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UNO [17]
3 years ago
14

An investment counselor calls with a hot stock tip. He believes that if the economy remains​ strong, the investment will result

in a profit of ​$10,000. If the economy grows at a moderate​ pace, the investment will result in a profit of ​$30,000. ​However, if the economy goes into​ recession, the investment will result in a loss of ​$30,000. You contact an economist who believes there is a ​30% probability the economy will remain​ strong, a 60​% probability the economy will grow at a moderate​ pace, and a 10​% probability the economy will slip into recession. What is the expected profit from this​ investment?
Business
1 answer:
mixer [17]3 years ago
7 0

Answer:

6,000

Explanation:

The expected value from this investment can be calculated by possible values for random variables by multiplying them by their probability

DATA

Strong  = 30,000   , probability = 30%

Moderate = 10,000 , probability = 60%

Weak = -30,000 , probability = 10%

Calculation

Expected profit = Values x Probability

Expected profit = (30,000 x 30%) + (10,000 x 60%) + ( 30,000 x 10%)

Expected profit = 6,000 + 6,000 -6,000

Expected profit = 6,000

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Assume that you are a loan officer of a bank. A local church is seeking a $4 million, 20-year loan to construct a new classroom b
n200080 [17]

Answer:

Explanation:

a.

There is little information on how funds are used or how much money is spent to manage the church. The financial statements have been prepared incorrectly.

Interpretation:

While drafting the financial accounts, the church committed many errors. The church's revenue is equivalent to its daily operations operating expenditures. They have approximately $3 million in funding assets that they do not owe any money on.  

It may be deduced that the church is attempting to preserve asymmetric information, and therefore it will be better to justify its sources of income and use of money in order to determine whether they can or they cannot pay the debt.

b.

The revenue from various channels must be detailed in the yearly report so that the loan officer may make an informed judgment.

Interpretation:

Since payments and contributions account for 90% of revenue and revenue from other sources accounts for 10%, it's surprising how the church earns money in other ways as stated on the income statement. As a result, it's important to understand what other potential revenue streams the church has before approving the loan.

c.

The officer in charge of the loan should check the church's book records to make sure and guarantee that there are no outstanding loans. This situation necessitates a thorough examination and assessment.

Interpretation:

The church has $3 million worth of equipment. The church's expenses, on the other hand, are equivalent to the church's income. As a result, it's unclear how the church acquired the equipment without taking out a loan. As a result, the church must be urged to produce a full breakdown of its expenses, which may be thoroughly and fully studied to see whether there are any financing charges that the church is attempting to hide in its yearly reports.

d.

There is no direct or primary source of income for the church. It solely makes money from charity donations.

Interpretation:

The church's only sources of income are fundraisers and charitable donations. It also doesn't possess any significant revenue streams. Because the church is attempting to conceal numerous possible pieces of information, this may be a case of micro-management by the proprietors, and so these issues should be considered by the officer in charge of the loan before accepting the loan.

8 0
3 years ago
Exercise 13-17 Swifty Company has been operating for several years, and on December 31, 2017, presented the following balance sh
mixer [17]

Answer:

(a) Current ratio = 2.746

(b) Acid-test ratio = 1.423

(c) Debt to assets ratio = 47.48%  

(d) Return on assets = 6.15%

Explanation:

For Balance Sheet, pleased see attached file.

Current Ratio = Current Asset / Current Liabilities

Current Ratio = 212,800 / 77,500

Current Ratio = 2.746

Acid-Test Ratio = (Current Assets – Inventories) / Current Liabilities

Acid-Test Ratio = (212,800 – 102,500) / 77,500

Acid-Test Ratio = 1.423

Debt to Asset ratio = (Total Liabilities / Total Assets)*100

Debt to Asset ratio = (205,500 / 432,800)*100

Debt to Asset ratio = 47.48%

ROA = (Net Income / Total Assets)*100

ROA = (26,600 / 432,800)*100

ROA = 6.15%

The Current Ratio is a liquidity measure that shows the ratio between current asset and current liabilities. It tells how many dollars of the current asset are per dollar of current debts, that gives an idea of the company`s ability to perform its debts.    

The Quick Ratio is also a liquidity indicator, but using its most liquid assets, to pay its current liabilities at maturity. The inventory, although it is a current asset, is not considered, since it cannot be converted into cash in a very short term.

The difference between the Quick Ratio and the Current Ratio, implies that while both are measures of the company's ability to pay its debts, the quick ratio also tells how much the company depends on its inventory to get that objective.

The Debt to Assets ratio is a financial ratio that shows how much of a company assets is owed to its creditors.  

ROA is a financial indicator that gives an idea as to how efficient a company's management is at using its assets to generate earnings, by determining how profitable a company is relative to its total assets.

6 0
3 years ago
On June 30, 2018, Yang Corporation granted compensatory stock options for 25,000 shares of its $24 par value common stock to cer
Charra [1.4K]

Answer:

$50,000

Explanation:

Since the service year is for a period of two year beginning from January 1 2018,the fair value of the shares options would be recognized over the two years on straight line basis,in other words $50,000 is the compensation expense for each i.e $100,000/2.

The appropriate entries would be a credit to paid in capital-share options account and debit goes to compensation expense in both years.

For instance ,2018 entries would:

Dr compensation expense $50,000

Cr paid in capital shares options      $50,000

6 0
3 years ago
How much is the sea level expected to rise by 2050?
liubo4ka [24]
I think that answer is 1.5 
8 0
3 years ago
Ginny Trueblood is considering an investment which will cost her $120,000. The investment produces no cash flows for the first y
velikii [3]

Answer:

The project should be rejected as the payback period of 3.97 years exceeds the required 3 years. So, the correct option is E

Explanation:

The table showing the discounted cash flows of each year:

Computing discounted payback as:

Discounted Payback = Number of years + (Initial Cost - Discounted Cash flow of year 1 + Discounted Cash flow of year 2 + Discounted Cash flow of year 3 / Discounted Cash flow of year 4)

= 3 + ($120,000 - $0 - $28,925.62  - $41,322.31  / $51,226.01)

= 3 + ($49,752.07 / $51,226.01)

= 3 + 0.97

= 3.97

Working Note:

Discounted Cash Flow is computed as:

Discounted cash flow = Cash Flow / (1 + r) ^ n

where

r is rate of return that is 10%

n is number of year

So,

For 1st year:

= $0 / (1 + 0.1) ^1

= $0

For 2nd year:

= $35,000 / (1 + 0.1) ^ 2

= $35,000 / 1.21

= $28,925.61

For 3rd year:

= $55,000 / (1 + 0.1) ^ 3

= $55,000 / 1.331

= $41,322.31

For 4th year:

= $75,000 / (1 + 0.1) ^ 4

= $75,000 / 1.4641

= $51,226.01

6 0
3 years ago
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