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3 years ago

Cyclical unemployment:_________

Business

1 answer:

STatiana [176]3 years ago

8 0

Answer: Occurs only during a recession.

Explanation:

Cycling unemployment is a kind of unemployment where company lay-off workers because they can't meet up with their payments: as a result of a general drop in the demand for goods and services in the economy of country.

Cyclical unemployment are very common in recessions as companies then massively drop workers in their establishment due to general low economic activities.

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Instructions: Please make sure that you show all your work when solving the problems. Feel free to make any assumptions whenever

My name is Ann [436]

Answer:

Explanation:

From the given information:

The current price = $\dfrac{Dividend(D_o) \times (1+ Growth \ rate) }{\text{Cost of capital -Growth rate}}$

$15 = \dfrac{0.50 \times (1+ Growth rate)}{8\%-Growth rate}$

$15 \times (8 -Growth \ rate) = 0.50 +(0.50 \times growth \ rate)$

$1.20 - (15 \times Growth \ rate) = 0.50 + (0.50 \times growth \ rate)$

$0.70 = (15 \times growth \ rate) \\ \\ Growth \ rate = \dfrac{0.70}{15.50} \\ \\ Growth \ rate = 0.04516 \\ \\ Growth \ rate \simeq 4.52\% \\ \\$

2. The value of the stock

Calculate the earnings at the end of 5 years:

$Earnings (E_o) \times Dividend \ payout \ ratio = Dividend (D_o) \\ \\ Earnings (E_o) \times 35\% = \$0.50 \\ \\ Earnings (E_o) =\dfrac{\$0.50}{35\%} \\ \\ = \$1.42857$

$Earnings (E_5) year \ 5 = Earnings (E_o) \times (1 + Growth \ rate)^{no \ of \ years} \\ \\ Earnings (E_5) year \ 5 = \$1.42857 \times (1 + 12\%)^5 \\ \\ Earnings (E_5) year \ 5 = \$2.51763$

Terminal value year 5 = $\dfrac{Earnings (E_5) \times (1+ Growth \ rate)}{Interest \ rate - Growth \ rate}$

$=\dfrac{\$2.51763\times (1+0.04516)}{8\%-0.04516}$

=$75.526

Discount all potential future cash flows as follows to determine the stock's value:

$\text{Value of stock today} =\bigg( \sum \limits ^{\text{no of years}}_{year =1} \dfrac{Dividend (D_o) \times 1 +Growth rate ) ^{\text{no of years}}}{(1+ interest rate )^{no\ of\ years} }$

$+ \dfrac{Terminal\ Value }{(1+interest \ rate )^{no \ of \ years}} \Bigg)$

$\implies \bigg(\dfrac{\$0.50\times (1 + 12\%)^1) }{(1+ 8\%)^{1} }+ \dfrac{\$0.50\times (1+12\%)^2 }{(1+8\% )^{2}}+ \dfrac{\$0.50\times (1+12\%)^3 }{(1+8\% )^{3}} + \dfrac{\$0.50\times (1+12\%)^4 }{(1+8\% )^{4}} + \dfrac{\$0.50\times (1+12\%)^5 }{(1+8\% )^{5}} + \dfrac{\$75.526}{(1+8\% )^{5}} \bigg )$

$\implies \bigg(\dfrac{\$0.5600}{1.0800}+\dfrac{\$0.62720}{1.16640}+\dfrac{\$0.70246}{1.2597}+\dfrac{\$0.78676}{1.3605}+\dfrac{\$0.88117}{1.4693}+ \dfrac{\$75.526}{1.4693} \bigg)$

=$ 54.1945

As a result, the analysts value the stock at $54.20, which is below their own estimates.

3. The value of the stock

Calculate the earnings at the end of 5 years:

$Earnings (E_o) \times Dividend payout ratio = Dividend (D_o) \\ \\ Earnings (E_o) \times 35\% = \$0.50 \\ \\ Earnings (E_o) =\dfrac{\$0.50}{35\%}\\ \\ = \$1.42857$

$Earnings (E_5) year \ 5 = Earnings (E_o) \times (1 + Growth \ rate)^{no \ of \ years} \\ \\ Earnings (E_5) year \ 5 = \$1.42857 \times (1 + 12\%)^5 \\ \\ Earnings (E_5) year \ 5 = \$2.51763 \\ \\$

Terminal value year 5 = $\dfrac{Earnings (E_5) \times (1+ Growth \ rate)\times dividend \ payout \ ratio}{Interest \ rate - Growth \ rate}$

$=\dfrac{\$2.51763\times (1+ 7 \%) \times 20\%}{8\%-7\%}$

=$53.8773

Discount all potential cash flows as follows to determine the stock's value:

$\text{Value of stock today} =\bigg( \sum \limits ^{\text{no of years}}_{year =1} \dfrac{Dividend (D_o) \times 1 + Growth rate ) ^{\text{no of years}}}{(1+ interest rate )^{no \ of\ years} }+ \dfrac{Terminal \ Value }{(1+interest \ rate )^{no \ of \ years }} \bigg)$

$\implies \bigg( \dfrac{\$0.50\times (1 + 12\%)^1) }{(1+ 8\%)^{1} }+ \dfrac{\$0.50\times (1+12\%)^2 }{(1+8\% )^{2}}+ \dfrac{\$0.50\times (1+12\%)^3 }{(1+8\% )^{3}} + \dfrac{\$0.50\times (1+12\%)^4 }{(1+8\% )^{4}} + \dfrac{\$0.50\times (1+12\%)^5 }{(1+8\% )^{5}} + \dfrac{\$53.8773}{(1+8\% )^{5}} \bigg)$

$\implies \bigg (\dfrac{\$0.5600}{1.0800}+\dfrac{\$0.62720}{1.16640}+\dfrac{\$0.70246}{1.2597}+\dfrac{\$0.78676}{1.3605}+\dfrac{\$0.88117}{1.4693}+ \dfrac{\$53.8773}{1.4693} \bigg)$

=$39.460

As a result, the price is $39.460, and the other strategy would raise the value of the shareholders. Not this one, since paying a 100% dividend would result in a price of $54.20, which is higher than the current price.

Notice that the third question depicts the situation after 5 years, but the final decision will be the same since we are discounting in current terms. If compounding is used, the future value over 5 years is just the same as the first choice, which is the better option.

The presumption in the second portion is that after 5 years, the steady growth rate would be the same as measured in the first part (1).

8 0

3 years ago

Ming Chen began a professional practice on June 1 and plans to prepare financial statements at the end of each month. During Jun

Leya [2.2K]

Answer:

The accounting equation holds as follows:

Asset = Liabilities + Equity = $80,000

Explanation:

Note: See the attached excel file for the analysis of the Effect of June Transactions on the Accounting Equation

From the last balances in the attached excel file, we have:

Assets = Cash + Receivable + Equipment = $41,000 + $8,000 + $31,000 = $80,000

Liabilities = Payable = $0

Equity = M. Chen, Capital - M. Chen, Withdrawals + Revenue - Expenses = $75,000 - $1,000 + $10,500 - $4,500 = $80,000

Liabilities + Equity = $0 + $80,000 = $80,000

Therefore, the accounting equation holds as follows:

Asset = Liabilities + Equity = $80,000

Download xlsx

4 0

3 years ago

Nokia is a cell phone brand that offers digital cameras as part of its cell phone products. It is now in direct competition with

irakobra [83]

Answer:

A. Envelopement

Explanation:

Envelopment is the process whereby an organization or a company moves into another company's market by combining it's own functionality with the other company functionality to create a multi-platform bundle. In this case, Nokia decided to add cameras which are Sony and Canon market to their mobile phones thereby creating a multi-platform bundle in form of a camera mobile phone.

3 0

3 years ago

Dazzle Inc produces beads for jewelry making use . The following information summarizes production operations for June . The jou

Harman [31]

Answer:

Missing wordings <em>"Direct materials used $104,000, Direct labor used 177,000, Predetermined overhead rate (based on direct labor) 160 %, Goods transferred to finished goods 449,000, Cost of goods sold 461,000, Credit sales 980,000"</em>

<em />

Factory overhead = Direct Labor used * Predetermined Overhead rate

Factory overhead = 177,000 * 160%

Factory overhead = 283,200

Journal Entry Debit Credit

Work in Process Inventory $283,200

Factory Overhead $283,200

3 0

3 years ago

The production era marked a time when companies were able to increase their profits because they were able to decrease their pro

ollegr [7]

Answer:

true

Explanation:

it was the time of the production line making it easy to make expensive things with people that are lower skilled and cheaper overall

3 0

3 years ago