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antoniya [11.8K]
2 years ago
11

Suppose that the market price of Company A is $50 per share and that of Company B is $20. If A offers half a share of common sto

ck for each share of B, what is the percentage increase in wealth for B's shareholders?
A. -25%.
B. -20%.
C. -20%.
D. +25%.
Business
1 answer:
liubo4ka [24]2 years ago
3 0

Answer:

D) +25%.

Explanation:

If A offers 1/2 a share per 1 share of B, it means that the value of B's shares will increase from $20 to $25 (= $50 x 1/2). This $5 increase represents a 25% increase in wealth {= [($25 - $20) / $20] x 100}.

The price of the stock represents the wealth of the stockholders, since a stockholder that had 100 shares previously owned $2,000 in stocks, but as the price increases, the stockholder's wealth increases to $2,500.

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Arbitrage

Explanation:

Arbitrage occurs when the same good sells for different prices at different market. This price difference allows market participants to earn riskless profit .

In this case, the generator is more expensive in South Carolina when compared with other places. Thus, in order to earn riskless profit, people would buy where it is cheaper and sell at South Carolina where it is more expensive.

Economic theory suggest that if this kind of buying continues, soon the prices would be the same in both markets .

I hope my answer helps you

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3 years ago
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You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president h
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Answer:

Explanation:

Variance analysis studies the relationship between actual and budgeted cost for business activities. Variance analysis helps the management in two ways;

  • Favorable
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Unfavorable - if the actual cost is more than the budgeted cost, the difference is an extra expenditure for the company.

Flexible budget;

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The report showing the Activity and Spending  Variances for march is given in the file attached below, in other not to cause confusion. Thank you.

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3 0
3 years ago
During its most recent fiscal year, Dover, Inc. had total sales of $3,200,000. Contribution margin amounted to $1,500,000 and pr
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Answer:

Fixed costs= 1,100,000

Explanation:

Giving the following information:

During its most recent fiscal year, Dover, Inc. had total sales of $3,200,000. Contribution margin amounted to $1,500,000 and pretax income was $400,000.

We need to reverse engineer the income statement to determine the total fixed costs. We know that the pretax income is the difference between the total contribution margin and the fixed costs.

Pretax= total contribution margin - fixed costs

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Answer:

The correct answer is True.

Explanation:

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In general, stability and survival strategies are defensive strategies, that is, strategies that seek to maintain the competitive position achieved by the company. This fact does not mean that the company cannot grow; in fact, on many occasions, to maintain market share growth is necessary (sustainable growth). In other cases, these strategies involve a decrease (organizational downsizing, outsourcing or outsourcing of activities).

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