All categories

3 years ago

The ceteris paribus assumption is employed in economic analysis, in order to:

1 answer:

3 0

Let's start with the meaning of ceteris paribus , it is a Latin phrase which means keeping all the other things constant or unchanged .
Now options were
A)Focus on the effect of a single factor on a certain variable
B)Make sure that all relevant factors are considered
C)Distinguish macroeconomics from microeconomics
D)Avoid making normative statements
So from above definition we can understand that it works only on one
variable keeping others constant.
So the answer will be
A)Focus on the effect of a single factor on a certain variable

You might be interested in

A man purchased $90,000 annuity with a single premium, and began receiving payments 2 months after that

Anton [14]

The type of Annuity is : Immediate annuity, where distribution starts within 1 year of purchase. A man purchased $90,000 annuity with a single premium, and began receiving payments 2 months after that, the type of annuity is Immediate Annuity. Immediate annuities are long-term, tax-deferred contracts one purchase from an insurance company, it provide immediate regular payments in exchange for a lump-sum investment. These payments are guaranteed to last for life or a specified period of time.

5 0

4 years ago

Travel by bus and pawn-shop services would be expected to be examples of

drek231 [11]

An example of inferior goods

4 0

4 years ago

Read 2 more answers

Shelf registration

dolphi86 [110]

Answer:

B. - .

Explanation:

Shelf registration is a process that is part of regulation that a correction can evoke tomcomply with U.S. Securities and Exchange Commission (SEC) registration requirements for a new stock offering up to two years before doing the actual public offering.

Once shelf registration is complete, the only other SEC requirements revolve around standard reporting.

6 0

3 years ago

In its income statement for the year ended December 31, 2017, Crane Company reported the following condensed data. Salaries and

Westkost [7]

Answer:

NET INCOME = $180,067

Explanation:

CRANE COMPANY

Income statement for the year ended December 31, 2017

PARTICULARS $ $

Sales

Sales Revenue 3,646,500

Less Sales Discount 264,000

Net Sales 3,382,500

Cost of Goods Sold 1,628,550

Gross Profit 1,753,950

Operating Expenses

Salary and wages Expenses 767,250

Utility expenses 181,500

Depreciation Expenses 511,500

Total Operating Expenses 1,460,250

Income from operation 293,700

Add: Other Revenue

Interest Revenue 107,250

400,950

Less: Other expenses and losses

Interest expenses 41,250

Loss on disposal of plant assets 137,775 (179,025)

Income before income taxes 221,925

Income Expenses Tax 41,250

NET INCOME $180,067

3 0

3 years ago

The market consensus is that Analog Electronic Corporation has an ROE = 9%, a beta of 1.25, and plans to maintain indefinitely i

Gekata [30.6K]

Answer:

a. Stock Price is $10.60.

b. Trailing P/E ratio is 3.53, while Leading P/E ratio is 3.33.

c. Present value of growth opportunitiesis -$9.28.

d .Stock Price is $15.85.

Explanation:

The following are given in the question:

ROE = 9%

b = beta = 1.25

pr = Plowback ratio = 2/3 = 0.67

dpr = dividend payout ratio = 1- pr = 1/3 = 0.33

e0 = This year’s earnings per share = $3

mr = The coming year’s market return = 14%

tr = T-bills return = 6%

We can now proceed as follows:

a. Find the price at which Analog stock should sell. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

The stock price can be calculated using the following formula:

P0 = Stock Price = d * (1 + g) / (r - g) …………………………. (1)

Where;

d = dividend per share = e0 / dpr = $3 / (1 / 3) = $1

g = Sustainable growth rate = ROE * pr = 9% * 2/3 = 0.06

rf = Risk free rate = Return on T-bills = 6%

b = Beta = 1.25

mr = Market return = 14%

r = Required return on Equity = rf + b * (mr - rf) = 6% + 1.25 * (14% - 6%) = 0.16

Substituting the values into equation (1), we have:

Stock Price = $1 * (1 + 0.06) / (0.16 – 0.06)

Stock Price = $1 * 1.06 / 0.10

Stock Price = $1 * 10.60

P0 = Stock Price = $10.60

b. Calculate the P/E ratio. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Trailing P/E ratio = P0/E0 = $10.60 / $3 = 3.53

Leading P/E ratio = P0/e1 ………………………………………. (2)

Where;

e1 = e0 * (1 + g) = $3 * (1 + 0.06) = 3.18

Substituting the values into equation (2), we have:

Leading P/E ratio = $10.60 / 3.18 = 3.33

c. Calculate the present value of growth opportunities. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)

P0 = e1 / r + pvgo …………………………………… (3)

Where pvgo denotes present value of growth opportunities, and P0, e1 and r are as already obatained in part a and b.

Substituting the values into equation (2) and solve for pvgo, we have:

$10.60 = $3.18 / 0.16 + pvgo

$10.60 = $19.875 + pvgo

pvgo = $10.60 - 19.875

pvgo = -$9.28

d. Suppose your research convinces you Analog will announce momentarily that it will immediately reduce its plowback ratio to 1/3. Find the intrinsic value of the stock.

g = ROE * pr = 9% * (1 / 3) = 3%

dpr = 1 – pr = 1 - 1/3 = 2/3

d = dividend per share = e0 / dpr = $3 / (2 / 3) = $2

Stock Price = d * (1 + g) / (r - g) = $2 * (1 + 3%) / (0.16 – 3%)

Stock Price = $2 * (1 + 3%) / (0.16 – 3%)

Stock Price = $15.85

4 0

4 years ago