Answer:
Comment for statement A - The firm must still compare the IRR with the opportunity cost of capital when using the IRR rule. Therefore, even with the IRR method, the appropriate discount rate must still be specified.
Comment for statement B - There should be a higher discount rate on risky cash flows than the rate used to discount less risky cash flows.
Making use of the payback rule is equivalent to using the NPV rule with a zero discount rate for cash flows before the payback period and an infinite discount rate for cash flows thereafter.
Explanation:
a)
“I like the IRR rule. I can use it to rank projects without having to specify a discount rate”
The firm must still compare the IRR with the opportunity cost of capital when using the IRR rule. Therefore, even with the IRR method, the appropriate discount rate must still be specified.
b.
“I like the payback rule. As long as the minimum payback period is short, the rule makes sure that the company takes no borderline projects. That reduces risk”
There should be a higher discount rate on risky cash flows than the rate used to discount less risky cash flows.
Making use of the payback rule is equivalent to using the NPV rule with a zero discount rate for cash flows before the payback period and an infinite discount rate for cash flows thereafter.
Answer: the correct answer is D) $250,000
Explanation:
Answers
transactions relating to stockholder's equity
Issued shares 10,000* $7 = $70,000
Issued shares 20,000*$8 = $160,000
net income = $100,000
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Sub Total $330,000
Debts
50,000 dividend ($50,000)
3,000 *$10 treasury stock ($30,000)
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Sub Total ($80,000)
Total $330,000-$80,000 = $250,000
Independent, classroom, activist, pragmatic
Answer:
d. Reported as a current asset on the balance sheet
Explanation:
Merchant inventory refers to st finished goods available for sale at any given time. Merchant inventory is commonly referred to as inventory. It is recorded as a current asset in the balance sheet.
Merchant inventory is acquired through purchasing by retailers, wholesalers, and distributors to be sold to customers. Merchant inventory will specifically refer to the unsold goods at the end of a period. It is recorded at its acquisition cost. i.e., the cost which the trader paid to obtain the merchandise.
Answer:
$1,500
Explanation:
Given the compounding formula 
And given an investment (P), made at 16% compounded annually (r), and an ending amount of $1,740 (A) at the end of the year (n = 1 year), the original amount invested (P) can be computed as follows.
= P = 1,740/1.16 = 1,500.
Therefore, the original investment was $1,500.
