An unfinished desk is produced for $36.00 and sold for $65.00. A finished desk can be sold for $75.00. The additional processing cost to complete the finished desk is $5.95. What is the differential revenue if you process further

Answers

Answer 1

Answer:

Differential revenue from further processing = $4.05

Explanation:

A business should process further a product if the additional revenue from the split-off point is greater than than the further processing cost.  

Also note that all cost incurred up to the split-off point are irrelevant to the decision to process further .i.e $36 irrelevant to the decision to process further

The differential revenue if the desk is processed further would be the difference between the additional revenue from further process and the further processing cost.

                                                                                  $

Sales price after the split-off point                         75

Sales price at the split-off point                               65

Additional sales revenue                                         10

Further processing cost                                       (5.95)

Differential revenue from further processing        4.05

Differential revenue from further processing = $4.05


Related Questions

Blue Cab Company had 69,000 shares of common stock outstanding on January 1, 2021. On April 1, 2021, the company issued 39,000 shares of common stock. The company had outstanding fully vested incentive stock options for 14,500 shares exercisable at $11 that had not been exercised by its executives. The end-of-year market price of common stock was $32 while the average price for the year was $31. The company reported net income in the amount of $364,915 for 2021. What is the diluted earnings per share (rounded)

Answers

Answer:

$3.38

Explanation:

The diluted earnings per share is calculated as;

First, we need to calculate the weighted average outstanding shares.

Weighted average outstanding share is

= Common shares + (Issued shares × 9/12[April - December] + [(Issued shares - Shares exercisable)

= 69,000 shares + (39,000 shares × 9/12) + ( 14,750* - 5,145*)

= 69,000 + 29,250 + 9,605

= 107,855

Therefore, the diluted earnings per share is;

= Net income / Weighted average outstanding shares

= $364,915 / 107,855

= $3.38

Note : (14,500 shares × 11) / 31

= 5,145

Byrd Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would have 205,000 shares of stock outstanding. Under Plan II, there would be 125,000 shares of stock outstanding and $1.73 million in debt outstanding. The interest rate on the debt is 8 percent and there are no taxes. a. Use MM Proposition I to find the price per share. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the value of the firm under each of the two proposed plans? ((Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.)

Answers

Answer:

a) $21.63

b) $4,433,125

Explanation:

plan I, total stocks outstanding = 205,000

plan II, total stocks outstanding = 125,000, and $1,730,000 in debt ($1,730,000 x 8% = $138,400 in interests)

under MM proposition I, a firm's total value is equal whether it uses external financing (debt) or not:

205,000P₀ = 125,000P₀ + $1,730,000

205,000P₀ - 125,000P₀ = $1,730,000

80,000P₀ = $1,730,000

P₀ = $1,730,000 / 80,000 = $21.625 = $21.63

the firm's total value = $21.625 x 205,000 = $4,433,125

According to the CAPM, what is the market risk premium given an expected return on a security of 15.8%, a stock beta of 1.1, and a risk-free interest rate of 7%? Multiple Choice 7.70% 6.05% 7.00% 8.00%

Answers

Answer:

The risk premium on market is 8%

Explanation:

The CAPM or Capital Asset Pricing Model is used to calculate the required rate of return on a stock which is the minimum return that is expected or required by the investors to invest in a stock based on its systematic risk as measured by the beta of the stock.

The formula to calculate r under the CAPM is,

r = rRF + Beta * rpM

Where,

rRF is the risk free raterpM is the risk premium on market

To calculate the risk premium on market, we will input the available values for r, rRF and beta in the equation above.

0.158 = 0.07 + 1.1 * rpM

0.158 - 0.07 = 1.1 * rpM

0.088 / 1.1 = rpM

rpM = 0.08 or 8%

So, the risk premium on market is 8%

A firm has the following gross requirements for Item OF. Ordering costs are $60 per order and carrying costs are $0.50 per period.

Item F Period
LT: 1 1 2 3 4
Gross Requirements 60 40 80 60
Schedule Receipts
Project on Hand 100
Net Requirements
Planned Order Receipts
Planned Order Releases

If EOQ lot sizing is used the minimum order quantity would be:_______

a. 85
b. 100
c. 120
d. 150

Answers

Answer:

c. 120

Explanation:

The economic order quantity is the minimum amount of inventory that a seller must keep to demand and lower the holding cost. The formula for Economic order quantity is represented by the formula:

EOQ = [tex]\sqrt{\frac{2*Demand*Ordering Cost}{Holding cost} }[/tex]

EOQ = [tex]\sqrt{\frac{2*240*60}{0.5} }[/tex]

EOQ = 120

Garcia Co. sells snowboards. Each snowboard requires direct materials of $105, direct labor of $35, and variable overhead of $50. The company expects fixed overhead costs of $645,000 and fixed selling and administrative costs of $111,000 for the next year. It expects to produce and sell 10,500 snowboards in the next year.

Required:
What will be the selling price per unit if Garcia uses a markup of 15% of total cost?

Answers

Answer:

Selling price = $301.3

Explanation:

The selling price would be determined by adding the total unit cost to the mark- up.

Mark up is the proportion of cost that is to be earned as profit.

Selling price = Total unit cost + Profit

Profit = 25% × unit cost

Selling price = Unit cost + Mark-up

Selling price = Unit cost + (15%× unit cost)

Total unit cost =Variable cost + unit fixed cost

Total fixed cost = 645,000 +  111,000 = 756,000

Unit fixed cost = $756,000 /10,500 =×72

Total unit cost = 105 + 35 + 50 + 72 = 262

Selling price = 262 + ( 15% + 262) = 301.3

Selling price = $301.3

Many of today’s ____________________ systems concentrate on hiring and managing existing employees to get the total potential of the human talent in the organization.

Answers

Answer:

The correct answer is: Human Resource Management

Explanation:

To begin with, the Human Resource Management Systems are the ones that focus on the managing of the human factor inside the organization with the purpose of making easier the processes of hiring, collecting data and more. So therefore that this systems concentrate on hiring and managing existing employees to get the total potential of the human talent in the organization by having a better and more organized place in where the managers can deal with those issues and other stuff related to that.

Assume you have a margin account with a 50% initial margin. You purchase 100 shares of stock at $80 per share. The price increases to $100 per share. What is the net value of your investment (margin) now

Answers

Answer:

Net value of the investment (margin) is $6,000

Explanation:

The initial margin = (100 shares * $80) * 50%

The initial margin = $4,000

Increase in the Margin value = 100 shares* ($100-$80)

Increase in the Margin value = 100 shares * $20

Increase in the Margin value =$2,000

Net value of the investment (margin) = $4,000 + $2,000

Net value of the investment (margin) = $6,000

Required information [The following information applies to the questions displayed below.] Simon Company’s year-end balance sheets follow.
At December 31 2017 2016 2015
Assets Cash $ 31,800 $ 35,625 $ 37,800
Accounts receivable, net 89,500 62,500 50,200
Merchandise inventory 112,500 82,500 54,000
Prepaid expenses 10,700 9,375 5,000
Plant assets, net 278,500 255,000 230,500
Total assets $ 523,000 $ 445,000 $ 377,500
Liabilities and Equity
Accounts payable $ 129,900 $ 75,250 $ 51,250
Long-term notes payable secured by
mortgages on plant assets 98,500 101,500 83,500
Common stock, $10 par value 163,500 163,500 163,500
Retained earnings 131,100 104,750 79,250
Total liabilities and equity $ 523,000 $ 445,000 $ 377,500
The company’s income statements for the years ended December 31, 2017 and 2016, follow.
For Year Ended December 31 2017 2016
Sales $ 673,500 $ 532,000
Cost of goods sold $ 411,225 $ 345,500
Other operating expenses 209,550 134,980
Interest expense 12,100 13,300
Income taxes 9,525 8,845
Total costs and expenses 642,400 502,625
Net income $ 31,100 $ 29,375
Earnings per share $ 1.90 $ 1.80
Calculate the company’s long term risk and capital structure positions at the end of 2015 and 2014 by computing the following ratios.
(1) Debt and equity ratios.
(2) Debt to equity ratios.

Answers

Answer:

(1) Debt and equity ratios.  (I guess the years should be 2017 and 2016)

debt ratio = liabilities / assets

equity ratio = stockholder's equity / assets

debt ratio 2016 = $155,750 / $411,250 = 37.87%

debt ratio 2017 = $202,575 / $484,000 = 41.85%

equity ratio 2016 = $255,500 / $411,250 = 62.13%

equity ratio 2017 = $281,425 / $484,000 = 58.15%

(2) Debt to equity ratios. (2017 and 2016)

debt to equity ratio = liabilities / stockholders' equity

debt to equity ratio 2016 = $155,750 / $255,500 = 60.96%

debt to equity ratio 2017 = $202,575 / $281,425 = 71.98%

Explanation:

average liabilities 2017 = ($129,900 + $75,250 + $98,500 + $101,500) / 2 = $202,575

average liabilities 2016 = ($75,250 + $51,250 + $101,500 + $83,500) / 2 = $155,750

average assets 2017 = ($523,000  + $445,000) / 2 = $484,000

average assets 2016 = ($445,000 + $377,500) / 2 = $411,250

average stockholders' equity 2017 = $484,000 - $202,575 = $281,425

average stockholders' equity 2016 = $411,250 - $155,750 = $255,500

Suppose we have the following information for 2008: Potential output: $17 trillion Actual output: $16 trillion Actual Deficit: $ 500 billion Tax Rate: 15% What is the structural deficit in 2008

Answers

Answer:

The structural budget in 2008 is $350 billion

Explanation:

Actual deficit = Government spending - Tax Revenue Collection

i.e Actual deficit = G-T

T = (Tax rate) (Actual output)

$500 billion = G - (0.15)($16 trillion)

$500 billion = G - 2400 billion

G =  $500 billion + 2400 billion

G =  $2900 billion

Thus, Government spending is $2900 billion

Structural deficit = G - T'

T' = (Tax rate)(Potential output)

T' = (0.15)(17000 billion)

T' = $2550 billion

Structural deficit = G - T'

Structural deficit = $2900 billion - $2550 billion

Structural deficit = $350 billion

Thus, the structural budget in 2008 is $350 billion

Kenneth Arrow discussed two important situations in which profit maximization can be socially inefficient. One of these occurs when

Answers

Answer:

Explanation:

One of these occurs when costs are not paid for, as in pollution, the other is when there is an imbalance of knowledge between buyer and seller. Pollution  can be a consequence that cannot be solved with money and can also be socially irresponsible for a company. On the other hand, an imbalance of knowledge can prevent a company from profit maximization if the seller does not understand the product or services that the buyer is selling.

The master budget of Sheffield Corp. shows that the planned activity level for next year is expected to be 50000 machine hours. At this level of activity, the following manufacturing overhead costs are expected: Indirect labor$730000 Machine supplies200000 Indirect materials220000 Depreciation on factory building120000 Total manufacturing overhead $1270000 A flexible budget for a level of activity of 60000 machine hours would show total manufacturing overhead costs of

Answers

Answer:

Total overhead= $1,500,000

Explanation:

Giving the following information:

First, we need to separate the variable overhead and the fixed overhead:

Variable overhead:

Indirect labor 730,000

Machine supplies 200,000

Indirect materials 220,000

Total variable overhead= $1,150,000

Fixed overhead:

Depreciation on factory building $120,000

Now, we need to calculate the unitary variable overhead:

unitary variable overhead= 1,150,000/50,000= $23

Finally, the total overhead for 60,000 units:

Total overhead= 23*60,000 + 120,000

Total overhead= $1,500,000

The XYZ Corporation pays no cash dividends currently and is not expected to for the next five years. Its latest EPS was $18.00, all of which was reinvested in the company. The firm’s expected ROE for the next five years is 16% per year, and during this time it is expected to continue to reinvest all of its earnings. Starting in year 6, the firm’s ROE on new investments is expected to fall to 11%, and the company is expected to start paying out 30% of its earnings in cash dividends, which it will continue to do forever after. DEQS’s market capitalization rate is 24% per year. a. What is your estimate of XYZ’s intrinsic value per share? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Answers

Answer:

current intrinsic value per stock = $26.35

Explanation:

year                      dividend              EPS

0                              0                       $18

1                               0                       $20.88

2                              0                       $24.22

3                              0                       $28.10

4                              0                       $32.59

5                              0                       $37.81

6                              $12.59              $41.97

growth rate up to year 5 = 16%

ROE growth rate starting year 6 = 11%

dividend growth rate starting year 6 = 11% x (1 - 30%) = 7.7%

cost of equity = 24%

horizon value at year 5 = $12.59 / (24% - 7.7%) = $77.24

current intrinsic value per stock = $77.24 / 1.24%⁵ = $26.35

Midyear on July 31st, the Digby Corporation's balance sheet reported: Total Assets of $205.498 million Total Common Stock of $6.350 million Cash of $10.050 million Retained Earnings of $44.117 million. What were the Digby Corporation's total liabilities?
a) $165.081 million.
b) $144.981 million.
c) $155.031 million.
d) $161.381 million.

Answers

Answer:

The value of total liabilities is $155.031 million and option c is the correct answer.

Explanation:

The basic accounting equation states that the total value of assets is always equal to the sum of the total value of liabilities and the total value of equity.

Thus, we can say that,

Total Assets = Total Liabilities + Total Equity

The equity part can contain various components. In the given question it has two components namely Common Stock and retained earnings.

205.498 = Total Liabilities + (6.350 + 44.117)

205.498 = Total Liabilities + 50.467

205.498 -  50.467 = Total Liabilities

Total Liabilities = $155.031

Founder of Vanguard, Jack Bogle, believes that all investors should buy stock indices. Group of answer choices He believes in strong form market efficiency. He believes in semi-strong form market efficiency. He believes in weak form market efficiency. He believes markets are not efficient.

Answers

Answer:

Correct Answer:

1. He believes in strong form market efficiency.

Explanation:

Jack Bogle believed that, in a situation where people simply buy an entire group of stocks as a result of investors investing money into the index fund, it will create a strong market. That is, if every investor in the world only purchased the same index fund, then the market of buyers and sellers would no longer set the fair market price of the stocks in the stock market.

When Production decreases what is a very likely possibility? a hire new workers b expand production c purchase new equipment d downsizing

Answers

The correct answer is D. Downsizing

Explanation:

In businesses, the term "downsizing" is used to describe a reduction in the number of workers or the total labor force. This often means non-essential workers are fired or even complete departments are eliminated. Moreover, this is likely to occur if the business expenses are higher than its profits or if the production decreases because in both situations fewer workers are needed to eliminate unnecessary expenses. In this context, if production decreases it is likely downsizing occurs.

The classic quote from the movie Field of Dreams, "If you build (produce] it
they will come [purchase]," can be used to describe
O Say's Law
O Keynesian economic policy
an economy driven by a strong aggregate demand

Answers

The correct answer is A. Say's Law

Explanation:

Say's Law proposed by the economist Jean-Baptiste Say establishes the supply (availability of a product) or the production itself is the factor that creates demand (customers willing to buy the product). For example, the production of a new model of cellphone or computer makes people want to buy the new model. This idea is expressed by the quote "If you build (produce] it  they will come [purchase]" because in the quote it is explained the production of something make people go to buy that product.

The following data was collected from the manufacturing of an auto component. It represents the diameter (in mm) of that component. What is the LCL for a control chart using this data (z=3)?Sample Obs 1 Obs 2 Obs 3 Obs 41 10 12 12 142 12 11 13 163 11 13 14 144 11 10 7 85 13 12 14 13

Answers

Answer:

9.37

Explanation:

The computation of LCL for a control chart is shown below:-

Sample  Obs 1  Obs 2    Obs 3   Obs 4   Mean observation    Range

1                 10      12           12          14              12                         4

2                 12     11            13          16              13                          5

3                 11      13            14           14              13                          3

4                 11       10            7            8               9                          4

5                13     12             14            13             13                         2

For computing the mean observation  and range we will use the below formulas

Mean observation = ( Obs 1 + Obs 2 + Obs 3 + Obs 4) ÷ 4

Range = Highest value - Lowest value

[tex]LCL = \bar{\bar{X}} - A2 \bar{R}[/tex]

[tex]\bar X[/tex] =  ( 12 + 13 + 13 + 9 + 13 ) ÷ 5

= 12

[tex]\bar R[/tex] =  ( 4 + 5 + 3 + 4 + 2 ) ÷ 5

= 3.6

Since we found the value of A2 with the help of constants table for control charts for a 4 subgroup size.

A2  = 0.729

[tex]LCL = \bar{\bar{X}} - A2 \bar{R}[/tex]

12 - 0.729 × 3.6

= 9.37

The amortization of bond premium on long-term debt should be presented in a statement of cash flows (using the indirect method for operating activities) as a(n)

Answers

Answer:

Operating Activity

Explanation:

The Indirect method, reconciles the Operating Profit to the Operating Cash Flow by adjusting the following items (1) Non Cash flow items previously added or deducted from Operating Profit and (2) Changes in Working Capital items.

Amortization of bond premium is an item of non-cash flow that was previously deducted from Operating Profit and needs to be added back.

Time Again LLC produces and sells a mantel clock for $150.00 per unit. In​ 2017, 43,000 clocks were produced and 36,000 were sold. Other information for the year​ includes: Direct materials $43.00 per unit Direct manufacturing labor $8.00 per unit Variable manufacturing costs $4.00 per unit Sales commissions $15.00 per part Fixed manufacturing costs $63.00 per unit Administrative​ expenses, all fixed $38.50 per unit What is the inventoriable cost per unit using absorption​ costing?

Answers

Answer:

Unitary cost= $118

Explanation:

Giving the following information:

Production= 43,000

Direct materials $43.00 per unit

Direct manufacturing labor $8.00 per unit

Variable manufacturing costs $4.00 per unit

Fixed manufacturing costs $63.00 per unit

The absorption costing method includes all costs related to production, both fixed and variable. The unit product cost is calculated using direct material, direct labor, and total unitary manufacturing overhead.

Unitary cost= 43 + 8 + 4 + 63

Unitary cost= $118

A company has a net cash inflow from operating activities of $793,000, a net cash outflow of $58,000 from investing activities and a net cash inflow of $100,800 from financing activities. The company paid $128,000 in interest, $188,500 in income taxes, and $204,000 in cash dividends. Which of the following statements about the statement of cash flows is not correct?a. The statement of cash flows will show a net increase in cash and cash equivalents of $838, 500. b. If the direct method is used, the $125,000 of interest paid and the $187,000 of income taxes paid will be reported in the cash flows from operating activities. c. The cash dividends of $201,000 paid will be reported as a cash outflow in the cash flow from investing activities section. d. Supplemental disclosures required for a company using the indirect method include the amount of interest and the amount of income taxes paid.

Answers

Answer:

Incorrect Statement about the Statement of Cash Flows:

c. The cash dividends of $201,000 paid will be reported as a cash outflow in the cash flow from investing activities section.

Explanation:

Cash dividends of $201,000 will be reported as a cash outflow in the financing activities section and not the investing activities section.

Statement of Cash Flows is broadly divided into three, the operating, investing, and financing activities sections.  The operating activities section show the cash flows from the normal business of the enterprise.  The investing activities section shows the acquisition and disposal of investments made by the company in cash.  While, the financing section shows the inflow and outflow of cash resulting from the funding of the business by stockholders and noncurrent creditors.

Think of two methods used to improve productivity in business. Discuss your reasons for choosing these methods

Answers

Answer:

Actually we have 2 method of launching a product. First simultaneously which isn't the best way. Second is sequentially in one market after anther. And this method seems to be more useful than others.

Answer:

Planning is the first one because I believe this can improve productivity in everything.  Giving employees a schedule of what they day should look like is a great idea to give them an idea on what their time distribution should be.  It also makes their day less stressful without having to worry about unexpected jobs that need to be done and overall should make them more productive through a workday.  Having a organized process is another great attribute to improve productivity.  This will allow a clean process in creating your products and service and keep everything in place.  

Explanation:

Pelican Cove Corporation is trying to decide whether to invest in equipment to manufacture a new product. If the investment project is accepted, sales revenue will increase by $65,000 per year and materials costs will increase by $16,000 per year. The equipment will cost $140,000 and is depreciable over 10 years using simplified straight line. The firm has a marginal tax rate of 34%. Calculate the firm's annual cash flows resulting from the new project. Group of answer choices

Answers

Answer:

The firm's annual cash flows resulting from the new project is $58,220

Explanation:

Increase in EBIT               $81,000

(65,000 + 16,000)

Less: Depreciation           $14,000

Profit before tax               $67,000  

Less: Tax at 34%              $22,780

Net income                       $44,220  

Add: Depreciation            $14,000

Operating cash flows     $58,220

Note: Depreciation = $140,000/10 years = $14,000

Attributes of a company's competitive advantage, including land, capital, technological knowhow, and physical infrastructure, are known as:

Answers

Answer: Factor endowments

Explanation:

Factor endowment is amount of land, capital, labor, and entrepreneurship that is possessed by a country and which the country can use for production purpose.

Therefore, Attributes of a company's competitive advantage, including land, capital, technological knowhow, and physical infrastructure, are factor endowments.

Duval inc budgets direct materials at $1/liter and requires 4 liters per unit of finished product. April’s activities show usage of 832 liters to complete 196 units at a cost of $798.72. Calculate the direct materials price and quantity variances and indicate favorable or unfavorable results.

Answers

Answer:

Instructions are below.

Explanation:

Giving the following information:

Duval inc budgets direct materials at $1/liter and requires 4 liters per unit of the finished product.

April’s activities show usage of 832 liters to complete 196 units at a cost of $798.72.

To calculate the direct material price and quantity variance, we need to use the following formulas:

Direct material price variance= (standard price - actual price)*actual quantity

Actual price= 798.72/832= $0.96

Direct material price variance= (1 - 0.96)*832

Direct material price variance= $33.28 favorable

Direct material quantity variance= (standard quantity - actual quantity)*standard price

Standard quantity= 4*196= 784

Direct material quantity variance= (784 - 832)*1

Direct material quantity variance= $48 unfavorable

You expect General Motors​ (GM) to have a beta of 1.3 over the next year and the beta of Exxon Mobil​ (XOM) to be 0.9 over the next year.​ Also, you expect the volatility of General Motors to be​ 40% and that of Exxon Mobil to be​ 30% over the next year. Which stock has more systematic​ risk? Which stock has more total​ risk?

Answers

Answer:

As the beta of GM (1.3) is more than that of XOM (0.9), GM has more systematic risk than XOM.

The volatility of GM (40%) is higher than that of XOM (30%). Thus, GM has a higher total risk than XOM.

Explanation:

The systematic risk is the risk caused by factors that affect all of the market and are unavoidable. Such a risk is also known as a market risk and is measured by the beta of a stock. The market beta is always 1. A stock having a beta higher than 1 has higher systematic risk than market and a stock having a lower beta than 1 has a lower systematic risk than the market.

As the beta of GM (1.3) is more than that of XOM (0.9), GM has more systematic risk than XOM.

Total risk, on the other hand, is the risk that comprises of both systematic and unsystematic risk. The systematic risk is the market risk as mentioned above while the unsystematic risk is the firm specific risk and is avoidable. The total risk is measured by the standard deviation or volatility of the stock. The stock with higher volatility has higher total risk and vice versa.

The volatility of GM (40%) is higher than that of XOM (30%). Thus, GM has a higher total risk than XOM.

Hotel Cortez is an all-equity firm that has 10,900 shares of stock outstanding at a market price of $37 per share. The firm's management has decided to issue $66,000 worth of debt and use the funds to repurchase shares of the outstanding stock. The interest rate on the debt will be 8 percent. What is the break-even EBIT

Answers

Answer:

$32,264.07

Explanation:

The computation of the Break-even EBIT  is shown below:

(EBIT ÷ Number of shares) = (EBIT - Interest) ÷ Number of shares  

(EBIT ÷ 10,900) = (EBIT - $66,000 × 0.08) ÷ (10,900 - (66,000 ÷ $37))

(EBIT ÷ 10,900) = (EBIT - $5,280) ÷ (10,900 - 1,783.78)

(EBIT ÷ 10,900) = (EBIT - $5,280) ÷ (9116.22)

After solving this, the value of break-even EBIT is $32,264.07

15 POINTS IF U ANSWER NOW!!!!! Which non-income factor for a potential job promotion would influence a person whose mother needs frequent medical attention? Location Personal satisfaction Independence Family

Answers

Answer:

Family

Explanation:

Because the person's mother needs medical attention and the mother is family, she would be influenced by family

An insurance company will only sell its Select policy to people for whom the probability of a stroke in the next ten years is less than .01. If a smoker with a systolic blood pressure of 230 applies for a Select policy, under what condition will the company sell him the policy if it adheres to this standard?

Answers

Answer:

The insurance company would only sell the Select Policy insurance to a smoker with systolic blood pressure of 230 if after carrying out a medical test, t was found out that, the probability of him or her having a stroke is actually less than 0.01.

This is to insure that, the smoker didn't capitalise on his dying nature in-order to obtained the insurance thereby defrauding the insurance company.

Explanation:

If bookstore ABC Books determines it is going to sell books at its profit-maximizing price of $15 in a market facing monopolistic competition, calculate total profit for the store

ABC Books Revenue and Cost

Quantity Price Total Revenue Marginal Revenue Total Cost Marginal Cost

0 $26 $0 $325

10 $23 $230 $23 $365 $4

20 $20 $400 $17 $425 $6

30 $18 $540 $14 $505 $8

40 $16 $640 $10 $605 $10

50 $14 $700 $6 $725 $12

60 $12 $720 $2 $865 $14

Answers

Answer: $35

Explanation:

Profit will be the Total Revenue less the total costs involved with selling the goods.

Total Revenue at $16 is $640.

Total Cost at $16 is $605.

Profit = 640 - 605

= $35

Note; Your question has $15 as the maximizing price which is not available in the table. It might be a typo so I attached the question.

Explain how you would value a stock. Provide an example of a valuation of a stock based on retrieved real data. Include evidence of the retrieved data in your answer. Compare your valuation with the actual price of the stock at the designated time for your valuation.

Answers

Answer with Explanation:

There are numerous stock valuing models but here, I will use Dividend Valuation Model which is based on finding the intrinsic value of Stock which is the present value of the stock at a required rate of return. The formula to calculate Intrinsic value of stock is given as under:

P0= D0   *  (1 + g) / (ke - g)

Here

P0 is the intrinsic value of the stock

D0 is the dividend just paid

g is the growth rate

ke is the investor's required rate of return

The model doesn't holds if the company doesn't pays Dividend.

Now suppose that the Dividend just paid by Apple is $20 per stock. The anticipated growth rate of dividend is 10% and the required rate of return is at 15%.

By putting values in the above equation, we have:

P0= $20 * (1 + 10%) / (15% - 10%)

= $20 / (15% - 10%)

= $400 per share

The value of stock of Apple is $400 per share which must be its fair market value as per the Dividend Valuation Model.

As per the model, if the value of stock is higher as per dividend valuation model then we must purchase the stock as it will generate higher value and vice versa. The inherent limitation of the model is that it assumes that the dividend is growing at constant rate and is consistently paid. The main disadvantage of Dividend valuation model is that it doesn't account for political factors, economical factors, evolving business risks, technological factors, etc.

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