Answer:
Transaction Assets Liabilities Stockholders' Equity
Issue common stock Increase NE Increase
Issue preferred stock Increase NE Increase Purchase treasury stock Decrease NE Decrease
Sale of treasury stock Increase NE Increase Declare cash dividend NE Increase NE
Pay cash dividend Decrease Decrease NE
100% stock dividend NE NE NE
2-for-1 stock split NE NE NE
When shares are sold or issued, they increase the stockholders equity as people buy these shares. They also increase assets because cash comes into the company when the shares are sold. This is why the Issuing of preference and common stock as well as the sale of Treasury shares had the same effects.
When cash dividends are declared, they become a liability that is owed to equity holders.
When these dividends are then paid, they remove the liability but reduce assets as cash is used to pay the dividends.
100% stock dividend reduces retained earnings but increases equity so stockholders equity does not change.
Answer:
d. $(6,642)
Explanation:
The present value is the sum of after tax cash flows.
Present value can be calculated using a financial calculator
Cash flow in year 0 = $-81,000
Cash flow each year in year 1 to 3 = $27,000 + $2,900 = $29,900
I = 10%
Present value = $(6,642)
To find the PV using a financial calacutor:
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
I hope my answer helps you
Answer:
Option (D) is correct.
Explanation:
Given that,
Dividend, D0 =$1.20
Price, P0 = $50.00
Growth rate, g = 6% (constant)
Based on the DCF approach, then
Cost of Equity:
= [D0 × (1 + g) ÷ P0] + g
= [(1.20 × (1 + 0.06)) ÷ 50] + 0.06
= (1.272 ÷ 50) + 0.06
= 0.02544 + 0.06
= 0.08544 or 8.54%
Hence, the cost of equity from retained earnings is 8.54%.
Answer:
B. it ignores the firm's demand curve.
Explanation:
A: With the help of average cost pricing, the fixed cost can quickly estimate. Therefore, it cannot be the answer.
C: The average cost must consider the effect of variable cost. Therefore, it is also the wrong statement.
D: It is easy to estimate profit if there is an average cost pricing.
B: average-cost pricing always ignores the demand curve because it is a "U" shaped curve. Because after a certain level of product selling, the average cost is increasing. On the other hand, demand curve is such that if the price decreases, the quantity demanded increases. Therefore, it is a downward slopping curve. Hence, it is understood that, average-cost pricing ignores demand curve.
