Answer: the stock is a good buy.
Explanation: The required return of a stock refers to the amount that will be paid to the security holders for bearing the risk of buying them. While the expected return refers to the return that the stock can earn from the market.
Thus, if the expected return is greater than the required return that it will eventually lead to retained earnings which will, further result in increase in the price of the stock.
Reduction in Account Receivables $500,000
($2,500,000 * 20%)
<u>* Interest rate 11% </u>
Annual saving $55,000
Less: Annual cost of system <u>-$15,000</u>
Pretax Net annual savings <u>$40,000</u>
Hello! Payless Shoe Source is a chain of e. Specialty stores. This is the case because the store specializes in shoes.
The amount that will be debited to the bonds payable account on December 31, 2020 will be:
a) Data and Calculations:
January 1, 20xx:
Face value of bonds issued = $9,000,000
Maturity period = 20 years
Stated interest rate = 9%
Interest payment = June 30 and December 31
Semiannual Interest Payment in dollars = $405,000 ($9,000,000 * 4.5%)
b) At maturity of the bonds after 20 years, Target Corporation will debit the Bonds Payable account and credit its Cash account with the sum of $9,000,000. On that date, the bond's carrying amount will be equal to the Bonds Payable account balance, all things remaining equal.
The inflation premium is 2%.
The inflation premium is a component of a required return that compensates for inflation risk. It is the portion of the interest rate that investors demand in addition to the real risk-free rate due to the risk of a decline in the purchasing power of money. Inflation erodes the purchasing power of money over time. This is a major concern for investors who have money invested in bonds for years. The inflation premium is the yield needed to compensate for the expected inflation rate. Based on market interest rates, you can estimate the inflation premium. Inflation premiums are only indicators of inflation expectations. There is no way to predict actual future interest rates, especially over several years.
Learn more about inflation premium here-