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stepan [7]
3 years ago
10

Shelton Enterprises is expecting tremendous growth from its newest boutique store. Next year the store is expected to bring in n

et cash flows of $675,000. The company expects its earnings to grow annually at a rate of 13 percent for the next 15 years. What is the present value of this growing annuity if the firm uses a discount rate of 18 percent on its investments? (Round to the nearest dollar.)
A. $5,478,320
B. $6,448,519
C. $6,750,000
D. $7,115,449
Business
1 answer:
Sedaia [141]3 years ago
4 0

Answer:

B. $6,448,519

Explanation:

The computation of the present value of this growing annuity is given below:

PVA = [Cash flow at year 1 ÷ (interest rate - growth rate)] × {1 - [(1 + growth rate) ÷ (1 + interest rate)^number of years}

= [$675,000 ÷ (0.18 - 0.13)] × [1 - (1.13 ÷ 1.18)^15]

= $6,448,519

Hence, the correct option is b.

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An analAn analyst wants to use the Black-Scholes model to value call options on the stock of Heath Corporation based on the foll
lawyer [7]

Answer:

Value of the call option using Black-Scholes Model is $3.47

Explanation:

d1 = 0.175

• d2 = -0.025

• N(d1) = 0.56946

• N(d2) = 0.49003

N(d1) and N(d2) represent areas under a standard normal distribution function.

Stock price: $40.00 N(d1) = 0.56946

Strike price: $40.00 N(d2) = 0.49003

Option maturity: 0.25

Variance of stock returns: 0.16

Risk-free rate: 6.0%

The Black-Scholes model calculates the value of the call option as:

V = P[N(d1)] – Xe^rt[N(d2)]

= $40(0.56946) – $40e^rt(0.49003)

= $22.78 – $19.31

= $3.47

6 0
4 years ago
What is the difference between a shortage and scarcity? A shortage can be temporary or long-term, but scarcity always exists. A
Alika [10]

Answer:

A shortage can be temporary or long-term, but scarcity always exists.

Explanation:

Scarcity is a basic concept in economics which explains that human wants are unlimited and thus termed insatiable as the resources required to meet those needs are in limited supply.

As such scarcity as a concept has always been in existence and will always b. Shortage on the other hand is a limited supply of an item which may be in the short term or in the long run. While a shortage may be dealt with in time, scarcity will always be in existence.

8 0
4 years ago
Having just finalized its new tablet design, Epic Electronics's marketing team plans to begin a rollout with ________ to only on
wlad13 [49]

Answer:

Exclusive distribution; Selective distribution; Intensive distribution

Explanation:

Exclusive distribution refers to the phenomenon where only certain retailers are given the opportunity to carry the product in their retailer shops. For example as in the above case, only one store is exclusively chosen.

Selective distribution is that retailers are carefully selected to engage in the product of selling. For example only a few stores are engaged with in the above question.

Intensive distribution is when all kind of retailers are given the opportunity to keep the products in their shops. For example the last phase described in the question where all sorts of retailers are engaged in selling activity.

4 0
4 years ago
The allowance method of estimating uncollectible accounts receivable based on an analysis of receivables shows that $839 of acco
In-s [12.5K]

Answer:

$1,037

Explanation:

Allowance for doubtful accounts is a contra asset account that must have a credit balance since it reduces the value of accounts receivable. In this case, since the account had a debit balance of $198, and the ending balance of the account should be $839, then we must credit = $839 + $198 = $1,037

The adjusting entry should be:

December 31, adjusting entry allowance for doubtful accounts

Dr Bad debt expense 1,037

    Cr Allowance for doubtful accounts 1,037

6 0
3 years ago
PLZ HELP. Classify the customer buying motive as rational or emotional.
Lina20 [59]

Answer:

rational

Explanation:

Trade can be defined as a process which typically involves the buying and selling of goods and services between a producer and the customers (consumers) at a specific period of time.

Buying motive refers to the considerations, urge, emotions or influences that creates the impulse in consumers (customers) to buy a particular good, so as to satisfy their desire or needs.

This ultimately implies that, behind every purchase made by a consumer, there's a consideration, urge or feeling to satisfy that desire or needs l, this is generally referred to as buying motive.

In Economics, buying motives are classified into five (5) main categories and these include;

I. Acquired and Inherent buying motives.

II. Conscious and Dormant buying motives.

III. Physical, Psychological and Sociological buying motives.

IV. Primary and Selective buying motives.

V. Rational and Emotional buying motives.

A rational buying motive is typically based on the consumer's logical and economical consideration of a product in terms of price, durability, need, quality, etc. Thus, it involves a careful consideration of a product rather than feelings as in emotional buying motive.

In this scenario, Mark buys a particular brand of frozen food because it is economical for him. Thus, the buying motive would be classified as rational.

6 0
3 years ago
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