Answer:
External funds needed = $40,000.
Explanation:
An increase in the firm's retained earnings (a component of the shareholder's equity) arises as a result of higher sales volume, thereby making the Asset = Liability + Shareholder's Equity Equation unbalanced.
Therefore, there must be an increment in the firm's assets by an equal amount in order to re balance the equation. If there is an increase in assets by a greater magnitude than retained earnings increment, the gap is filled by external financing (which is a liability and increases the liability component of the equation).
Net income = Sales * profit margin = $500000*10% = $50000
Dividend= Net income * payout ratio = $50000*20%= $10000
Increase in retained earnings = Net income - Dividend = $(50000-10000)
= $40000
Increase in assets = $80000
External funds needed = $(80000-40000) = $40,000.
Answer:
The remaining part of the question is given below:
(Note that the subsidy can be granted to the education institutions or to the students directly or indirectly; for example, through low- interest student loans.)
a. P2-P0
b. P2-P1
c. P0-P1
d. P1
<u>Correct Answer:</u>
b. P2-P1
Explanation:
A pigouvian subsidy is a subsidy that is used to encourage behaviour that have positive effects on others who are not involved or society at large. <em>Behaviors or actions that are a benefit to others who are not involved in the transaction are called positive externalities.</em>
Answer:
retention ratio
Explanation:
Retention ration is the portion of net income retained by a firm to grow its business rather than being declared and paid as dividened.
When a company makes profit at the end of financial period, the company can either retain part of its earning for business expansion, declare part as dividends paid to shareholder or combine both.
Where a firm now reinvest the portion of the profit earned in itself, it is called retention ratio.
price per share of the company's stock is $53.28
Explanation:
Under dividend growth model a stock is overvalued or undervalued assuming that the firm’s expected dividends grow at a value g forever, which is subtracted from the required rate of return or k.
Therefore, the stable dividend growth model formula calculates the fair value of the stock as P =D1 / ( k – g ).
P= price per share
D1 = current dividend
k = required return
g = growth rate
P= $3.41 ÷ (11 % - 4.6% ) =( 3.41 ÷ 0.064 )= $53.28
Answer: $35,332,160
Explanation:
The boik value of the purchase will be calculated thus:
Cost of plant = $43,088,000
Useful life = 15
Savage value = $4,308,800
Depreciation per year = ($43,088,000 - $4,308,800) / 15
= $38779200/15
= $2,585,280
Accumulated depreciation after third year will be:
= $2,585,280 × 3
= $7755840
Book value = $43,088,000 - $7,755,840
= $35,332,160
