Answer:
$26.42
Explanation:
According to the given situation, the computation of the estimated current stock price is shown below:-
Estimated current stock price = Earning per share × PE ratio
= $2.08 × 12.7
= $26.42
Therefore for computing the estimated current stock price we simply applied the above formula and ignore all other value as they are not relevant.
Answer:
The correct answer is option D.
Explanation:
Increase in government spending may not lead to an expansionary effect on the economy because of the crowding-out effect. This is because increased borrowing to fund spending leads to increase in interest rates. Increased interest rate discourages investors leading to a decline in private investment. This further has an adverse effect on aggregate demand.
If the debt spending is spent on constructive work such as infrastructure, research, and development, education, etc it will create value in the future. Such spending will pose less problem in the long run. Spending on education will create human capital. Spending on infrastructure and research and development will further help in the production process.
The purpose of the Federal Reserve cutting interest rates during a recession is to encourage borrowing (borrowing becomes cheaper) and in this way especially for companies they may spend more money then on improvements, new products etc so the economy theoretically will be stimulated to counteract the recession.
FIFO stands for First In First Out and LIFO stands for Last In First Out.
Answer: LIFO produces more favorable cash flow because LIFO PRODUCES LOWER INCOME TAX EXPENSE.
During inflation, LIFO approach is adopted for tax benefits. With the rise in prices, LIFO produces higher cost of sold amounts of goods.
Answer:
C) 4.2 years
Explanation:
The computation of the payback period is as follows;
As we know that
Payback Period = Initial cost ÷ Annual net cash flow
Here
Initial cost = $278000
Annual net cash flow = Incremental after tax + Depreciation per year
where,
Depreciation per year = (Original cost - Salvage value) ÷ Estimated Life
= ($278,000 - $30,000) ÷ 8 years
= $31,000
Annual net cash flow is
= $35000 + $31000
= $66000
So,
Payback Period is
= $278000 ÷ $66000
= 4.2 Years
