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Helga [31]
3 years ago
8

Southern Wear stock has an expected return of 15.1 percent. The stock is expected to lose 8 percent in a recession and earn 18 p

ercent in a boom. The probabilities of a recession, a normal economy, and a boom are 2 percent, 87 percent, and 11 percent, respectively. What is the expected return on this stock if the economy is normal?
Business
1 answer:
Scilla [17]3 years ago
3 0

Answer:

15.26%

Explanation:

Let the expected return if economy is normal be X

Expected return ; E(R) = SUM(probability. *return)

E(R) =15.1% OR 0.151 as a decimal

RECESSION: (probability. *return) = -0.08 * 0.02 = -0.0016

NORMAL: (probability. *return) = 0.87 *X = 0.87X

BOOM: (probability. *return) = 0.11 *0.18 = 0.0198

Next, sum the three returns and equate them to 0.151;

-0.0016 + 0.87X + 0.0198 = 0.151

0.87X + 0.0182 = 0.151

Subtract 0.0182 from both sides;

0.87X = 0.151 - 0.0182

0.87X = 0.1328

Divide both sides by 0.87 to solve for X;

X = 0.1526 as a decimal or 15.26%

Therefore, expected return if economy is normal is 15.26%

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viva [34]

Answer:

Bold Stapler Sales Company (BSS)

                                     FIFO             LIFO           Weighted Average

Ending inventory       $4,500         $3,240                 $4,122

Cost of goods sold $96,300      $97,560              $96,678

Explanation:

a) Data and Calculations:

Beginning balances in 2019:

Cash $80,000

Inventory $7,200

Common stock $2,000

Retained earnings $2,000

Description                    Units   Unit Cost   Total

Beginning inventory        400      $18      $7,200

The first purchase        1,600      $21       33,600

The second purchase 2,400     $25       60,000

Goods available           4,400               $100,800

Sales of units              (4,220)    $45   $189,900

Ending inventory             180

FIFO:

Ending inventory = $4,500 ($25 * 180)

Cost of goods sold = $96,300 ($100,800 - $4,500)

LIFO:

Ending inventory = $3,240 ($18 * 180)

Cost of goods sold = $97,560 ($100,800 - $3,240)

Weighted Average:

Weighted average cost per unit = $22.91 ($100,800/4,400)

Ending inventory = $4,122 (22.91 * 180)

Cost of goods sold = $96,678 ($100,800 - $4,122)

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Isabella files her income tax return 35 days after the due date of the return without obtaining an extension from the IRS. Along
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Answer:

a. Failure to pay penalty = 400

b. Failure to file penalty = $4,000

Explanation:

The monthly rate for failure to pay penalty is 0.5% while the failure to file penalty.

Since it is assumed that there are 30 days in a month, the 35 days after the due date of the return without obtaining an extension from the IRS is will be counted as 2 months regardless of the fact that the second month is just 5 files when she filed.

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5        $23 Million    $9 Million                                    $14 Million

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