Which of the following statements reflects upon the difficulty companies face when requiring international suppliers to follow e
1 answer:
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Answer:
Bad Debt Expense for 20x2 is $50,245
Explanation:
Note: The full question is attached as picture below
Ending balance = Beginning balance + Sales on account or credit sales - Cash collected - Uncollected accounts
Beginning balance of Accounts receivable (given) = $850000
Credit sales in 20X2 = 80% * $3125000 = $2500000
Cash collections (given) = $2400000
Uncollectible accounts (given) = $52100
Ending balance = $850000 + $2500000 - $2400000 - $52100 = $897900
Allowance required to be made for 20X2 = 5% of Accounts receivables ending balance on 20X2 = 5% * $897900 = $44895
First we will write off uncollectible accounts of $52100 from the beginning balance of allowance for uncollectible accounts. (Beginning balance of allowance for doubtful accounts = $46750 ).
Difference = Beginning balance of allowance account - Uncollectible accounts = $46750 - $52100 = - $5350
It means that there is a shortfall of $5350 in the allowance for doubtful accounts. And, also a total of $44895 should be there in the credit of Allowance for doubtful accounts at the end of 20X2. Allowance needed in 20X2 = $44895 + $5350 = $50,245 . So, the Bad debt expense for 20X2 is $50,245.
Part a: The market capitalization rate is 9.25%
Part b: The intrinsic value of the stock is $70.59
Market capitalization rate is another name for the stock's required rate of return. It is called the market capitalization rate because we can infer it by observing the market value of the stock. One way to find this rate is the capital asset pricing model (CAPM).
Part a:
Let,
r = market capitalization rate
f = risk free rate = 5%
m = return on the market = 10%
We can find the market capitalization rate with the help of the capital asset pricing model (CAPM),
The market capitalization rate is 9.25%.
Part b:
Let,
D be the dividend expected = $3
r be the interest rate = 9.25%
g = growth rate of dividends = 5%
The price is given by the dividend growth model:
The intrinsic value of the stock is $70.59
Learn more about CAPM:
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