An expense resulting from failing to take advantage of cash discounts when using the net method of recording purchases is called

10 points Return to questionItem 3Item 3 10 points Suppose Stark Ltd. just issued a dividend of $2.24 per share on its common st

8_murik_8 [283]

Answer:

a. The best estimate of the company’s cost of equity capital using the arithmetic average growth rate in dividends is 10.91%

a. The best estimate of the company’s cost of equity capital using the geometric average growth rate is 10.88%

Explanation:

a.

Time Dividend per share ($) Growth

-4 1.80

-3 1.98 10.00%

-2 2.05 3.54%

-1 2.16 5.37%

0 2.24 3.70%

Average 5.65%

D0 = $ 2.24 / share

g = 5.65%

D1 = D0 x (1 + g)

= 2.24 x (1 + 5.65%)

= $ 2.37

Current share price = P = $ 45 = D1 / (Ke - g)

The cost of equity = D1 / P + g

= 2.37 / 45 + 5.65%

= 10.91%

Therefore, The best estimate of the company’s cost of equity capital using the arithmetic average growth rate in dividends is 10.91%

a. What if you use the geometric average growth rate?

A DPS of $ 1.80 / share 4 years back has given way to a DPS of $ 2.24 today.

CAGR, g = (2.24 / 1.80)1/4 - 1

= 5.62%

D1 = 2.24 x (1 + g)

= 2.24 x (1 + 5,62%)

= $ 2.37

cost of equity = D1 / P + g

= 2.37 / 45 + 5.62%

= 10.88%

Therefore, The best estimate of the company’s cost of equity capital using the geometric average growth rate is 10.88%

7 0

3 years ago

The Tradeoff Theory suggests that ________. A. with higher costs of financial distress, it is optimal for a firm to choose hig

ratelena [41]

Answer:

The correct answer is D. The Tradeoff Theory suggests that a firm should choose a debt level where the tax savings from increasing leverage are just offset by the increased probability of incurring the costs of financial distress.

Explanation:

The trade-off theory of capital structure states that companies choose their leverage ratio to maximize benefits and minimize costs. The classic version of the hypothesis goes back to Kraus and Litzenberg, who observed a balance between the risk of loss of welfare from impending bankruptcy and the tax benefits of outside capital. In the trade-off theory, debt and equity financing are calculated in such a way that the present value of the tax shield is as large as possible and the present value of the costs of “financial distress” is possibly small.

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3 years ago

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Exercise 4-20 (Algo) Statement of cash flows; indirect method [LO4-8] Presented below is the 2021 income statement and comparati

dedylja [7]

Answer and Explanation:

The preparation of the cash flow statement is presented below:

TIGER ENTERPRISES

Cash flow statement

Cash flow from operating activities

Net income $3,324

Adjustment made

Add: Depreciation expenses $410

Add: Decrease in account receivable $165 ($835 - $1,000)

Less: Increase in inventory -$55($825 - $770)

Less: Increase in prepaid insurance -$100 ($140 - $40)

Less: Decrease in account payable -$145 ($385 - $530)

Less: Decrease in accrued liabilities -$185 ($385 - $570)

Add: Increase in income taxes payable $45 ($365 - $320)

Net cash provided by operating activities $3,459

Cash flow from investing activities

Purchase of equipment -$650 ($3,300 - $2,650)

Net cash used by investing activities -$650

Cash flow from financing activities

Issuance of the note payable $300 ($1,100 - $800)

Issuance of the common stock $150 ($1,120 - $970)

Dividend paid -$2,989 ($870 + $3,324 - $1,205)

Net cash used by financing activities -$2,539

Increase in cash $270

Add: Beginning cash balance $370

Ending cash balance $670

The items which shown in a positive sign reflects the cash inflow and the items which shown in a negative sign reflects the cash outflow ,

4 0

3 years ago

When banks are compared to retail stores, banks are said to “buy” money. What does the term “buy” refer to? The bank collaterali

zimovet [89]

Answer:

pay for

Explanation:

your welcome

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3 years ago

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The UCC rule that says that a merchant who offers to buy, sell, or lease goods and gives a written and signed assurance on a sep

makvit [3.9K]

The UCC rule says that a merchant who offers to buy, sell, or lease goods and gives a written and signed assurance on a separate form that the offer will be held open cannot revoke the offer for the time stated or if no time is stated, for a reasonable time is referred to as the <u>Firm Offer Rule.</u>

<u></u>

<h3><u>A Firm Offer: What Is It?</u></h3>

When goods are sold, a firm offer is deemed to have been made when a guarantee to keep the offer open has been signed and the selling merchant meets the requirements for a merchant under the Uniform Commercial Code. Customers frequently ask for a definite offer so they can be certain of their cost over a predetermined period of time. A lot of retailers also request definite offers from their suppliers. Firm offers have a number of benefits, but there is a chance that things could change and the original offer would no longer be appropriate.

For instance, you might not be able to maintain the price you initially proposed due to rising raw material costs or running out of stock.

Only the time period specified in the offer is valid for firm offers. If the offer does not include a deadline, it will be valid for a maximum of three months.

Learn more about the firm offer rule with the help of the given link:

brainly.com/question/13640672?referrer=searchResults

#SPJ4

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2 years ago