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Burka [1]
2 years ago
10

The CEO of Fly Corporation decides to change an accounting method at the end of the current year. The change results in reported

profits increasing by 5%, but the company's cash flows are not changed. If capital markets are efficient, then what would happen to the company stock price? Justify your answer with logical arguments
Business
1 answer:
Angelina_Jolie [31]2 years ago
3 0

Answer:

Fly Corporation

The stock price will not be affected by the accounting change.

Explanation:

This opinion is based on the assumption that the capital markets are efficient.  Therefore, the stock's market price will reflect all available and relevant information.  Since all the necessary information is already incorporated into the stock price, the CEO of Fly Corporation cannot beat the market by the change in accounting method, and the stock price will not be undervalued or overvalued.  Moreover, the change in accounting method only shifts the timing for reporting income.

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A government imposes a per-unit tax on light bulbs in a competitive market. Afterward, the seller's after-tax price increases fr
Montano1993 [528]

Answer:

A. Total expenditure on light bulb increases after the tax.

Explanation:

The government has imposed tax on the light bulb production and the new price after the tax is $14. The price before the tax was $12 and the marginal cost before tax was $9. There was a profit of $3 for the producers of the light bulb. The tax burden is shifted to the consumers of the bulb since the marginal price after tax is $12. Total expense for the production of bulb has increased due to tax.

7 0
3 years ago
Thornton Industries began construction of a warehouse on July 1, 2018. The project was completed on March 31, 2019. No new loans
Aleksandr-060686 [28]

Answer:

2018 $21,600

2019 $4,320

Explanation:

We need to work out average cost of borrowing as follows;

$2,000,000*8%+$8,000,000*4%=$480,000

$480,000/(2,000,000+8,000,000)=4.8%

July1, 2018    $400,000*4.8%*6/12=$9,600

Sept 30,2018  $600,000*4.8%*3/12=$7,200

Nov. 30, 2018  $600,000*4.8%* 2/12=$4,800

Total interest to be capitalized in December 31, 2018 =$21,600

Total interest to be capitalized in December 31 2018$540,000*4.8%*2/12=$4,320

6 0
3 years ago
Suppose the median household earned $9,242 in 1976 and $52,624 in 2016. During that time, also suppose the CPI rose from 45.6 to
Mekhanik [1.2K]

Answer:

a) 469.40%

b) 18.15%

Explanation:

a)

Total nominal growth rate = (\frac{\textup{Earned income in 2016}}{\textup{Earned income in 1976}}-1)\times100\%

thus,

Total nominal growth rate = (\frac{\textup{52,624}}{\textup{9,242}}-1)\times100\%

= 469.40%

b) Total real growth rate = (\frac{\textup{Real earned income in 2016}}{\textup{Real earned income in 1976}}-1)\times100\%

now,

Real earned income in 1976 = \frac{\textup{Earned income in 1976}}{\textup{CPI in 1976}}

=  \frac{\textup{9,242}}{\textup{45.6}\%}

= $20,267.54

and,

Real earned income in 2016 = \frac{\textup{Earned income in 2016}}{\textup{CPI in 2016}}

=  \frac{\textup{52,624}}{\textup{219.75}\%}

= $23,947.21

Therefore,

Total real growth rate = (\frac{\textup{23,947.21 }}{\textup{20,267.54 }}-1)\times100\%

= 18.15%

4 0
3 years ago
Which of the following is a lasting impact resulting from 20th-century banking reforms in the United States
tresset_1 [31]

The lasting impact resulting from 20th-century banking reforms in the United States is "the reforms approved the Board to determine reserve requirements and interest rates for deposits at member bank."

The banking reforms made in the 20th century in the United States are many, and many of these reforms are still applicable today.

Some of the lasting effects of these reforms include the following:

The Board of Governors to determine the monetary policy.

The reforms established the Federal Deposit Insurance Corporation.

The reforms also separate commercial banks from investment banks.

Hence, in this case, it is concluded that the many banking reforms made in the 20th century still exist today.

Learn more here: brainly.com/question/12008240

7 0
2 years ago
Sarah's Muffler Shop has one standard muffler that fits a large variety of cars. Sarah wishes to establish a reorder point syste
GarryVolchara [31]

Answer:

Following is the solution for the given problem.

Explanation:

Best order size, EOQ =√2DS/H

EOQ = √2*4700*60/5

EOQ = 336 units.

D = 4700/300 = 15.66.

σ L= √∑σ²

= √3*(5)² = 8.66.

Reorder point, R = D*L+ z σ L

Reorder point, R = 15.66*3 + 1.282*8.66

Reorder point, R = 58 units.

4 0
3 years ago
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