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swat32
4 years ago
15

Eight years ago, Stan purchased 10 shares of an aggressive growth mutual fund at $90 per share, for a total of $900. Today he so

ld all 10 shares for $4,500. What was his average annual rate of return on this investment, before tax
Business
1 answer:
pychu [463]4 years ago
3 0

Answer:

Average annual rate of return = 22.3%

Explanation:

The average annual rate of return can be computed using the Future value of a a single sum

FV = PV × (1+r)^n

<em>FV = value of investment, PV = cost of investment, r- rate of return, n- number of years</em>

900×(1+r)^8 = 4500

divide both sides by 900

1+r = 4,500/900

1+r =  (4.500/900)^(1/8)

r =  (4.500/900)^(-10) - 1

r= 0.2228

r =0.2228  × 100

Average annual rate of return = 22.3%

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3 years ago
Jackson Tires reported net sales of $80 million and total operating costs (including depreciation) of $52 million. Jackson Tires
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Answer:

d. 8.18 million

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Explanation:

Net residual Income is the value of the firm. All the preferred and required / agreed return on any the funding availed is deducted from the net earning after profit to make the value for the firm. The income purely associated to the firm is considered as the value of the firm.

Earning Before Interest and tax = Net Sales - Operating costs = $80 million - $52 million = $28 million

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Value created for the firm = Net operating profit after tax - Return on investor-supplied capital = $16.8 - $8.625 = $8.175 million = $8.18 million

MVA is the net of market capitalization and stockholders equity of the firm. It is the difference of market value and book value of equity of a firm.

MVA = ( Outstanding shares x Market value of shares ) - Book value od the equity = ( 20 million shares x $25 per share ) - $120 million = $500 million - $120 million = $380 million

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