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ArbitrLikvidat [17]
2 years ago
12

Oriole Tire Co. just paid an annual dividend of $1.70 on its common shares. If Oriole is expected to increase its annual dividen

d by 3.10 percent per year into the foreseeable future and the current price of Oriole’s common shares is $19.65, what is the cost of common stock for Oriole? (Round intermediate calculations to 4 decimal places, e.g. 0.1555 and final answer to 2 decimal places, e.g. 15.25%.)
Business
1 answer:
Butoxors [25]2 years ago
4 0

Answer:

Cost of common stock is 12.02%

Explanation:

The cost of common stock can be computed from share price formula given below:

share price=do*(1+g)/r-g

do is the dividend just paid which is $1.70

g is the expected dividend growth per year which is 3.10%

r is the cost of common stock which is unknown

share price is $19.65

by changing the subject of the formula:

r=do*(1+g)/share price+g

r=1.70*(1+3.10%)/19.65+3.10%

r=1.7527/19.65+3.10%

r=0.0892+3.10%=12.02%

The company's cost of capital which is also the cost of common stock is 12.02%

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Pet Toys Inc. has four customers. Details on revenues and expenses are presented below. Customer A Customer B Customer C Custome
natali 33 [55]

Answer:

a. Customer A.

Explanation:

operating profit = EBIT

in this case, the company allocates fixed operating costs equally, which is incorrect since the sales volumes are very different. Fixed operating costs should be allocated proportional to the amount of units sold:

total fixed operating costs = ($30,000 x 4) + ($20,000 x 4) + ($10,000 x 4) = $240,000

total sales = 10,000 + 20,000 + 35,000 + 50,000 = 115,000 units

fixed operating costs per unit = $240,000 / 115,000 = $2.08696 per unit

                                               A                B                   C                D

units sold                        10,000         20,000        35,000        50,000

sales                               $100,000     $150,000    $200,000   $250,000

total variable costs        $75,000       $105,000    $125,000    $155,000

allocated fixed costs     $20,869       $41,739       $73,044       $104,348

EBIT per customer         $4,131            $3,261        $1,956         -$9,348

EBIT per unit                   $0.41            $0.16           $0.06          -$0.19

Since customer A's EBIT per unit sold is higher, then it is the client with the highest customer level operating profit per unit sold.

3 0
3 years ago
If you were worried about your money being safe from financial disaster in your bank, which new deal program would calm your fea
Sever21 [200]

The FDIC, or the Federal Deposit Insurance Corporation was created in the time of the Great Depression to guarantee deposits up to a certain amount in case the bank fails. The purpose was to restore faith in the United States banking system.

5 0
3 years ago
Which of the following are present value methods of analyzing capital investment proposals? a. internal rate of return and avera
Dmitriy789 [7]

Answer:

C) Net present value and internal rate of return

Explanation:

Of the methods discussed, cash payback and average rate pf return does not take into account the time value of money. Cash payback and ARR basically only use the cash flows and profits in relevance to the investment.

Net present value as the name suggests, discounts these cash flows and then subtracts the initial outlay costs and Internal rate of return also discounts the project cash flows so that they equal zero. Thus these two are the options that take into account the time value. IRR often is calculated by discounting cash flows at different rates until the NPV = 0.

Hope that helps.

8 0
2 years ago
A city government is considering two types of​ town-dump sanitary systems. Design A requires an initial outlay of ​$405 comma 00
SIZIF [17.4K]

Answer:

Desing A is a better deal as the equivalent annual cost is lower than desing B

Anywa, bot desing cost are above the city collections thus, it cannot afford the sanitary systems unless it raises taxes

Explanation:

<em><u>Desing A </u></em>

F0 405,000

operating and maintenance cost 51,000 for 14 years

Present value of the operating and maintenance cost:

C \times \frac{1-(1+r)^{-time} }{rate} = PV\\

C = $ 51,000.00

time = 14 years

rate = 0.07

51000 \times \frac{1-(1+0.07)^{-14} }{0.07} = PV\\

PV $446,018.8673

net worth: $ 851,081.87

equivalent annual cost:

PV \div \frac{1-(1+r)^{-time} }{rate} = C\\

PV 851,082

time 14

rate 0.07

851081.87 \div \frac{1-(1+0.07)^{-14} }{0.07} = C\\

C  $ 97,316.904

<u><em>Desing B</em></u>

F0 251,000

operating and maintenance cost 89,000 for 14 years

C \times \frac{1-(1+r)^{-time} }{rate} = PV\\

C 89,000.00

time 14

rate 0.07

89000 \times \frac{1-(1+0.07)^{-14} }{0.07} = PV\\

PV $778,346.6507

net worth: $ 1,029,346.65

equivalent annual cost:

1029346.65 \div \frac{1-(1+0.07)^{-14} }{0.07} = C\\

C  $ 117,700.580

5 0
3 years ago
A company switched from the cash basis to the accrual basis for recognizing warranty expense. The unrecorded liability for warra
Murrr4er [49]

Answer:

Report a prior period adjustment decreasing retained earnings by $1,365,000.

Explanation:

Going by the question we can derive that $2,100,000 is the prior period's warranty. Consequently, it will be charged to the current year's earnings following the deduction of tax, 35%.

(2,100,000 *65) /100 = $1,365,000

This above calculation is so because Under the accrual basis of accounting...operating expense are reported on the income statement in the particular period when they took place or when they expire

4 0
3 years ago
Read 2 more answers
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