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grandymaker [24]
3 years ago
14

You have two alternatives to consider to produce a part. The first alternative requires an initial investment of $50,000, produc

tion costs are $30 per part and they can be sold for $50. The second alternative is that you can buy the part externally for $40 and they still sell for $50.a. Make and explain your recommendation for these two alternatives showing your calculations and the graph you would show to management.b. What are two make-buy issues of which management should be aware?

Business
1 answer:
egoroff_w [7]3 years ago
4 0

Answer:

At 5,000 both option has the same cost.

Below that volume is better to but

and above this, produce the part generates a cost savings.

Explanation:

there is a point of indifference at which potal cost for both option is the same.

50,000 + 30X = 40X

X = 50,000 / 10 = 5,000

At this pouint the total cost is the same for both alternatives

Therefore the company will have to check for which is their relevant range

in order to decide whether to produce or buy the part.

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stock currently sells for $35.25 per share. The dividend is projected to increase at a constant rate of 4.75% per year. The requ
USPshnik [31]

Answer:

The stock price 5 years from now will be 44.46

Explanation:

The stock price will increase like  compound interest at the same rate as the dividends.

Stock(1+ g)^{time} = Amount

Stock 35.25

time 5

dividend grow rate 0.0475

35.25 (1+ 0.0475)^{5} = Amount

Amount 44.45588696

The stock price 5 years from now will be 44.46

<u>Reasoning:</u>

In five years, if we calcualte the gordon dividend growth model:

\frac{divends_{year5}}{return-growth} = Intrinsic \: Value

and year 5 dividends would be:

Dividend\: (1+ g)^{5} = Divends_{year5}

\frac{Dividend\: (1+ g)^{5}}{return-growth} = Intrinsic \: Value

we can arrange the formula like this:

\frac{Dividend}{return-growth} \times (1+ g)^{5}= Intrinsic \: Value

The first part is the current stock price so our formula is confirmed.

$Market Value Today \times (1+ g)^{5}= Intrinsic \: Value

6 0
3 years ago
ABC Corporation raised capital through an offering of equity securities. Which component of the balance sheet has changed as a r
Stels [109]

Answer:

Share capital in the shareholders equity section

Explanation:

The balance sheet is structured according to the accounting formulae

Asset = Liabilities + Owners Equity

When a company raises capita by the issuing of securities or is referred to as share capital.

The securities issued are common stock or preferred stock.

There is a maximum amount that a company can raise from the sale of shares and this is called authorised share capital.

Share capital is a line item that is reported under Owner equity section of the balance sheet.

8 0
3 years ago
LTM, Inc. has an issue of preferred stock whose par value is $1,000. The preferred stock pays a 4.5% dividend. If investors requ
Elena L [17]

Answer:

Explanation:

return on preferred stock (rp) = Dividend/ Current price

rate of return  = 5.5% or 0.055 as a decimal

Dividend amount = dividend rate * par value ;

Dividend amount = 4.5% * 1000 = $45

Current price = ?

Next, plug the numbers to the formula above to find Price;

0.055 = 45/ Price

0.055Price = 45

Divide both sides by 0.055;

Price = 45/ 0.055

Price = $818.18

7 0
3 years ago
Benjamin Graham, the father of value investing, once said, "In the short run, the market is a voting machine, but in the long ru
Ber [7]

Answer:

1- a. A stock's intrinsic value is based on true investor return.

2- a. Most investors prefer companies that can rise prices beyond reasonable levels.

b. Successful companies can avoid raising external funds in the financial markets.

Explanation:

Intrinsic value of a company's stock is the real value of stock which is based on systematic factors affecting the company. The factors affecting the intrinsic value of company are usually internal factors. The performance of company management, employee satisfaction and its operational efficiencies are the factor which drive intrinsic value of a company.

6 0
2 years ago
MSI is considering outsourcing the production of the handheld control module used with some of its products. The company has rec
Alik [6]

Answer:

1)

cost of making (14000*22) = 308000

cost of buying (14000*(18+6)) = 336000

Difference cost = 28000

2)

No, Since, there is not other use of fixed cost, therefore, fixed cost will be a part of cost of buying.

3-a)

cost of making (14000*22) = 308000

cost of buying (14000*18) = 252000

3-b)

Yes, Since, there is other use of fixed cost, therefore, fixed cost will not be a part of cost of buying.

8 0
3 years ago
Read 2 more answers
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