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Law Incorporation [45]
3 years ago
15

A firm has 120,000 shares of stock outstanding, a sustainable rate of growth of 3.8%, and $648,200 in next year's free cash flow

. What value would you place on a share of this firm's stock if you require a 14% rate of return?A) $48.09.B) $54.02.C) $61.58.D) $52.96
Business
1 answer:
True [87]3 years ago
7 0

Answer:

option (D) $52.96

Explanation:

Data provided in the question:

Number of stock outstanding = 120,000 shares

Growth rate, g = 3.8% = 0.038

Free cash flow in the next year =  $648,200

Required rate of return, r = 14% = 0.14

Now,

Stock price is calculated as:

Stock price = \frac{\frac{\textup{Free cash flow}}{r-g}}{\textup{Number of shares outstanding}}

on substituting the respective values, we get

Stock price = \frac{\frac{\$648,200}}{0.14-0.038}}{\textup{120,000}}

or

Stock price = 52.957 ≈ $52.96

Hence,

the correct answer is option (D) $52.96

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Assume that a parent company owns a 100% controlling interest in its long-held subsidiary. On December 31, 2013, a parent compan
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Related to the transferred equipment, the items that is true regarding the preparation of the consolidated financial statements for the year ending December 31, 2013 is:

C. The consolidation entries will include a $26,000 debit to "Gain on Sale of Equipment."

Explanation:

a) Data and Calculations:

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b) The unaccounted balance of $26,000 needs to be credited to the parent's Equipment account to remove it from the account.  This will have a corresponding debit entry in another account.  The only correct entry among the options is C.

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3 years ago
Sheila and Vickie are sisters who enter into a contract to buy a vacation property. The sisters get into a dispute, and Vickie n
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Answer:

The correct answer is Novation.

Explanation:

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3 years ago
Bovine Company, a wholesale distributor of DVDs, has been experiencing losses for some time, as shown by its most recent monthly
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Solution :

Particulars                   \text{Total company}          \text{South  }           \text{Central}          \text{North}

Sales                           $1,500,000              $400,000      $600,000     $500,000

Variable expenses        588,000                208000       180000     200000

Contribution margin      912000                  192000        420000    300000

Traceable fixed          770,000                    240,000      330,000    200,000

expenses          

Geographic market      142,000          -$48000              $90000       $100000

segment expenses

Common fixed

expenses not traceable

to geographic markets

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3 0
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Which situations are examples of how credit scores determine nonfinancial opportunities for consumers? Check all that apply.
rusak2 [61]

Answer:

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D. An apartment owner determining whether to rent a unit to someone

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Credit scores are numbers ranging from 300 to 850 that are used to gauge the creditworthiness of individuals. Creditors check the credit history of borrowers to determine how well they have performed over time in prompt payment of debts and maintenance of good financial history. The higher the credit score, the better chances an individual has of being considered for financial favors. In the above scenario,

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5 0
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