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Taya2010 [7]
3 years ago
11

You are considering the purchase of a certain stock. You expect to own the stock for the next four years. The current market pri

ce of the stock is $24.50 and you expect to sell it for $55 in four years. You also expect the stock to pay an annual dividend of $1.25 at the end of year 1, $1.35 at the end of year 2, $1.45 at the end of year 3 and $1.55 at the end of year 4. What is your expected return from this investment?
Business
1 answer:
murzikaleks [220]3 years ago
7 0

Answer:

The answer is: The expected rate of return from this investment is 26.68%

Explanation:

We are given the following cash flows for this operation:

  • Initial investment = -$24.50
  • Cash flow 1 = $1.25 (dividend year 1)
  • Cash flow 2 = $1.35 (dividend year 2)
  • Cash flow 3 = $1.45 (dividend year 3)
  • Cash flow 4 = $56.55 ($1.55 dividend year 4 + $55 stock's sales price)

Using an excel spreadsheet and the IRR function:

=IRR(value 1: value 5) =26.68%  

where

  • value 1 = -24.50
  • value 2 = 1.25
  • value 3 = 1.35
  • value 4 = 1.45
  • value 5 = 56.55

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1. Describe the four management functions and the type of management activity associated with each.
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Planning and Decision Making – Determining Courses of Action.

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Explanation:

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The Warren Watch Company sells watches for $21, fixed costs are $180,000, and variable costs are $15 per watch.
enyata [817]

Answer:

  • 5,000 watches : $150,000  loss
  • 20,000 watches:  $60,000  (Loss)
  • Break-even point = 30,000  units
  • if the selling price rises to 32  = break even points descends to 10,588 units
  • If the selling price rises to $32 but variable costs rises to $26  , the break even point goes back to 30,000units.

Explanation:

Hi, to answer this question we have to apply the next formula:

Profit = Revenue -cost

Where the revenue is equal to the units sold (x) multiplied by the selling price,

R = 21 x  

And cost is equal to the sum of the fixed and variable costs.

C = 15x + 1800

So:

P = 21x-(15x +180,000)

P = x ( 21-15)- 180,000

  • For 5,000 watches:

P = 5000(21-15)-180,000

P = 5000(6) -180,000

P= 30,000-180,000

P=-$150,000  (loss , since is negative )

  • For 20,000 watches:

P = 20,000(6) -180,000

P = 120,000-180,000

P=-$60,000  (Loss)

  • To find the break even point:

R = C

21x = 15x + 180,000

21x-15x =180,000

6 x = 180,000

x = 180,000/6

x =30,000  units

  • if the selling price rises to 32

32x = 15x + 180,000

32x-15x = 180,000

17x =180,000

x = 180,000/17

x = 10,588 units

It descends,

  • If the selling price rises to $32 but variable costs rises to $26  

32x = 26x+180,000

32x-26x = 180,000

6x = 180,000

x = 180,000/6

x =30,000

The break-even point comes back to 30,000 units.

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Answer:

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Explanation:

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