Net operating income is calculated by subtracting selling and administrative expenses from gross margin.
<h3>What is Net operating income?</h3>
In accounting, net income can be regarded as the subtraction of income from other costs.
These other costs could be;
- goods sold
- expenses
- depreciation and amortization
- interest
Learn more about Net operating income at:
brainly.com/question/20216218
A business that sells watches that are more inexpensive than the watches a competitor sells is using a private sector type of competition.
Answer:
Explanation:
The formula for the current price, P₀, of a <em>stock</em> that will pay <em>annual dividends</em> starting next year with D₁, with a constant <em>annual growing rate</em>, g, to perpetuity (<em>indefinitely</em>), for which is required a<em> return </em>of r percent, is:
![P_0=\dfrac{D_1}{r-g}](https://tex.z-dn.net/?f=P_0%3D%5Cdfrac%7BD_1%7D%7Br-g%7D)
Substitute and solve for D₁, the <em>next annual dividend</em>:
![\$34.50=\dfrac{D_1}{0.102-0.04}\\\\\\\D_1=\$34.50\times 0.062 =\$2.14](https://tex.z-dn.net/?f=%5C%2434.50%3D%5Cdfrac%7BD_1%7D%7B0.102-0.04%7D%5C%5C%5C%5C%5C%5C%5CD_1%3D%5C%2434.50%5Ctimes%200.062%20%3D%5C%242.14)
Answer: $3,365.98
Explanation:
Value of firm with beta of 0.9.
First use CAPM to find the required return:
= Risk free rate + beta * (Market return - risk free rate)
= 3% + 0.9 * (14% - 3%)
= 12.9%
Firm Value = Perpertual cashflow / Required return
= 1,000 / 12.9%
= $7,751.94
Value of firm with beta of 1.8.
Required return = 3% + 1.8 * (14% - 3%)
= 22.8%
Value of firm = 1,000 / 22.8%
= $4,385.96
Difference = 7,751.94 - 4,385.96
= $3,365.98
<em>You would be paying $3,365.98 than the firm is worth. </em>