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prohojiy [21]
3 years ago
6

Rite Bite Enterprises sells toothpicks. Gross revenues last year were $8.0 million, and total costs were $3.9 million. Rite Bite

has 1.2 million shares of common stock outstanding. Gross revenues and costs are expected to grow at 4 percent per year. Rite Bite pays no income taxes. All earnings are paid out as dividends. (Do not round intermediate calculations and round your answers to 2 decimal places. (e.g., 32.16))
a. If the appropriate discount rate is 14 percent and all cash flows are received at year’s end, what is the price per share of Rite Bite stock? $35.53
b. Rite Bite has decided to produce toothbrushes. The project requires an immediate outlay of $17.5 million. In one year, another outlay of $6.5 million will be needed. The year after that, earnings will increase by $4.7 million. That profit level will be maintained in perpetuity. What will the new stock price be if the project is undertaken?
Business
1 answer:
ArbitrLikvidat [17]3 years ago
6 0

Answer:

a. Calculation of PV of the gross revenue

PV(revenue) = $8,000,000*(1+4%) / (14%-4%) = $83,200,000

Calculation of PV of the total cosst

PV(revenue) = $3,900,000*(1+4%) / (14% - 4%) = $40,560,000

Since there is no tax, the Pv of divided will be: Dividend = $83,200,000-$40,560,000 = $42,640,000

Calculation of price per share

Price per share = Present value dividend / Share outstanding = $42,640,000 / 1,200,000 = $35.53

b. Increase in Stock prcie= (-Immediate outlay - Another outlay next year/1.14 + (Increase in Earning in year 2/14%)/1.14)/Outstanding Share  

Increase in Stock price= (-17.5 -6.5/1.14 + (4.7/14%)/1.14)/1.2

Increase in Stock price = $5.21

New stock price = $35.53 + 5.21

New stock price = $40.74

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What effect does lowering the estimate for doubtful accounts have on the income statement and balance sheet? Do you believe Blai
podryga [215]

Answer no 1  

Bringing down the estimate for far fetched accounts makes the benefit bigger by paying off Bad Debt Expense and makes the Balance Sheet look better by exaggerating Assets. Since the contra-resource Allowance for Doubtful Accounts would be downplayed.  

Answer no 2  

This activity of change the stipends for far fetched accounts isn't inside the rights and zone of control of a director and is a moral infringement. No chief ought to have the option to transform anything inside the bookkeeping capacity. A supervisor ought to deal with the business, not the accounting for that business.

8 0
3 years ago
A gas company in Massachusetts charges $1.30 for 15 ft3 of natural gas (CH4) measured at 20°C and 1.0 atm. Calculate the cost of
Vesnalui [34]

Answer:

$0.0224

Explanation:

First, determine the amount of heat required to raise the temperature of 450 mL water from 20°C to 100°C.

density of water = 1 g/mL  

Use = AH = m(AT)Cp

AH (delta H) = amount of heat required

m = mass of water = 450 mL: (1g/mL) = 450 g

AT(delta T) = temperature difference = 100 - 20 = 80 °C

Cp = specific heat of water (from a table) = 4.18 J/g °C

So,  

AH  = 450 (80) (4.18) = 150 480 J = 150.48 kJ

Second, determine the heat ACTUALLY required

Since 50 % of heat produced (from combustion of methane) are used for water,

heat ACTUALLY required = 2 x 150.48 kJ = 300.96 kJ

Third, determine the amount of methane in the supply (in mole)

Assume ideal gas,

PV = nRT

P = 1.0 atm

V = 17 ft3 = 481.38 L

T = 20 + 273 = 293 K  

R = 0.082 1 L atm K−1 mol−1

n = PV/RT

so,

n = (1 x 481.38)/(293 x  0.0821) = 20.011 mol

Interpretation: 17 ft3 of methane supplied is equivalent to 20.011 mol methane (17 ft3/20.011 mol)

Fourth, determine the heat produced from combustion of methane

The combustion of methane gas is represented by the reaction:

CH4 (g)  +   2 O2 (g) CO2 (g)  +   2 H2O (g)  

heat of combustion =

[heat of formation of CO2 (g) + 2 x heat of formation of H2O (g)] -

[heat of formation of CH4 (g) + 2 x heat of formation of O2 (g)]

From the standard table:

= [ -393.5 kJ + 2x(-241.8 kJ)] - [-74.8 kJ + 2x(0 kJ)]

= - 802.3 kJ  

Interpretation: The combustion of 1 mole of methane produces 802.3 kJ, otherwise known as molar enthalpy (-802.3 kJ/mol)

Fifth, determine the amount of methane required from energy requirement for heating water

heat required = 300.96 kJ

So,  

methane required = 300.96 kJ (1mol/ 802.3 kJ) =  0.3751 mol

Sixth, determine the volume of methane required

Volume methane required = 0.3751 mol (17 ft3/20.011 mol)

= 0.3186 ft3

Finally, the cost required at price rate $1.20/17 ft3

Cost of methane =  0.3186 ft3 ($1.20/17 ft3) =  

$0.0224

6 0
4 years ago
Zero Corp's total common equity at the end of last year was $350,000 and its net income was $70,000. What was its ROE
Arturiano [62]

Answer:

ROE = 20%

Explanation:

Given:

Common equity = $350,000

Net income = $70,000

Find:

ROE

Computation:

ROE = [Net income/Common equity]100

ROE = [$70,000/$350,000]100

ROE = 20%

5 0
3 years ago
​Bill's Barbershop has two barbers available to cut​ customer's hair. Both barbers provide roughly the same experience and​ skil
svlad2 [7]

Answer:

A. It will take average customer to complete this process in 42minutes

B. B1=6.7 ,B2=8.6, B3=5 B4 =4

Explanation:

The process flow and calculation is attached

8 0
3 years ago
The karakul is a breed of Central Asian sheep that produces curly, glossy wool. This wool is popular in some countries for the m
Darina [25.2K]

Answer: a. absolute advantage

Explanation:

Absolute advantage is a principle in Economics in which a business enjoys the advantage of producing higher number of goods and services than their competitors even when they use the same amount of input or resources. This grant such producer low marginal cost, cheap materials, workers, etc.

This concept was developed by Adam Smith in his 1776 publication titled The wealth of Nations.

6 0
4 years ago
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