BUSINESS COLLEGE

To fund your dream vacation, you plan to save $1,475 per year for the next 15 years starting one year from now. If you can earn an interest rate of 6.25%, how much will you have saved for your vacation?

Answers

Answer 1

Answer:

Answer:

FV= $34,993.05

Explanation:

Giving the following information:

Annual deposit= $1,475

Number of periods= 15 years

Interest rate= 6.25%

To calculate the future value, we need to use the following formula:

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

FV= {1,475*[(1.0625^15) - 1]} / 0.0625

FV= $34,993.05

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Firm B has a 12% ROE. Other things held constant, what would its expected growth rate be if it paid out 25% of its earnings as dividends?

Answers

Answer:

the expected growth rate is 9%

Explanation:

The computation of the expected growth rate is shown below:

As we know that

Retention ratio = (1 - dividend payout ratio)

So,

Retention ratio = (1 -0.25) = 0.75

Now

Growth rate = Retention ratio × ROE

= 0.75 × 12

= 9%

hence, the expected growth rate is 9%

We simply applied the above formula so that the correct value could come

And, the same is to be considered

The numerator of the return on common stockholders' equity is_____________. a.income before income tax b.operating income minus interest expense c.net income d.net income minus preferred dividends

Answers

The numerator of the return on common stockholders' equity is net income minus preferred dividends.

Option d

Explanation:

Return on common stockholders' equity which is also named as return on equity (ROE) ratio evaluates the accomplishment of a company in resulting income for the benefit of common stakeholders.

Use of return on equity:

Isolates common equity returns
Can be used to evaluate dividends
Evaluates the use of capital by the management

It is calculated by income available for stockholders divided by the total number of common stock and is expressed or represented in percentage. Income available for common stockholders can be arrived by reducing preference dividends from Net income.

That is, $\text { Net income }-\text { Preference dividends }=\text { Equity available for common stockholder }$

Hence, net income minus preferred dividends is the right answer.

The common stock of Flavorful Teas has an expected return of 19.65 percent. The return on the market is 14.5 percent and the risk-free rate of return is 4.2 percent. What is the beta of this stock?

Answers

Answer:

beta= 1.5

Explanation:

The common stock of flavorful tea has an expected return of 19.65%

The return on the market is 14.5%

The risk-free rate is 4.2%

Therefore, the beta of the stock can be calculated as follows

Required return= Risk free rate+beta(market rate-risk free rate)

19.65%= 4.2%+beta(14.5%-4.2%)

19.65%= 4.2% + 14.5beta-4.2beta

19.65%= 4.2% + 10.3beta

19.65%-4.2%= 10.3beta

15.45%= 10.3beta

beta= 15.45/10.3

beta= 1.5

Hence the beta of this stock is 1.5

Final answer:

The beta of Flavorful Teas' common stock can be determined using the Capital Asset Pricing Model (CAPM). The beta, which measures a stock's volatility in comparison to the market, is calculated using the expected return of the stock, the return of the market, and the risk-free rate.

Explanation:

The beta of a stock is a measure of its volatility in comparison to the market as a whole, represented here by the return on the market. Beta is calculated using the Capital Asset Pricing Model (CAPM), which describes the relationship between the expected return of a security and its risk. We can calculate beta using the formula: Beta = (Expected Return of the Stock - Risk-Free Rate of Return) / (Market Rate of Return - Risk-Free Rate of Return).

So in this case, the expected return on Flavorful Teas is 19.65 percent, the market return is 14.5 percent, and the risk-free rate is 4.2 percent. Plugging these values into the formula gives: Beta = (19.65 - 4.2) / (14.5 - 4.2). That will provide the value for the beta of Flavorful Teas' common stock.

Learn more about Beta of Stock here:

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Hadrana corporation reports that at an activity level of 5,500 units, its total variable cost is $275,330 and its total fixed cost is $86,240. what would be the average fixed cost per unit at an activity level of 5,600 units? assume that this level of activity is within the relevant range.

Answers

Calculation of average fixed cost per unit at an activity level of 5,600 units:

The average fixed cost per unit can be calculated using the following formula:

Average Fixed cost Per unit = Total Fixed Cost / Number of Units

Total Fixed Cost at the level of 5,600 units is given $86,240

Hence, Average Fixed cost Per unit = 86240/5600 = $15.40

So, the average fixed cost per unit at an activity level of 5,600 units is $15.40

The RST Company makes 38,000 parts to be used in its main products. The cost per part at this activity level is: Direct materials
$
6.50
Direct labor
$
6.60
Variable manufacturing overhead
$
3.75
Fixed manufacturing overhead
$
3.45

An outside supplier offered to supply RST Company this part at $18 per unit. If RST Company decides not to make the parts, there would be no other use for the production facilities and none of the fixed manufacturing overhead cost could be avoided. Direct labor is a variable cost. The annual financial advantage (disadvantage) for the company as a result of buying these parts from the outside supplier rather than making them internally would be:

($186,200)

($87,400)

($43,700)

$87,400

Answers

Answer:

($43,700)

Explanation:

38,000 units produced:

Direct materials $6.50
Direct labor $6.60
Variable manufacturing overhead $3.75
Fixed manufacturing overhead $3.45
total cost per unit = $20.30

outside supplier offers parts at $18 per unit

fixed manufacturing overhead is unavoidable

Alternative 1 Alternative 2 Differential

keep producing buy amount

Prod. cost $771,400 $0 $771,400

Purchase cost $0 $684,000 ($684,000)

Unavoidable costs $0 $131,100 ($131,100)

total $771,400 $815,100 ($43,700)

The financial disadvantage of purchasing the parts from an outside vendor = ($43,700)

Kent Enterprises purchased a truck for $60,000 on January 1 of its first year. The company uses the units-of-activity method and it estimates that the truck’s useful life will be 100,000 miles. The truck will have an estimated salvage value of $10,000. The company drives the truck 25,000 miles in the first year and drives it 20,000 miles in the second year. How much accumulated depreciation will be reported on the company’s balance sheet as of the end of the second year?