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Pachacha [2.7K]
3 years ago
12

Stagnant Iron and Steel currently pays a $9.55 annual cash dividend (D0). They plan to maintain the dividend at this level for t

he foreseeable future as no future growth is anticipated. If the required rate of return by common stockholders (Ke) is 13 percent, what is the price of the common stock
Business
1 answer:
denis-greek [22]3 years ago
3 0

Answer:

The price of the common stock today is $73.46

Explanation:

The stock is a zero growth stock which means that the dividend has zero growth. For such a stock, the price or fair value is simply calculated just like the value of a perpetuity. The formula to calculate the price of a zero dividend growth stock is,

P0 = D/Ke

Where,

  • Po is the price or fair value of the stock today
  • D is the dividend paid today which will remain constant
  • Ke is the required rate of return on such a stock

Thus,

P0= 9.55 / 0.13

P0 = $73.46

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Entity B bought equipment for $240,000 on January 1, 2021. It estimated the useful life to be 3 years with no salvage value, and
mezya [45]

Answer:

Part 1

Revised depreciation expense =  $32,000

Part 2

The entry to record depreciation expense :

Debit : Depreciation Expense $32,000

Credit : Accumulated Depreciation $32,000

Explanation:

Straight line method charges a fixed depreciation charge over the year of use of an asset.

<em>Depreciation expense = (Cost - Salvage Value) ÷ Estimated Useful Life</em>

2021

Depreciation expense = $80,000

2022

Old Depreciation expense = $80,000

New Depreciation expense = Depreciable Amount ÷ Remaining Useful Life

                                              = ($240,000 - $80,000) ÷ 5

                                              = $32,000

7 0
3 years ago
Suppose a technological improvement has lowered the cost of manufacturing cell phone batteries. This would lead to ___________ (
Julli [10]

Answer:

The correct answer is: an increase; fall; substitutes; decrease; complements; increase.

Explanation:

Technological improvement has lowered the cost of producing cell phone batteries. This reduction in the cost of production will cause the price of cell phone batteries to decline. Since batteries are used as inputs in the cell phone. The reduction in the price of inputs means that the cost of production would decrease. The firms will be able to supply more at the same cost. The supply, as a result, will increase. The supply curve will shift to the right. The price of cell phones will decline.

Cell phones and landlines are substitutes. They can be used in place of each other. A decrease in the price of cell phones would cause the demand for landlines to decrease as the consumers will prefer a cheaper substitute.

The cell phones and applications, however, are use complements. They are used together. So when the price of cell phones decrease and its demand increase, the demand for cell phone applications will increase as well.

6 0
3 years ago
ERIC: Hi, Hubert. This is my first economics course, and many of the concepts discussed in class are really confusing. Today the
Ymorist [56]

Answer:

ERIC: Hi, Hubert. This is my first economics course, and many of the concepts discussed in class are really confusing. Today the professor explained that the true cost of going to college includes both the tuition I pay as well as something called the "opportunity cost" of going to college. I don't understand. I pay $32,000 per year in tuition. The tuition is what I pay to the school, so it seems like that should be my true cost!

HUBERT: Hi, Eric. Many concepts in economics can be confusing at first. Let's talk it through.

Economists think of costs a bit differently than just the dollar amount that you pay. To an economist, the true cost of college includes the total value of what you give up in order to acquire your college education. In other words, not only did you give up the tuition money that you paid, but by attending college, you gave up opportunities to do other things with your time as well. This is where the idea of opportunity cost comes from.

The opportunity cost of your decision to go to college is the value of the next best alternative that you gave up. Suppose that your next best alternative to college is to work as a cashier. By not going to college, and taking this job, you could earn $16,000 per year. Then your opportunity cost of college is <u>$16,000</u>, and your total cost of a year of college is <u>$48,000</u> per year.

ERIC: I think I get it now. So when I take into account the opportunity cost of college, the true cost is actually <u>more </u>than just the tuition.

HUBERT: Correct. Thinking about costs in this way will help you make more rational decisions in your everyday life. Now tell me, how can you explain your decision to go to college?

ERIC: I chose to go to college because, for me, the value of a year in college <u>gives me a higher stand and offers me a better long-term opportunity that someone without a college degree.</u>

Explanation:

The question poses a discussion about the opportunity cost of attending college. The understanding behind this is that by choosing to go to college, Eric is forfeiting the opportunity to get a job as a cashier that would earn him $16,000 a year while incurring his college fees of $32,000. Therefore, the total cost of attending college to him should be $48,000.

3 0
3 years ago
If government tax revenues change automatically and in a countercylical direction over the course of the business cycle, this wo
luda_lava [24]

Answer: Option (C) is correct.

Explanation:

Correct Option: Political business cycle

If government tax revenues change automatically and in a countercylical direction over the course of the business cycle, this would be called a Political business cycle.

These cycles are present in macroeconomic variables such inflation rate, output and unemployment. There are two types of regime follow in this cycle are as follows:

(i) Regime A consist of expansionary polices which results in a economic growth and inflation. If the inflation rate is high enough then there is a withdrawal of policy.

(ii) Regime B consist of contractionary polices which results in reducing economic growth and inflation. It will become voted out if the unemployment is too high, replaced by Regime A. It generally lead to downward movement of the cycle.

7 0
3 years ago
The phrase leadership praise followers in public private is really a statement concerning what two important parts of communicat
taurus [48]

The phrase leader should praise followers in public and punish them in private is really a statement concerning what two important parts of communication?

Answer:

Encoding and Decoding

Explanation:

The two important parts of communication in this situation is known as Encoding and Decoding

Here the Encoding means that the sender that is leader, sends the message that is praise in the public, to an effect, that is using certain symbols including actions, words, etc, such that the receiver can quickly grab the message.

At the same time, with the Decoding, the receiver that is followers quickly understood the message, that is praise in the public or punishment in the private, in a way that the meaning of the message is not lost.

Hence, in this case, the correct answer is Encoding and Decoding.

4 0
2 years ago
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