Plugging these values into the formula, we get:
Producer surplus = (13.33 – 5) * 6.67 / 2
= $33.34
Therefore, the producer surplus for this monopoly is $33.34.
d) Deadweight loss is the loss of economic efficiency that occurs when the monopoly reduces output and increases price compared to a perfectly competitive market. In this case, we can calculate the deadweight loss as the difference between the consumer surplus and the producer surplus, integrated over the quantity produced.
The consumer surplus is the area under the demand curve and above the price charged by the monopoly. At the monopoly quantity of 6.67 liters, the price charged is $13.33. The demand equation is P(Q) = 20 – Q. Plugging these values into the formula for the area of a triangle, we get:
Consumer surplus = (20 – 13.33) * 6.67 / 2
= $22.26
Therefore, the deadweight loss is:
Deadweight loss = Consumer surplus – Producer surplus
Deadweight loss = $22.26 - $33.34
= -$11.08
This negative value indicates that there is actually a net gain in economic efficiency due to the monopoly, rather than a loss. This may seem counterintuitive, but it occurs because the monopoly is able to produce at a lower cost than a competitive market due to economies of scale.
However, there is still a transfer of surplus from consumers to producers, which is a social welfare loss.
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Surgical Supplies Corporation just Paid a $1.67 dividend last year. The dividend is expected to grow at growth rate of 20 percent over the next three years. It will then grow at normal and constant rate of 5 persent for the foeseeable future. Assuming a required rate of return of 12%, compute the price of the stock.
The price of the stock is $100.32.
How can we find the stock price?Using the dividend discount model:
P = D / (r - g)
where P is the price of the stock, D is the dividend, r is the required rate of return, and g is the growth rate.
For the first three years, the dividends are:
D1 = D0 * (1 + g) = $1.67 * (1 + 0.20) = $2.004
D2 = D1 * (1 + g) = $2.004 * (1 + 0.20) = $2.4048
D3 = D2 * (1 + g) = $2.4048 * (1 + 0.20) = $2.88576
After year 3, the dividend will grow at a constant rate of 5% per year. Thus, the next dividend after year 3 is:
D4 = D3 * (1 + 0.05) = $2.88576 * 1.05 = $3.03005
The required rate of return is 12%, so:
r = 0.12
Now, we can use the formula to calculate the price of the stock:
P = ($2.004 / (1 + 0.12)^1) + ($2.4048 / (1 + 0.12)^2) + ($2.88576 / (1 + 0.12)^3) + ($3.03005 / (0.12 - 0.05) / (1 + 0.12)^3)
P = $2.004 / 1.12 + $2.4048 / 1.2544 + $2.88576 / 1.4049 + $3.03005 / (0.12 - 0.05) / 1.4049
P = $1.7857 + $1.9161 + $2.0559 + $94.5632
P = $100.3209
Therefore, the price of the stock is $100.32.
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