Answer:
r = 9.86%
Explanation:
The formula for calculating the future value of an invested amount yielding a compound interest is given by:
where:
FV = future value = $16,000
PV = present value = $10,000
r = interest rate = ?
n = number of compounding period per year = 1
t = time in years = 5
∴ 
dividing both sides by 10,000
to remove the power of 5, we have to take the 5th root of both sides:
Using your calculator:
1.09856 = 1 + r
∴ r = 1.09856 - 1 = 0.09856
r = 0.0986 = 9.86%
∴ r = 9.86%
Answer:
a. The price that the company should sell the new toy at if it prices at cost plus profit at 100% profit markup is:
= $20.
b. The price that the company should sell the new toy at if it prices using competitive pricing is:
= $22.50 (average of competitors' prices)
c. The price that the company should sell the new toy at if it prices using penetration pricing is:
= $20 (lowest market price)
d. The price that the company should sell the new toy at if it prices using price skimming is:
= $25.
Explanation:
a) Data and Calculations:
Cost of producing a new toy = $10
Competitors' prices are:
Product A – $25
Product B – $20
Product C – $23
Product D– $22
Total = $90
Average price = $22.50 ($90/4)
Cost = $10
Markup 10 ($10 * 100%)
Price = $20
b) An important consideration in the pricing of products is customers' and competitors' reactions to the firm's selling price. The purpose of considering customers is to ensure that enough demand is generated to cover production cost and make profits. Competitors can wage price wars to discourage new entrants into their markets. Many pricing methods are in use, depending on the prevailing market realities.
Answer:
Domestic demand: Q = 5,000 – 100P; Supply: Q = 150P
At equilibrium, demand equals supply.
5,000 – 100P = 150P
250P = 5,000
P = 5,000/250
Equilibrium price (P) = $20
Substituting P in demand equation:
Q = 5,000 – (100*20)
Equilibrium quantity (Q) = 3,000 portable radio would be imported
Technology innovates more and more products in this century. It makes the lives of people much easier. Therefore, they are attracted to buy such products that are directly offered by these companies who have hired technicians and scientists to innovate products. Or, another case would be that they have bought these technologies from companies that have sold it to them. Technology provides efficiency and therefore, it makes an effective solution to attract consumers, or customers in the process.
Answer:
Cost of common equity=15.74%
WACC=11.91%
Explanation:
Complete Question:
Palencia Paints Corporation has a target capital structure of 35% debt and 65% common equity, with no preferred stock. Its before-tax cost of debt is 8%, and its marginal tax rate is 40%. The current stock price is P0=$22.00. The last dividend was D0=$2.25, and it is expected to grow at a 5% constant rate. What is its cost of common equity and its WACC?
Answer and Explanation:
First we have to calculate the cost of equity which shall be calculated as follows:
Cost of equity=D0(1+g)/P0+g
In the given question:
D0=$2.25
P0=$22.00
g=growth rate=5%
Cost of common equity=$2.25(1+5%)/$22.00+5%
=15.74%
Now we will calculate the WACC which shall be determined through following mentioned formula:
WACC=[Portion of Equity in capital structure*Cost of equity+Portion of Debt in capital structure*Post tax cost of debt]/Portion of Equity in capital structure+Portion of Debt in capital structure
WACC=[65%*15.74%+35%*(1-40%)*8%]/100%
WACC=11.91%
