ing using a calculator​) Jesse Pinkman is thinking about trading cars. He estimates he will still have to borrow ​$ to pay for his new car. How large will​ Jesse's monthly car loan payment be if he can get a ​-year ​( equal monthly​ payments) car loan from the​ university's credit union at an APR of percent compounded​ monthly?

Answers

Answer 1

Answer:

Monthly car loan payment = $414 (Approx.)

Explanation:

Missing information;

Amount borrow = $29,000

NUmber of payment = 7 year x 12 = 84

Rate = 5.3% yearly = 0.053 / 12 monthly

Find:

Monthly car loan payment

Computation:

PV = $29,000

N = 84

r = 0.053/12

FV = 0  

PV = (PMT/r)[1 – 1/(1 + r)ⁿ] + FV/(1 + r)ⁿ  

29,000 = [PMT/(0.053/12)][1 – 1/(1 + 0.053/12)^84] + 0  

PMT = 413.98

Monthly car loan payment = $414 (Approx.)


Related Questions

Franchising can be a beneficial way for entrepreneurs to get a head start in launching their own businesses since they do not have to pay the franchisor royalties after buying the franchise. true or false

Answers

Answer:

false

Explanation:

A franchise provides entrepreneurs with a shortcut way of starting a business without necessarily beginning from the scratch.

The entrepreneur is free to leverage on the trademark and the customer base of the franchisor. This eliminates part of the risk associated with starting an entirely new business.

However, the franchisee continues to pay royalty to the franchisor which makes the franchise arrangement quite expensive.

Why would a firm that incurs losses choose to produce rather than shut​ down? In a perfectly competitive​ industry, if a firm is incurring​ losses, then it might choose to produce in the short run because A. is greater than ​, resulting in profit in the long run. B. is greater than ​, resulting in smaller losses than would result from shutting down. C. variable costs are greater than fixed​ costs, resulting in smaller losses than would result from shutting down. D. zero in the long​ run, resulting in profit in the long run. E. is greater than ​, resulting in smaller losses than would result from shutting down.

Answers

Answer:

E. price is greater than ​, resulting in smaller losses than would result from shutting down

Explanation:

The firm incurred losses and select to generate instead of shutting down as in the perfect competifive market if a firm has the loss so it produce in the short run because here the price should be more than due to which it result in less losses as compared to the losses at the time of shutting down

So as per the given situation, the option e is correct

Hailey Corporation pays a constant $9.45 dividend on its stock. The company will maintain this dividend for the next 13 years and will then cease paying dividends forever. If the required return on this stock is 10.7 percent, what is the current share price?

Answers

Answer:

$64.76

Explanation:

The current share price can be determined by calculating the present value of the dividend

Present value is the sum of discounted cash flows

Present value can be calculated using a financial calculator

Cash flow from year 1 to 13 = 9.45

I = 10.7

PV = 64.76

To find the PV using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.  

3. Press compute  

1. The journal entry to recognize depreciation on machinery would include a debit to Factory Overhead. debit to Accumulated Depreciation. credit to Factory Overhead. None of these choices are correct. 2. The journal entry to record the transfer from work in process to finished goods would include a debit to Work in Process. Finished Goods. Cost of Goods Sold. None of these choices are correct.

Answers

Answer:

1. The journal entry to recognize depreciation on machinery would include

= None of these choices are correct.

2. The journal entry to record the transfer fro work in process to finished goods would include a debit to

= Finished Goods.

Explanation:

a) The correct journal entry is a debt to Depreciation on Machinery and a credit to Accumulated Depreciation on Machinery.  However, when the Depreciation is being transferred to Work in Process, the debit goes to Work in Process with the credit going to the Depreciation on Machinery account.

b) The corresponding credit entry is a credit to Work in Process.

Silky Smooth has an EPS of $2.93 per share and a profit margin of 6.3 percent. If the Price to Sales ratio of the industry is 1.56 times, what is a good estimate for Solky Smooth's stock price

Answers

Answer:

$88.16

Explanation:

The computation of the estimation of the stock price is given below:

Net profit ÷ sales = 6.3%

And,

Net profit ÷ Number of shares = $2.93

So,

6.3% of sales ÷ Number of shares = $2.93

Sales ÷ Number of shares = 46.51

Now PS ratio is = Price ÷ sales

= 1.56 × 46.51

= $88.16

40. Giả sử tỷ giá giao ngay của EUR là 0.9 USD/EUR . Tỷ giá giao ngay dự kiến một năm sau là 0.85 USD/EUR, % thay đổi của tỷ giá giao ngay là :

Answers

Answer:

Sorry I can't understand

L. Bowers and V. Lipscomb are partners in Elegant Event Consultants. Bowers and Lipscomb share income equally. M. Ortiz will be admitted to the partnership. Prior to the admission, equipment was revalued downward by $8,000. The capital balances of each partner are $96,000 and $40,000, respectively, prior to the revaluation.
a. Provide the journal entry for the asset revaluation.
b. Provide the journal entry for Ortiz’s admission under the following independent situations:
1. Ortiz purchased a 20% interest for $20,000.
2. Ortiz purchased a 30% interest for $60,000.

Answers

Answer: See attachment and explanation

Explanation:

1. Ortiz purchased a 20% interest for $20,000.

Total capital after the admission of the partner will be:

= ($96000 - $4000) + ($40000 - $4000) + $20000

= $92000 + $36000 + $20000

= $148000

The share of new partner in the capital structure will be:

= Total capital × Interest of new partner

= $148000 × 20%

= $29600

There'll be a deficiency in the profit which the existing partner contributes to and this will be:

= $29600 - $20000

= $9600

Then each partner shares =$9600/2 = $4800

2. Ortiz purchased a 30% interest for $60,000.

Total capital after the admission of the partner will be:

= ($96000 - $4000) + ($40000 - $4000) + $60000

= $92000 + $36000 + $60000

= $188000

The share of new partner in the capital structure will be:

= Total capital × Interest of new partner

= $188000 × 30%

= $56400

Since the share is less than the amount of $60000 bought in, the existing partner will be compensated in the amount of ($60000 - $56400) = $3600. Therefore each partner gets $3600/2 = $1800

Check attachment for the journal entries.

Preparation of the statement of cash flows does not involve: Select one: a. Computing the net increase or decrease in cash. b. Computing and reporting net cash provided or used by operations. c. Computing the profit compared to the net increase or decrease in cash. d. Computing and reporting net cash provided or used by financing activities. e. Computing and reporting net cash provided or used by investing activities.

Answers

Answer:

c. Computing the profit compared to the net increase or decrease in cash.

Explanation:

In a typical cash flow statements, the company's activities are divided into 3 sections that are recognized in the cash flow statements.

These are operating activities, investing activities and financing activities.

Operating activities includes cash inflow/outflow as a result of changes to inventory, payables and receivables.

Investing activities includes cash inflow/outflow from the disposal/acquisition of assets while financing includes cash inflow/outflow from the sale of shares.

Hence the only option not involved in the preparation of the statement of cash flows is computing the profit compared to the net increase or decrease in cash.

A minimum acceptable rate of return for an investment decision is called the: Multiple Choice Internal rate of return. Average rate of return. Hurdle rate of return. Maximum rate of return. Payback rate of return.

Answers

Answer:

Hurdle rate of return.

Explanation:

A hurdle rate can be regarded as minimum rate of return that is been required by an investor or manager

on a particular project or investment.

The hurdle rate gives the description of the appropriate compensation as regards level of risk present. There are

higher hurdle rates associated with riskier projects.

It should be noted that A minimum acceptable rate of return for an investment decision is called the Hurdle rate of return.

Harvey quit his job at State University where he earned $45,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $5,000 a year. To start the business, be cashed in $100,000 in bonds that earned 10% interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 each. Of the $75, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.

Required:
What's the economic profit generated by Extreme Gaming in the first year?

Answers

Answer:

$160,000

Explanation:

Economic profit = accounting profit - implicit cost

Accounting profit= total revenue - explicit cost

Total revenue =price x quantity sold

total revenue = 75 x 11,000 = 825,000

Explicit cost includes the amount expended in running the business.

explicit cost = 55 x 11,000 = 605,000

Accounting profit = 825,000 - 605,000 = 220,000

Implicit cost is the cost of the next best option forgone when one alternative is chosen over other alternatives

Harvey's implicit costs = amount he would have earned in the university + income from entrepreneurial talent + interest income

Interest income = 0.1 x 100,000 = 10,000

10,000 + 45,000 + 5,000 = 60,000

Economic profit =220,000 - 60,000 = 160,000

You have decided to start saving up to buy a house. You plan on withdrawing $25,000 at the end of year 4 for a down payment, $18,000 at the end of year 5 and again $18,000 at the end of year 6 for upgrades, and $20,000 at the end of year 7 to add a pool. How much do you need to deposit today into an account with an annual interest rate of 1.25%

Answers

Answer:

$75,745.56

Explanation:

In order to determine how much to deposit today, calculate the present value of the cash flows

Present value is the sum of discounted cash flows

Present value can be calculated using a financial calculator

Cash flow in year 1  - 3 = 0    

Cash flow in year 4 = $25,000

Cash flow in year 5 = $18,000

Cash flow in year 6 = $18,000

Cash flow in year 7 = $20,000

I = 1.25 %

PV = $75,745.56

To find the PV using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.  

3. Press compute  

Bond Company uses a plantwide overhead rate with direct labor hours as the allocation base. Use the following information to solve for the amount of direct labor hours estimated per unit of product G2.
Direct material cost per unit of G2 $13
Total estimated manufacturing overhead $312,000
Total cost per unit of G2 $28
Total estimated direct labor hours 156,000 DLH
Direct labor cost per unit of G2 $4.85
a. 5.08 DLH per unit of G2.
b. 17.85 DLH per unit of G2.
c. 8.60 DLH per unit of G2.
d. 0.52 DLH per unit of G2.
e. 2.00 DLH per unit of G2.

Answers

Answer:

a. 5.08 DLH per unit of G2.

Explanation:

The calculation is given below:

We know that

Direct material + direct labor + applied overhead = Total cost    

$13 + 4.85 + x = 28      

x = 28 - 13 - 4.85 1

= 10.15 overhead per unit    

Now

Estimated overhead rate      

= $312000 ÷ 156000

= 2.0      

So, the Direct labor hours per unit is

= 10.15 ÷ 2

= 5.08

The cost to produce was $20 per unit in 2019. During 2020, it has increased to $23 per unit. In 2020, Supplier Company has offered to supply for $18 per unit. For the make-or-buy decision:_____.a. incremental costs are $2 per unit.
b. differential costs are $7 per unit.
c. net relevant costs are $2 per unit.
d. incremental revenues are $7 per unit.

Answers

Answer: Differential cost is $5 per unit

Explanation:

Differential cost is the extra cost that the company would incur if they made the product themselves versus if they bought it from an outside supplier.

Differential cost is therefore:

= Cost to produce internally - Cost from supplier

= 23 - 18

= $5

likely

MC Qu. 99 The Work in Process Inventory account... The Work in Process Inventory account of a manufacturing company that uses an overhead rate based on direct labor cost has a $5,220 debit balance after all posting is completed. The cost sheet of the one job still in process shows direct material cost of $2,200 and direct labor cost of $1,000. Therefore, the company's overhead application rate is:

Answers

Answer:

202%

Explanation:

Calculation to determine what the company's overhead application rate is

First step is to calculate the Total manufacturing overhead using this formula

Total manufacturing overhead = Overhead rate - Direct material cost - Direct labor cost

Let plug in the formula

Total manufacturing overhead =5220 - 2,200 - 1000

Total manufacturing overhead =2020

Now let determine the overhead application rate using this formula

Overhead application rate=Total manufacturing overhead/Direct labor cost

Let plug in the formula

Overhead application rate=2020/1000*100

Overhead application rate=202%

Therefore, the company's overhead application rate is:202%

1. Susie Ques Inc., a company that produces and sells a single product, has provided its contribution format income statement for October: Sales (6,200 units) $136,400 Variable expenses $80,600 Contribution margin $55,800 Field expenses $48,700 Net operating income $7,100 If the company sells 5,800 units, its total contribution margin should be how much money

Answers

Answer:

52,200

Explanation:

Calculation to determine total contribution margin

First step is to calculate the contribution margin per unit

Contribution margin per unit=($136,400/6,200 )-($80,600/6,200)

Contribution margin per unit= $22 per unit- $13 per unit

Contribution margin per unit = 9

Now let determine the total contribution margin

Total contribution margin=5,800 x 9

Total contribution margin = 52,200

Therefore total contribution margin should be $52,200

3. If nominal GDP and real GDP both drop by 10 percent, then the GDP deflator Question 3 options: also rises by 10 percent rises by about 20 percent falls by 10 percent is unchanged

Answers

Answer: unchanged

Explanation:

The formula for calculating the GDP price deflator is:

= (Nominal GDP / Real GDP) × 100

Let's assume that the nominal GDP and the real GDP is $100 million. Then if they drop by 10%, they will both be $90 million, then the deflator will be:

= (90m / 90m) × 100

= 100

Therefore, the GDP deflator will be unchanged.

You wish to sell short 100 shares of XYZ corporation stock. If the last two transactions were at $34.10 followed by $34.15, you only can sell short on teh next transaction at a price of

Answers

Answer: b. 34.15 or higher

Explanation:

Short sales refer to the sale of borrowed stocks in anticipation that the stock price of the underlying stock will fall. This will then enable you to make a profit by buying the cheaper shares and giving it back to the entity you borrowed from thereby making a profit.

With short sales, the price is usually upward trending so will normally increase from the last price. As the last price here was $34.15, that would be the likely minimum for the next sale.

This means that the next sale will either be at a price of $34.15 or a price higher than that.

Madeline is an interior designer. When she chooses a new color for her client's walls, she always checks the swatch against different colored objects in the room. Madeline is aware of how colors change because of:

Answers

Answer:

relative luminance

Explanation:

From the question we are informed about Madeline who is an interior designer. When she chooses a new color for her client's walls, she always checks the swatch against different colored objects in the room. Madeline in this case, is aware of how colors change because of relative luminance.

Relative luminance can as well be regarded as Perceptual constancy, This can be explained as amount of light that can be reflected by an objects on its surroundings. Perceptual constancy is one that visualize familiar objects as one having a consistent color, even though a case whereby light changes the court arises. Relative luminance can be regarded as one that goes in same way as photometric definition of luminance, here Relative luminance has normalized values of 1 or 100 with respect to reference white.

When purchases of merchandise are made on account with a perpetual inventory system, the transaction is recorded with which entry

Answers

Answer:

debit Merchandise Inventory, credit Accounts Payable.

Explanation:

In the case when the merchandise is purchased on account, so the following journal entry is recorded

Merchandise inventory Dr XXXXX

      To account payable XXXXX

(Being merchandise inventory purchased on account)

Here merchandise inventory is debited as it increased the assets and credited the account payable as it also increased the liabilities

Portfolio Weights If you own 725 shares of Air Line Inc at $42.9, 340 shares of BuyRite at $56.15, and 440 shares of Motor City at $10.15, what are the portfolio weights of each stock?

Answers

Answer:

Explanation:

Answer: the portfolio weights of each stock Air Line Inc, BuyRite and Motor City are 0.5690, 0.3493  and 0.0817 respectively.

Explanation:

The total portfolio weight is given as  

= 725 shares × $42.90 + 340 shares ×$56.15 + 440 shares × $10.15

=31,102.5 + 19,091 +4,466

=$54,659.5

Now the weight  of each stock are as follows

For Air line inc

= 725 shares × $42.90 ÷$54,659.5

=31,102.5/54,659.5

= 0.5690

For Buyrite

= 340 shares × $56.15 ÷ $54,659.5

=  19,091 / 54,659.5

=0.3493

For Motor city

= 440 shares ×$10.15 ÷ $54,659.5

=4,466 /54,659.5

=0.0817

Escareno Corporation has provided its contribution format income statement for June. The company produces and sells a single product.
Sales (8,400 units) $ 764,400
Variable expenses 445,200
Contribution margin 319,200
Fixed expenses 250,900
Net operating income $68,300
If the company sells 8,200 units, its total contribution margin should be closest to:________.
a. $301,000
b. $311,600
c. $319,200
d. $66,674

Answers

Answer:

b. $311,600

Explanation:

Calculation to determine what total contribution margin should be closest to:

Using this formula

Contribution margin per unit=Current contribution margin ÷ Current sales in units

Where,

Contribution margin per unit

=$319,200 ÷ 8,400

Contribution margin per unit= $38

Now let determine the total contribution margin

Total contribution margin= 8,200 × $38

Total contribution margin=$311,600

Therefore total contribution margin should be closest to:$311,600

Four roommates are planning to spend the weekend in their dorm room watching old movies, and they are debating how many to watch. Here is their willingness to pay for each film:
Willingness to Pay
(Dollars)
Van Carlos Felix Larry
First film 10 9 6 3
Second film 9 7 4 2
Third film 8 5 2 1
Fourth film 7 3 0 0
Fifth film 6 1 0 0
Within the dorm room, the showing of a movie____a public good.
If it costs $8 to rent a movie, the roommates should rent____movies in order to maximize the total surplus.
Suppose the roommates choose to rent the optimal number of movies you just indicated and then split the cost of renting equally This means that each roommate will pay____.
Complete the following table with each roommate's total willingness to pay for this many movies and the surplus each person obtains from watching the movies.
Total Willingness to Pay Consumer Surplus
Roommate (Dollars) (Dollars)
Carlos
Felix
Larry
Raphael
In order to split the cost in a way that ensures that everyone benefits, the cost could be divided up based on the benefits each roommate receives. The practical problem with this solution is that each roommates has an incentive to____the value of the movies to him. Suppose they agree in advance to choose the efficient number and to split the cost of the movies equally.

Answers

Answer:

See the five answers below.

Explanation:

The roommates are debating how many movies they should watch.

This is the constraint; given that they have to pay to rent each movie.

PART (A)

Since their dormitory room is the 'cinema', meaning that it's just going to be 4 of them and a private good that they'll pay for; then the showing of a movie is not a public good!

Public goods are those general utilities usually provided by governments, for their citizens; e.g. public defense, clean drinking water, good roads, etcetera.

PART (B)

Given the 'willingness to pay' constraint, we need to find the optimal number of movies they can watch. It costs $8 to rent a movie, no matter how interesting it is or how much satisfaction the viewers derive from it. So the cost of the 1st film = the cost of the 2nd film = the cost of the 3rd film = the cost of the 4th film = the cost of the 5th film.

To get the total amount they're willing to pay for all 5 movies, sum up!

(10+9+6+3) + (9+7+4+2) + (8+5+2+1) + (7+3+0+0) + (6+1+0+0)

KEY: This arrangement should remind you of the law of diminishing marginal utility. The more movies they watch in one sitting or over a weekend, the less satisfaction they derive from the intangible commodity. Hence, the less they are willing to pay for more of the commodity.

So the sum is 28 + 22 + 16 + 10 + 7  =  83

Now to get the number of movies they should rent if they wish to maximize their total spending, divide the total willingness to pay by the cost for a movie:

83/8 = 10.375

Rounding up to the nearest whole number or in reality, that's 10 movies.

PART (C)

Suppose the roommates choose to rent this optimal number of movies - which is higher than the intended number of movies - and then split the cost equally, what will each roommate pay?

Here, we will use the approximated value 10.

10movies  x  $8  =  $80

Splitting the cost equally, divide by 4

$80 ÷ 4  = $20

This figure is just in obedience to the question's requirements which says the bill must be shared equally. In actual fact, some of the four roommates don't have a purchasing power or willingness that is up to $20! That's Felix and Larry.

PART (D)

Complete the given table by inputing each roommate's total willingness to pay for the 5 movies and the surplus each person obtains from watching the movies. Remember to assume that Van is the same person as Raphael.

Also, total cost for 5 movies is 8 x 5 = $40

Dividing this by 4, you have $10 per roommate. So a surplus would be the excess of each roommate's TWTP over $10.

                       TWTP($)          CS($)

VAN                    40                   30

CARLOS             25                    15

FELIX                  12                      2

LARRY                 6                      -4

PART (E)

If the cost is divided up based on the benefits (remember how the price for movie was static despite the movie and satisfaction received by each viewer? That's about to change) or satisfaction each roommate receives, the practical problem with this 'solution' is that each roommate has an incentive to reduce the value of the movies to him; and this can only be measured by the efficient number (the number that rates the value each roommate derives from each movie). In this case, the incentive is the window given to each roommate to 'not tell the truth' about their level of satisfaction from watching each movie, because that would mean a higher bill for the individual.

KUDOS!

A potential investor in Cristian's company wants to know how much money was paid in dividends in the last reporting period. What type of financial statement should he look at?
A. Statement of changes in equity
B. Balance sheet
C. Cash flow statement
D. Income statement

Answers

Answer:

A. Statement of changes in equity

Explanation:

Financial statements can be defined as a document used for the formal communication or disclosure of financial information and statements to present and potential users such as investors and creditors. These includes balance sheet, statement of retained earnings and income statement.

Basically, the type of financial statement a potential investor should look at is the statement of changes in equity.

The statement of changes in equity provides an information about the reconciliation of the opening and closing balances of equity with respect to a company at a specific period of time.

A monopolist desiring to increase its profit has just discovered that lowering its price and selling more output yielded the desired result. Profit increased. Based on this, one can conclude that the marginal cost of production is _____ the marginal revenue from production.

Answers

Answer:

Less than

Explanation:

The marginal cost of production is that change in the total production cost when an extra unit is produced. While the Marginal revenue from production is the additional profit realized from production due to the sale of an extra unit.

Generally, When, the marginal cost is less than the marginal revenue, the company's production is low and should increase its output to maximize profit.

A monopolist has to its price in order to sell due to marginal revenue not equalling to price, the monopolist maximizes profits by ensuring its marginal revenue and its marginal cost are the same. Producing when Price is greater than marginal cost makes a monopolist realize profits.

 

If the expected returns of two stocks are the same but the standard deviations of the returns differ, which security is to be preferred

Answers

What you’re talking about is Beta. Beta is the ratio of how much a stock changes relative to the market as a whole (NYSE, NASDAQ)

A Beta of 2.0 means it changes (up/down) twice as much as the general market (Dow, S & P, NAS), such as the twitchy, hyper reactive tech stocks ( FAANG’s and also boom-or-bust Big Oil). In other words, high Standard Deviations.

A Beta of 0.5 means it changes (up/down) half as much as the general market. Sleepy blue chips such as GE, AT&T or power utilities fall in that category. Low Standard Deviations

Most stocks by definition pretty much track the market (Beta 1.0) so there are a lot of those. Middling Standard Deviations

So…it is dictated by your risk tolerance.

Kathy Elliot has decided that she will start an internet company to sell reliable used cars to customers Nationwide she has decided to use the sole proprietorship business format. Elliot's next step is to write a formal _____ before she applies for a business loan

Answers

Answer:

business plan

Explanation:

Cash equivalents by definition a.are a comparison of cash and liabilities. b.will be converted to cash within one year. c.are expected to be converted to cash within three months. d.are long-term investments.

Answers

Answer: c.are expected to be converted to cash within three months

Explanation:

Cash equivalents refers to the total value of cash on hand which consist of items that are similar to cash. It should be noted that cash equivalents are typically current assets and are expected to be converted to cash within three months.

Examples of cash equivalents include money market funds, treasury bills, Commercial paper, etc.

The model of aggregate demand and aggregate supply a. is a straightforward extension of the model of supply and demand for a particular market, in which substitution of resources between markets is highlighted. b. is different from the model of supply and demand for a particular market, in that we cannot focus on the substitution of resources between markets to explain aggregate relationships. c. is different from the model of supply and demand for a particular market, in that we have to separate real and nominal variables in the aggregate model. d. is a straightforward extension of the model of supply and demand for a particular market, in which the interaction between real and nominal variables is highlighted.

Answers

Answer:

b. is different from the model of supply and demand for a particular market, in that we cannot focus on the substitution of resources between markets to explain aggregate relationships

Explanation:

Here The two models are different. But it shows the similar idea, also the variables that are determined are totally different. The individual markets should be equipped with the given sources while on the other hand the overall economy could be subsituted the resources inside the market

Therefore the option b is correct

Suppose the dividends for the Seger Corporation over the past six years were $1.42, $1.50, $1.59, $1.67, $1.77, and $1.82, respectively. Assume that the historical average growth rate will remain the same for 2020. Compute the expected share price at the end of 2020 using the perpetual growth method. Assume the market risk premium is 13.5 percent, Treasury bills yield 4.5 percent, and the projected beta of the firm is .75.

Answers

Answer:

$20.05

Explanation:

Calculating the required rate using CAMP Model

Required rate = Risk free rate + Beta*Market risk premium

Required rate = 4.5% + 0.75*13.5%

Required rate = 4.5% + 10.13%

Required rate = 14.63%

Calculating the growth rate using Future value method

Future value = Present value * (1+r)^n

r = [tex]n\sqrt{Future value/Present value }[/tex] - 1

r = [tex]5\sqrt{$1.82/$1.42}[/tex] - 1

r = 1.05088842546 - 1

r = 0.05089

r = 5.09%

Stock price = Last year dividend * (1 + Growth rate) / (Required rate - Growth rate)

Stock price = $1.82 * (1+0.05089) / (0.1463-0.05089)

Stock price = $1.82*1.05089 / 0.09541

Stock price = $1.9126198 / 0.09541

Stock price = $20.04632428466618

Stock price = $20.05

So, the expected share price at the end of 2020 using the perpetual growth method is $20.05.

Tomlinson Packaging Corporation began business in 2018 by issuing 30,000 shares of $5 par common stock for $8 per share and 5,000 shares of 6%, $10 par preferred stock for par. At year end, the common stock had a market value of $10. On its December 31, 2019 balance sheet, Tomlinson Packaging would report:___________

a. Common Stock of $100,000
b. Paid-In Capital of $150,000
c. Common Stock of $200,000
d. Common Stock of $160,000

Answers

Answer:

d. common stock of $150,000.

Explanation:

First and foremost, upon issuance of stocks, the common stock account would be credited with the total par value of the shares issued as shown below:

total par value=par value per share*shares issued

total par value=$5*30,000

total par value=$150,000

The paid-in capital would be credited with the  total amount the cash proceeds from the share issue exceeds the total par value

total cash proceeds=$8*30,000

total cash proceeds=$240,000

paid-in capital=$240,000-$150,000

paid-in capital=$90,000

The correct option is the common stock of $150,00, except that the number of shares issued is 20,000,hence, the common stock of $100,000 would be correct

Check a similar question below to drive home my point:

Kerwin Packaging Corporation began business in 2010 by issuing 30,000 shares of $5 par common stock for $8 per share and 10,000 shares of 6%, $10 par preferred stock for par. At year-end, the common stock had a market value of $10. On its December 31, 2011 balance sheet, Kerwin Packaging would report:

a. common stock of $300,000.

b. paid-in capital of $150,000.

c. common stock of $240,000.

d. common stock of $150,000.

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