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nadya68 [22]
3 years ago
12

Keidis Industries will pay a dividend of $3.55, $4.65, and $5.85 per share for each of the next three years, respectively. In fo

ur years, you believe that the company will be acquired for $53.00 per share. The return on similar stocks is 9.9 percent. What is the current stock price?
Multiple Choice

$61.72

$53.63

$51.10

$47.45

$47.82
Business
1 answer:
german3 years ago
8 0

Answer:

price = $47.82

Explanation:

Find the present value of each dividend at the required rate of return and sum them up to get the current price;

PV = FV /(1+r)^n

PV(D1) = 3.55/ (1.099^1) = 3.2302

PV(D2) = 4.65/ (1.099^2) = 3.8500

PV(D3) = 5.85 / (1.099^3) = 4.4072

PV(Price at t=4) = 53 / (1.099^4) = 36.3316

Price = 3.2302+2.9392+4.4072+36.3316

= 47.81897

Therefore, price = $47.82

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For journal entries 1 through 12, select the letter of the explanation that most closely describes it in the space beside each e
Ksivusya [100]

Question Completion:

For each of the following entries, select the letter of the explanation that most closely describes it in the space beside each entry. (You can use letters more than once.)

A. To record receipt of unearned revenue

B. To record this period's earning of prior unearned revenue

C. To record payment of an accrued expense

D. To record receipt of an accrued revenue

E. To record an accrued expense

F. To record an accrued revenue

G. To record this period's use of a prepaid expense

H. To record payment of a prepaid expense

I To record this period's depreciation expense

Journal Entries

Insurance Expense 1,900

Prepaid Insurance 1,900

Salaries Payable 3,900

Cash 3,900

Prepaid Rent 3,200

Cash 3,200

Salaries Expense 4,900

Salaries Payable 4,900

Interest Receivable 1,900

Interest Revenue 1,900

Cash 3,900

Accounts Receivable (from consulting) 3,900

Cash 5,900

Unearned Professional Fees 5,900

Cash 4,300

Interest Receivable 4,300

Rent Expense 8,000

Prepaid Rent 8,000

Interest Expense 6,300

Interest Payable 6,300

Depreciation Expense 1,300

Accumulated Depreciation 1,300

Unearned Professional Fees 1,900

Professional Fees Earned 1,900

Answer:

Journal Entries with appropriate descriptions:

Insurance Expense 1,900

Prepaid Insurance 1,900

G. To record this period's use of a prepaid expense

Salaries Payable 3,900

Cash 3,900

C. To record payment of an accrued expense

Prepaid Rent 3,200

Cash 3,200

H. To record payment of a prepaid expense

Salaries Expense 4,900

Salaries Payable 4,900

E. To record an accrued expense

Interest Receivable 1,900

Interest Revenue 1,900

F. To record an accrued revenue

Cash 3,900

Accounts Receivable (from consulting) 3,900

D. To record receipt of an accrued revenue

Cash 5,900

Unearned Professional Fees 5,900

A. To record receipt of unearned revenue

Cash 4,300

Interest Receivable 4,300

D. To record receipt of an accrued revenue

Rent Expense 8,000

Prepaid Rent 8,000

G. To record this period's use of a prepaid expense

Interest Expense 6,300

Interest Payable 6,300

E. To record an accrued expense

Depreciation Expense 1,300

Accumulated Depreciation 1,300

I To record this period's depreciation expense

Unearned Professional Fees 1,900

Professional Fees Earned 1,900

B. To record this period's earning of prior unearned revenue

Explanation:

Journal entries are usually recorded to adjust revenue and expenses to the accrual basis of accounting and to match expenses to the period's revenue and vice versa.  Short narrations are provided after recording each transaction.  The purpose is to provide some descriptions of the transaction so that it can be understood by another person reviewing the records.

4 0
3 years ago
Sage Hill Inc. Issues $254,000, 10-year, 10% bonds at 97. Prepare the journal entry to record the sale of these bonds on March 1
Mamont248 [21]

To record final annual interest and bond repayment:

2017

Mar 1

Bonds interest expense       $25,400

Bonds payable                      $254,000

          Cash                                                  $279,000

On March 1, 1997, the date of issuance, the entry is:

1997

Mar 1

Cash                                        $254,000

          Bonds payable                                  $254,000

On each March 1 for 10 years, beginning March 1, 1997 (ending March 1, 2017), the entry would be (Remember, calculate interest as Principal x Interest Rate x Time)

Mar 1

Bond Interest Expense ($100,000 x 12% x 1)          $25,400

          Cash                                                                                  $25,400


8 0
3 years ago
Hi-Tek plans to pay a $6 per share dividend one year from today, and will increase the dividend by 4 percent per year forever. W
Lunna [17]

Answer:

The current share price if the required return on this stock is 16 percent is $50.

Explanation:

price = dividend next year /(required rate of return - growth rate)

         = 6/(16% - 4%)

         = 50

Therefore, The current share price if the required return on this stock is 16 percent is $50.

5 0
3 years ago
There are several economic explanations for why trade is so commonplace. Match each of the examples listed below with the econom
levacccp [35]

Answer:

Explanation:

A. Swiss watch manufacturers producing high quality time pieces.

1. Comparative Advantage

B. U.S. auto makers offering a great variety of makes and models of cars.

2. Specialization or Economies of Scale

C. The ability of developing nations to export textiles to wealthier countries.

US auto makers manufacture on large scale so they have economies of scale . Moreover they are technically superior because of specialisation .  

1. Comparative Advantage

wealthier nation too can export textile but that will be costlier so developing nation has comparative advantage of cheap labour.

D. Doctors becoming experts in one type of medicine rather than becoming proficient in many areas.

2. Specialization or Economies of Scale

E. Your economics professor paying a gardener to do work that he/she could do on their own.

1. Comparative Advantage

Professor can earn more by using his time as a professor so he has comparative advantage .

5 0
3 years ago
A​ BBB-rated corporate bond has a yield to maturity of 7.7 %. A U.S. treasury security has a yield to maturity of 6.3 %. These y
ArbitrLikvidat [17]

Answer:

The price as a percentage of the treasury stock is 104.23%

The price as a percentage of the BBB-rated corporate bond is 98.37%

The credit spread on the bond is 1.40%

Find detailed computations in the attached.

Explanation:

The credit spread on BBB-rated corporate bond is the difference between its effective interest rate and the interest rate on the U.S government treasury security,that is:

7.7%-6.3%=1.40%

Note that the par value of a bond is usually $1000.

Download xlsx
5 0
3 years ago
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