Answer:
a. 4%
b. 10%
Explanation:
1. Federal funds target = Real Federal funds rate + Inflation rate + 1/2( inflation gap) + 1/2(output gap)
Inflation gap = Current inflation - inflation target = 2% - 2% = 0
Economy is at full employment so output gap is 0.
= 2% + 2% + 1/2(0) + 1/2 (0)
= 4%
2. Federal funds target = Real Federal funds rate + Inflation rate + 1/2( inflation gap) + 1/2(output gap)
= 2% + 6% + 1/2(6% - 2%) + 1/2(0)
= 10%
Negative Externality
This is the cost that is suffered by a third party as the result of a transaction. One example is the sale of cigarettes. The negative externality is the negative effects of cigarette smoke on people and the environment.
Answer:
D. The constant growth model cannot be used for a zero growth stock, where the dividend is expected to remain constant over time.
Explanation:
So, we evaluate each option.
a. We discount the dividends by the required rate of return. So incorrect.
b. The dividend yield is annual dividend per share divided by stick price per share. the 5% is the growth in dividend and not the actual dividend itself. So, incorrect.
c. The constant growth is appropriate for companies whose dividend patterns are stable. Startups have multiple stage growths and this option becomes incorrect as constant growth is not applicable.
d. A zero growth stock is one where dividend remains the same. So when there is no growth in dividend, the constant growth model becomes inapplicable. So, the statement is correct.
So, here we have our correct statement and all others are incorrect.
Answer:
Increase in net operating is $9,800
Explanation:
<u>Computation table</u>
Increase in sales $60,000
<u>Less:Variable expense (42%) $25,200</u>
<u>Increase in contribution $34,800</u>
<u>Less:Cost of advertising $ 25,000 </u>
<u>Increase in net operating $9,800</u>
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