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3 years ago

What does zero economic profit mean in a perfectly competitive market in the long run?

1 answer:

7 0

The existence of economic profits attracts entry, economic losses lead to exit, and in long-run equilibrium, firms in a perfectly competitive industry will earn zero economic profit. ... It will induce entry or exit in the long run so that price will change by enough to leave firms earning zero economic profit

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Storico Co. just paid a dividend of $2.05 per share. The company will increase its dividend by 24 percent next year and then red

VikaD [51]

Answer:

A share of stock sell for <u>$74.21 </u>today.

Explanation:

This can be calculated as follows:

Dividend per share in year 1 = Year 0 dividend * (1 + growth rate of year 1 dividend) = $2.05 * (1 + 24%) = $2.5420

PV of year 1 dividend per share = Year 1 dividend / (1 + rate of return)^1 = $2.5420 * / (1 + 10%)^1 = $2.31090909090909

Dividend per share in year 2 = Year 1 dividend * (1 + growth rate of year 1 dividend) = $2.5420 * (1 + (24% -6%)) = $2.5420 * (1 + 18%) =$3.00

PV of year 2 dividend per share = Year 2 dividend / (1 + rate of return)^2 = $3.00 / (1 + 10%)^2 = $2.47933884297521

Dividend per share in year 3 = Year 2 dividend * (1 + growth rate of year 2 dividend) = $3.00 * (1 + (18% -6%)) = $3.00 * (1 + 12%) =$3.36

PV of year 3 dividend per share = Year 3 dividend / (1 + rate of return)^3 = $3.36 / (1 + 10%)^3 = $2.5244177310293

Dividend per share in year 4 = Year 3 dividend * (1 + growth rate of year 3 dividend) = $3.36 * (1 + (12% -6%)) = $3.36 * (1 + 6%) =$3.5616

PV of year 4 dividend per share = Year 4 dividend / (1 + rate of return)^4 = $3.5616 / (1 + 10%)^4 = $2.43262072262824

Dividend per share in year 5 = Year 4 dividend * (1 + growth rate of year 4 dividend) = $3.5616 * (1 + 6%) = $3.775296

Price at year 4 = Year 5 dividend / (Rate of return – growth rate) = $3.775296 / (10% - 6%) = $94.3824

PV of price at year 4 = Price at year 4 / (1 + rate of return)^4 = $94.3824 / (1 + 10%)^4 = $64.4644491496482

Share price to day = PV of year 1 dividend per share + PV of year 2 dividend per share + PV of year 4 dividend per share + PV of year 4 dividend per share + PV of price at year 4 = $2.31090909090909 + $2.47933884297521 + $2.5244177310293 + $2.43262072262824 + $64.4644491496482 = $74.21

5 0

3 years ago

Materials used in product $125,700 Advertising expense $51,700 Depreciation on plant 63,400 Property taxes on plant 23,100 Prope

Elodia [21]

Answer:

cost of goods manufactured= $356,200

Explanation:

<u>To calculate the cost of goods manufactured, we need to use the following formula:</u>

<u></u>

cost of goods manufactured= beginning WIP + direct materials + direct labor + allocated manufacturing overhead - Ending WIP

Overhead:

Depreciation on plant 63,400

Property taxes on plant 23,100

Factory supplies used 31,700

Total overhead= $118,200

cost of goods manufactured= 13,800 + 125,700 + 116,100 + 118,200 - 17,600

cost of goods manufactured= $356,200

4 0

3 years ago

The emphasis of a marketing strategy for a discontinuous innovation would most likely be to: Multiple Choice a) advertise benefi

LiRa [457]

Answer:

c) generate awareness among consumers.

Explanation:

For a marketing channel to emphasize the discontinuation innovation of the strategy would be to focus on proving knowledge pt the customers about the new launch product and the explain its features as the example of HP inkjet printer that was dos[released earlier

the newer printhead technologies were developed that was a better way to put ink on the paper.

As the new product that is unable to meet the requirement of the people can be recalled and hence a need pf awareness has to be done through proper marketing and promotion channels.

7 0

3 years ago

T. Wiley sells one-half of her partnership to L. Tims for $10,000 cash. The entry to record this transaction in the books of the

Mandarinka [93]

The entry to record this transaction in the books of the partnership will include a debit to T. Wiley, Capital.

How are profits and losses allocated to partners in a partnership?

The subsequent allocation of this profit or loss to each partner's capital accounts is done according to their respective percentages of ownership in the company. For instance, the allocation is a debit to the income summary account and a credit to each capital account if there is a profit in the income summary account.

<h3>Is the Wiley family still involved in the company?</h3>

The involvement of the Wiley family is ongoing, with sixth-generation members (and siblings) Peter Booth Wiley serving as the non-executive chairman of the board and Bradford Wiley II serving as a director and past chairman of the board, even though the company is run by an independent management team and Board of Directors.

<h3>How are profits and losses split in a partnership?</h3>

By definition, participants in a partnership split the gains and losses. The earnings and losses of partnerships are frequently divided evenly among the partners. The distribution will be proportionate to the partners' relative ownership shares if they are not equal.

Learn more about limited partnership:

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8 0

1 year ago

The W.C. Pruett Corp. has $800,000 of interest-bearing debt outstanding, and it pays an annual interest rate of 8%. In addition,

statuscvo [17]

Answer:

1. TIE ratio = EBIT / Interest expense

EBIT = [ (Annual sales x profit margin) / (1 - tax rate) ] + Amount of debt x interest rate

= [ ($2,880,000 x 3%) / (1 - 0.30) ] + $800,000 x 8%

= 187428.57143

= $187,428.57

TIE ratio = $187,428.57 / ($800,000 x 8%)

TIE ratio = $187,428.57 / $64,000

TIE ratio = 2.92857

TIE ratio = 2.93

2. ROIC = [ EBIT x (1 - tax rate) ] / (Amount of debt + common stock)

= [$187428.57 x (1 - 0.30) ] / ($800,000 + $600,000)

= 0.093714285

= 9.37%

3 0

3 years ago