Answer:
1. Particulars Super premium Premium Economy
Material cost $16 $12 $10
Indirect cost (40000/10000) <u>$4 </u> <u>$4 </u> <u>$4</u>
Total cost $20 $16 $14
Profit (100% of total cost) <u>$20 </u> <u>$16 </u> <u>$14</u>
Selling price <u>$40</u> <u>$32 </u> <u>$28</u>
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2. Yes, the price calculated in part A takes into account what customers are willing to pay. This can be said because the company has the policy of adding 100% to the total cost. This means that the company knows that customers will be willing to pay that much amount.
Using the Gordon Growth Model (a.k.a. Dividend Discount Model), the intrinsic value of a stock can be calculated, exclusive of current market conditions. In this model, the value of the stock is equated to the present value of the stock's future dividends.
<span>Value of stock (P0) = D1 / (k - g)
</span>where
D1<span> = </span><span>expected annual </span>dividend<span> per share in the following year </span>
<span>k = the investor's discount rate or required </span>rate of return
g = the expected dividend growth rate
<u>From the problem:</u>
The value of stock is $10.80
D1 is $0.40
g is 0.08
k is unknown
Solution:
Rearranging the equation for Gordon Growth Model to solve for k:
k = (D1/P0) + g
Substituting the variables with the given values,
k = (0.40/10.80) + 0.08
k = 0.1170
In percent form, this is
0.1170 * 100% = 11.70%.
Thus, the total rate of return on the stock is 11.70%.
Answer:
C. financial break-even point.
Explanation:
Break even point in economics is the point in the business, wherein cost and revenue generated are equal and business make no profit, no loss. Similary Financial break even has a same concept, however, it is a point in business, wherein earning before EBIT is equal to the fixed financial cost of the company and these fixed costs should be earned by the company to run its business and meet its fixed financial obligation. The earning above the financial break-even point is a profit to the shareholder.
Point in financial break even, wherein earning per share is equal to zero.
Answer:
The correct answer is letter "D": the output effect works to increase total revenue and the price effect works to decrease total revenue.
Explanation:
The output effect in a monopoly takes place when the price of input will raise the production costs of a business and reduce its output level and vice-versa. The price effect refers to the impact an activity has on the value of something. The price effect consists of the effect of substitution and the effect of profits. While the output effect has the purpose of increasing revenue, the price effect works towards decreasing it.
To solve this question, first we need to find out the price of a single donut.
12 donuts = $ 6.00
1 donuts = $6.00 / 12
1 donuts = $ 0.50
After that, we just need to multiply the price for a single donut with the required amount (9), which will be:
9 x $ 0.50 = $ 4.50 . . . . for 9 donuts
