Answer:
b. 3.70 percent
Explanation:
Expected rate of return of a stock, given probabilities, is calculated by summing up the product of probability of each state occurring by the expected return of the stock should that happen.
Expected rate of return = SUM (probability *return)
Boom;(probability* return) = (0.15* 0.10) = 0.015 or 1.5%
Normal ;(probability* return) = (0.70* 0.04) = 0.028 or 2.8%
Recession ; (probability* return) = (0.15* -0.04) = -0.006 or -0.6%
Next, sum up the expected return for each state of the economy to find the expected rate of return on this stock;
= 1.5% + 2.8% -0.6%
= 3.7%
Therefore, the correct answer is choice B.
Explanation:
The journal entries are as follows
On December 31
Bad debt expense Dr $4,115 ($823,000 × 0.50%)
To Allowance for doubtful debts $4,115
(Being the bad debt expense is recorded)
On Feb 01
Allowance for doubtful debts Dr $412
To Account receivable $412
(Being the uncollectible amount is recorded)
On June 5
Account receivable $412
To Allowance for doubtful debts Dr $412
(Being the uncollectible amount is recorded)
On June 5
Cash Dr $412
To Account receivable $412
(Being the cash received is recorded)
Answer:
B. Subscribers cancelling their subscriptions
Explanation:
Central Times’s business environment had suffered tremendousy in recent times with transition from newspaper publication to online journalism. As a result of this, Time's publishing company has faced many problems some of which are highlighted below: many of the newspaper subscribers have cancelled their subscription, they were losing revenue, they had to relief a third of their reporting staff primarily. However, amidst all these, <u>the primary cause of disruption to Central Times’s business environment is option B</u> (Subscribers cancelling their subscriptions). It was this problem that led to the other problems (loss of revenue, firing a third of their reporting staffs)
Answer:
Share price : $ 56.23
Explanation:
CAPM
risk free = 0.05
market rate = 0.11
premium market = (market rate - risk free) 0.06
beta(non diversifiable risk) = 1.64
Ke 0.14840
Now, we solve for the present value of the future dividends:
year dividend* present value**
1 2.91 2.53
2 3.31 2.51
3 3.78 2.49
4 4.31 2.48
4 80.38 46.22
TOTAL 56.23
*Dividends will be calculate as the previous year dividends tiems the grow rate
during the first four year is 14%
then, we calcualte the present value of all the future dividends growing at 9% using the dividend grow model:

(4.31 x 1.09) / (0.1484 - 0.09) = 80.38
Then we discount eahc using the present value of a lump sum:
We discount using the CAPM COst of Capital of 14.84%
last we add them all to get the share price: $ 56.23