Answer:
Statement a. is correct.
Explanation:
The effective annual rate is always higher than the nominal interest rate, as the formula is clear for any number of periods, for any interest rate:
Effective Annual Rate of return = 
Further if we calculate the present value of annuity due and ordinary annuity assuming 6 % interest rate, then:
Present value of annuity due =
= 1.06 
$400.95
= $425.0089
Present value of ordinary annuity = 
= $150 2.6730
= $400.95
Therefore, value of annuity due is more than value of ordinary annuity.
Statement a. is correct.
$4.40 per share
Explanation:
The computation of the earning per share is shown below:
Earning per share = (Net income - preference dividend) ÷ (Weighted average of number of shares)
where,
Net income is $640,000
Preference dividend is $72,000
And, the weighted average number of share is
= 120,000
Answer:
i) Z = 20( 80 ) + 50(20 ) = $2600
ii) $3000
Explanation:
representing products A and B as x₁ and x₂
using the given data
Max ( z ) = 20x₁ + 50x₂ ( optimal product mix for optimal profit ) ---- ( 1 )
0.8 ( x₁ + x₂ ) ≥ 0
0.8x₁ + 0.8x₂ ≥ 0 ------------ ( 2 )
also x₁ ≤ 100 --- ( 3 ) considering the amount to be sold ( sales volume )
based on the availability of raw material
2x₁ + 4x₂ ≤ 240 ----- ( 4 )
resolve equations 2, 3, and 4 graphically
x₁ = 80 units , x₂ = 20 units
back to equation 1
Z = 20( 80 ) + 50(20 )
= 1600 + 1000 = $2600
ii) To increase the number of units of A produced
given that x₁ ≤ 100 and the actual optimal units produced = 80 units
2600 + 20(100-80)
= 2600 + 20(20) = 2600 + 400 = $3000
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