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kondor19780726 [428]
3 years ago
6

A company has 1000000 shares outstanding trading at $15 a piece. Managers believe that the discount rate appropriate for the ris

k borne is 15% and total cash flows, expected to be $1 million next year, will rise by 5% per year indefinitely. Discuss a strategy that is beneficial to the current shareholders.
Business
1 answer:
denpristay [2]3 years ago
6 0

Answer:

Explanation:

Knowing the value of the equity and establishing the intrinsic worth of the share may help you develop a perfect strategy that will benefit the current shareholders.

Value of the equity =  Cashflow÷(discount rate - growth rate)

= $1,000,000 ÷ (15%-5%)  

= $1,000,000 ÷ (10%)  

= $10,000,000

Intrinsic value per share = Value of the equity ÷ Shares outstanding

= $10,000,000 ÷ 1,000,000

= $10

For the share, The intrinsic value = $10

However, since the current trading share price is $15, then we can posit that the share price is over-valued.

As a result, the perfect strategy that will be beneficial to the shareholders is for the current shareholders to sell the shares (short selling at a high price and purchasing at a low price).

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Constable Co. reported the following information at December 31, Year 1: Accounts Payable $ 4,620 Accounts Receivable 9,470 Cash
avanturin [10]

Answer:

The total of the credit balance accounts is $117,260

Explanation:

In the classified balance sheet, we summarize the asset and liabilities into various types

Like assets are divided into fixed assets, current assets, and intangible assets.

Likewise, liabilities are also divided into current liabilities, long term liabilities

In every balance sheet, the accounting equation has used that means

Total assets = Total liabilities + Shareholder equity

The total assets have the debit balances whereas the total liabilities and the shareholder equity have the credit balances

So, The computation is shown below:

= Accounts Payable + Common Stock + Notes Payable  + Retained Earnings + Wages Payable

= $4,620 + $91,200 + $2,620 + $14,210 + $4,610

= $117,260

6 0
2 years ago
Assume the market basket contains 20X, 30Y, and 50Z. The current-year prices for goods X, Y, and Z are $2, $6, and $10, respecti
Aneli [31]

Answer:

CPI for the current year  = 200

Explanation:

Given;

Contents in market basket

20X, 30Y, and 50Z

The current-year prices for goods

X = $2

Y = $6

Z = $10

The base-year prices are

X = $1

Y = $3

Z = $5

Now,

Total cost of market basket in the current year

= ∑ (Quantity × Price)

= 20 × $2 + 30 × $6 + 50 × $10

= $40 + $180 + $500

= $720

Total cost of market basket in the base year

= ∑ (Quantity × Price)

= 20 × $1 + 30 × $3 + 50 × $5

= $20 + $90 + $250

= $360

also,

CPI for the current year = \frac{\textup{Cost of market basket at current year prices}}{\textup{Cost of market basket at base year prices}}\times100

or

CPI for the current year = \frac{\$720}{\$360}\times100

or

CPI for the current year = 200

8 0
3 years ago
g . Kings Donut Inc common stock sells for $39.86 a share at a market rate of return of 9.5%. The company just paid its annual d
Simora [160]

6.29% is the rate of growth

<u>Explanation:</u>

<u>The following formula is used </u>

Price = D1 / ke -g

39.86 = 1.2 multiply with (1 + g) / 0.095 - g

3.7867 – 39.86 g = 1.2 + 1.2 g

2.5867 = 41.06 g

Now, we have to calculate the value of g  

g = 2.5867 divide 41.06

= 0.0629  

= 6.29 %

Where:

G = growth, ke = market rate of return, D1 = dividend ( annual), P = price of the share of company

7 0
3 years ago
The standard materials cost to produce one unit of product m is 6 pounds of material at a standard price of $50 per pound. in ma
Musya8 [376]
Direct material cost variance = (Standard price - Actual Price) * Actual Quantity
= ($50 - $51) * 47,000
= $47,000 adverse
5 0
3 years ago
Jones Corporation reported current assets of $191,800, current liabilities of $137,000, and total liabilities of $275,714 on its
VMariaS [17]

Based on the information given the current ratio is:1.4.

<h3>Current ratio</h3>

Using this formula

Current ratio=Current assets/Current liabilites

Where:

Current assets=$191,800

Current liabilities=$137,000

Let plug in the formula

Current ratio=$191,800/$137,000

Current ratio = 1.4

Inconclusion the current ratio is:1.4.

Learn more about current ratio here:brainly.com/question/2686492

4 0
2 years ago
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