Sparks Corporation has a cash balance of $5,480 on April 1. The company must maintain a minimum cash balance of $5,000. During A
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Answer:
price earning ratio = 2
Explanation:
given data
Book value = $40 per share
Par value = $12 per share
Dividends = $5 per share
Dividend payout ratio = 20 %
Dividend yield ratio = 10 %
solution
first we get here market price per share by dividend yield ratio that is express as
dividend yield ratio = Dividends per share ÷ market price per share ........................1
put here value we get
market price per share =
market price per share = $50
and
now we get earning per share by dividend payout ratio that is express as
dividend payout ratio = dividend per share ÷ earning per share .................................2
put here value we get
earning per share =
earning per share = $25
so now we get here price earning ratio that is
price earning ratio = market price per share ÷ earning per share ..........................3
put here value we get
price earning ratio =
price earning ratio = 2
Answer:
The total effect is 35 out of which income effect is 15 and substitution effect is 20.
Explanation:
Ross has an income of $1440.
The price of chocolates (Px) is $10 and donuts (Py) is $9.
The utility function is given as
U = 0.5xy
Before price rise, Budget line:
1440 = 10x + 9y,
Consumption is optimal when
0.5y / 0.5x= 1.11
y = 1.11x
Substituting in budget line,
1440 = 10x + 9y = 10x + 9(1.11x)
1440 = 10x + 9.99x
19.99x = 1440
x = 72
y = 1.11x = 79.92 = 80
After price rise,
Py = 16.
New budget line:
1440 = 10x + 16y,
Price ratio
=
= 0.625
And,
y = 0.625x
Substituting in new budget line: 1440 = 10x + 16y
1440 = 10x + 16(0.625)x
1440 = 20x
X = 72
Y = 0.625x = 45
So, total effect (TE)
= Decrease in consumption of y
= 80 - 45
= 35
With previous (x, y) bundle,
U = 0.5xy
U = 0.5 x 72 x 80
U = 2880
Keeping utility level the same & substituting,
y = 0.625x in utility function:
28800 = 0.5xy
x = 96
Now, putting the value of x,
y =
y =
y = 60
Substitution effect (SE)
= 80 - 60
= 20
Income effect
= TE - SE
= 35 - 20
= 15