Answer:
The Bert Corp. and Ernie, Inc.
The profit expected is:
= $2,875.
Explanation:
a) Data and Calculations:
The Bert Corp. Ernie, Inc.
IPO order placed 1,150 shares 1,150 shares
Underpriced by $18.00
Overpriced by $6.50
Profited expected $10,350 -$7,475
Net profit = $2,875 ($10,350 - $7,475)
b) The profit expected is generated from the underpriced stock. This profit is reduced by the increased cost incurred on the over-priced stock. Therefore, the net profit is the difference between the profit and the additional cost incurred.
A rental company is considering the purchase of new trailers to least to customers. Each trailer will cost $20,000 today. Each trailer will bring $10,000.00 in an annual lease for 5 years. The lease is paid at the end of each year. At the end of the 5 years the trailer will have no depreciated or salvage value. The interest to be paid for this investment is 9%. Use this information to complete this table. Would you advise the firm to make this investment at 9%? Why?
Fill out the Table:
Year Future Value Present Value Discount Factor
1
2
3
4
5
Answer and Explanation:
The computation is shown below;
Year Future value present value Discount factors
1 $10,000.00 $9,170 0.917
2 $10,000.00 $8,410 0.841
3 $10,000.00 $7,720 0.772
4 $10,000.00 $7,080 0.708
5 $10,000.00 $6,490 0.649
Now
Net present value = -$20,000 + $10,000(PVIFA 9% 5 Years)
= -$20,000 + $10000 × (3.8897)
= -$20,000+ $38,897
= $18,897
So here the investment should be make as the net present value comes in positive
On January 1, 20X1, Jennifer purchases common stock of Gamma Corporation for $100,000. During the year, Gamma Corporation stock pays a dividend of $3,000. At the end of the year, Jennifer sells the Gamma stock for $104,000. What is the return on investment of the Gamma stock?
a) 79
b) 10%
c) 4%
d) 39
Answer:
Jennifer
The return on investment of the Gamma stock is:
a) 7%
Explanation:
a) Data and Calculations:
January 1, 20X1 Purchase of common stock of Gamma Corporation = $100,000
Dividend received from Gamma Corporation stock = $3,000
December 31, 20X1, Sale of Gamma Corporation stock = $104,000
Capital gains from the sale of Gamma stock = $4,000 ($104,000 - $100,000)
Total returns from the Gamma stock = Dividend Plus Capital Gains
= $7,000 ($3,000 + $4,000)
Return on investment of the Gamma stock = 7% ($7,000/$100,000 * 100)
Suppose that a bank has $80 in checkable deposits, reserves of $15 , and a reserve requirement of 10%. Also assume that the the bank suffers a $6 deposit outflow. If the bank chooses to borrow from the Fed to meet its reserve requirement, then the bank would need to borrow $nothing . (Round your response to the nearest two decimal place.)
Answer: See explanation
Explanation:
Based on the information given in the question, the amount of borrowing that's required will be:
= [ rr * ( D - O)] - (R-O)
where,
rr = reserve requirement = 10% = 0.1
D = checkable deposits = $80
R = reserves = $15
O = deposits outflow = $6
= [ 0.10 × ($80 - $6)] - ($15 - $6)
= [ 0.10 × $74 ] - $9
= $7.4 - $9
= -$1.60
A reason to establish internal control is to A. Provide reasonable assurance that the objectives of the organization are achieved. B. Encourage compliance with organizational objectives. C. Ensure the accuracy, reliability, and timeliness of information. D. Safeguard the resources of the organization.
Answer: D. Safeguard the resources of the organization.
Explanation:
The functions of internal controls are
to minimize risks to protect assetsto ensure accuracy of recordsto promote operational efficiencyto encourage adherence to policies, rules, regulations, and laws.cThe reason to establish internal control is to assist safeguard an organization and its objectives.
Hence, the correct option is D.
You are planning to save for retirement over the next 25 years. To do this, you will invest $1,000 a month in a stock account and $700 a month in a bond account. The return of the stock account is expected to be 9 percent, and the bond account will pay 6 percent. When you retire, you will combine your money into an account with a return of 7 percent. How much can you withdraw each month from your account assuming a 20-year withdrawal period
Answer:
Monthly withdraw= $12,452.6
Explanation:
First, we need to calculate the total accumulated at the moment of retirement. We will use the following formula:
FV= {A*[(1+i)^n-1]}/i
A= monthly deposit
Stock:
Monthly investment= $1,000
Interest rate= 0.09/12= 0.0075
Number of periods= 25*12= 300 months
FV= {1,000*[(1.0075^300) - 1]} / 0.0075
FV= $1,121,121.94
Bond:
Monthly investment= $700
Interest rate= 0.06/12= 0.005
Number of periods= 25*12= 300 months
FV= {700*[(1.005^300) - 1]} / 0.005
FV= 485,095.77
Total FV= 1,121,121.94 + 485,095.77
Total FV= $1,606,217.71
Now, the annual withdrawal:
Interest rate= 0.07/12= 0.005833
Number of months= 12*20= 240
Monthly withdraw= (FV*i) / [1 - (1+i)^(-n)]
Monthly withdraw= (1,606,217.71*0.005833) / [1 - (1.005833^-240)]
Monthly withdraw= $12,452.6
Kevin Morales invests $15,451.93 now for a series of $2,900 annual returns beginning one year from now. Kevin will earn a return of 12% on the initial investment.
Required:
How many annual payments of $1,300 will Kevin receive?
Answer:
9 annual payments
Explanation:
The correct annual payment is $2,900 not $1,300 as shown below:
Kevin Morales invests $15,451.93 now for a series of $2,900 annual returns beginning one year from now. Kevin will earn a return of 12% on the initial investment.
(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
How many annual payments of $2,900 will Kevin receive?
In a bid to determine the number of annual payments of $2,900 that Kevin would receive, we can make use of a financial calculator bearing in mind that the calculator would be set to its default end mode before making the below inputs and that the amount invested today is the present value of annual payments
PMT=2900(amount of each annual payment)
I/Y=12(the rate of interest to be earned annually without the "%" sign)
PV=-15451.93 (amount invested, it is negative since it is an outflow)
FV=0(after all annual payments have been received, number of outstanding annual payments would be nil)
CPT
N=9.00
You are planning to put $3,500 in the bank at the end of each year for the next four years in hopes that you will have enough money for a down payment on a condo. If you are investing at an annual interest rate of 5%, you'll have accumulated ___________ at the end of four years.
You decided to deposit your money in the bank at the beginning of the year instead of the end of the same year, but now you are making payments of $2,500 at an annual interest rate of 6%. How much money will you have available at the end of seven years?
Answer:
Results are below.
Explanation:
Giving the following information:
Annual deposit (A)= $3,500
Number of periods (n)= 4 years
Interest rate (i)= 5%
To calculate the future value, we need to use the following formula:
FV= {A*[(1+i)^n-1]}/i
A= annual deposit
FV= {3,500*[(1.05^4) - 1]} / 0.05
FV= $15,085.44
Now, the deposit is at the beginning:
Annual deposit (A)= $2,500
Number of periods (n)= 7 years
Interest rate (i)= 6%
FV= {A*[(1+i)^n-1]}/i + {[A*(1+i)^n]-A}
FV= {2,500*[(1.06^7) - 1]} / 0.06 + {[2,500*(1.06)^7] - 2,500}
FV= 20,984.59 + 1,259.08
FV= $22,243.67
what is the 4P of marketing
Answer:
The 4Ps of marketing is a model for enhancing the components of your "marketing mix"price, product, promotion, and place
Explanation:
hope it help
plss brainlys me
thanks for the points
Mehta Company traded a used welding machine (cost $9,000, accumulated depreciation $3,000) for office equipment with an estimated fair value of $5,000. Mehta also paid $3,000 cash in the transaction. Prepare the journal entry to record the exchange. (The exchange has commercial substance.)
Answer:
Debit : Office Equipment at Fair Value $5,000
Debit : Accumulated depreciation - Welding machine $3,000
Debit : Profit and Loss $4,000
Credit : Cash $3,000
Credit : Cost of Welding Machine $9,000
Explanation:
If the exchange has commercial substance, the assets acquired is deemed to have a cost equal to the Fair Value of Asset given up.
Thus Fair Value of Asset given up (Welding Machine) is $5,000. This becomes the Cost of the New Asset - Office Equipment.
The Cost and Accumulated depreciation of the Old Asset are derecognized by Crediting and Debiting the respective Accounts. Also Cash advanced is recognized.
This journal calculates the Profit or Loss on the Exchange as $4,000 (loss).
Crosley Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2020. The lease is for an 8-year period and requires equal annual payments of $35,004 at the beginning of each year. The first payment is received on January 1, 2020. Crosley had purchased the machine during 2019 for $160,000. Collectibility of lease payments by Crosley is probable. Crosley set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Crosley at the termination of the lease.
Instructions:
a. Compute the amount of the lease receivable.
b. Prepare all necessary journal entries for Crosley for 2020.
c. Suppose the collectibility of the lease payments was not probable for Crosley. Prepare all necessary journal entries for the company in 2020.
d. Suppose at the end of the lease term, Crosley receives the asset and determines that it actually has a fair value of $1,000 instead of the anticipated residual value of $0. Record the entry to recognize the receipt of the asset for Crosley at the end of the lease term.
Answer:
A.$230,410
B. 01-Jan-17
Lease Receivable $230,410
Cost of Goods Sold $160,000
Sales Revenue $230,410
Inventory $160,000
01-Jan-17
Dr Cash $35,004
Cr Lease Receivable $35,004
31-Dec-17
Dr Lease Receivable $11,724
Cr Interest Revenue $11,724
C)01-Jan-17
Dr Cash $35,004
Cr Deposit Liability $35,004
D. Dr Inventory $1,000
Cr Gain on Lease $1,000
Explanation:
A. Computation for the amount of the lease receivable.
PV of lease= PV(rate, nper, pmt, [fv]), [type])
PV of lease= -PV (6%,8,35004, , 1)
PV of lease =$230,410
Therefore the amount of the lease receivable is $230,410
B. Preparation of all necessary journal entries for Crosley for 2020.
01-Jan-17
Lease Receivable $230,410
Cost of Goods Sold $160,000
Sales Revenue $230,410
Inventory $160,000
01-Jan-17
Dr Cash $35,004
Cr Lease Receivable $35,004
31-Dec-17
Dr Lease Receivable $11,724
Cr Interest Revenue $11,724
C. Preparation of all necessary journal entries for the company in 2020.
01-Jan-17
Dr Cash $35,004
Cr Deposit Liability $35,004
D. Preparation to Record the entry to recognize the receipt of the asset for Crosley at the end of the lease term
Dr Inventory $1,000
Cr Gain on Lease $1,000
On January 7, stockholders invest $45,000 in JumpStart in exchange for common stock. Provide the journal entry for this transaction.
Answer:
Dr Cash $45,000
Cr Common stock $45,000
Explanation:
Preparation of the journal entry
Based on the information given the appropriate Journal entry On January 7 since the stockholders invest the amount of$45,000 in JumpStart in exchange for common stock will be:
January 7
Dr Cash $45,000
Cr Common stock $45,000
(To record investment in JumpStart)
Junktrader is an online company that specializes in matching buyers and sellers of used items. Buyers and sellers can purchase a membership with Junktrader, which provides them advance notice of potentially attractive offers.
a. Junktrader provided online advertising services for another company for $380 on account.
b. On the last day of the month, Junktrader paid $75 cash to run an ad promoting the company's services. The ad ran that day in the local newspaper.
c. Received $205 cash in membership fees for the month from new members.
d. Received an electricity bill for $130 for usage this month. The bill will be paid next month.
e. Billed a customer $216 for helping sell some junk. Junktrader expects to receive the customer's payment by the end of next month.
Required:
Prepare joumal entries for the above transactions, which occurred during a recent month.
Answer:
Junktrader
Journal Entries;
a. Debit Accounts Receivable $380
Credit Advertising Service Revenue $380
To record advertising service revenue provided on account.
b. Debit Advertising Expense $75
Credit Cash $75
To record the payment for ad in the local newspaper.
c. Debit Cash $205
Credit Membership fees $205
To record membership fees for the month.
d. Debit Electricity Expense $130
Credit Electricity Expense Payable $130
To accrue electricity expense for the month.
e. Debit Accounts Receivable $216
Credit Fees Revenue $216
To record fees revenue for services rendered on account.
Explanation:
1) Data and Transaction Analysis:
a. Accounts Receivable $380 Advertising Revenue $380
b. Advertising Expense $75 Cash $75
c. Cash $205 Membership fees $205
d. Electricity Expense $130 Electricity Expense Payable $130
e. Accounts Receivable $216 Fees Revenue $216
On January 1, 2019, Wasson Company purchased a delivery vehicle costing $36,500. The vehicle has an estimated 6-year life and a $3,500 residual value. What is the vehicle's book value as of December 31, 2020, assuming Wasson uses the straight-line depreciation method
Answer:
Book value= $25,500
Explanation:
Giving the following information:
Purchase price= $36,500
Residual value= $3,500
Useful life= 6 years
First, we need to calculate the annual depreciation:
Annual depreciation= (original cost - salvage value)/estimated life (years)
Annual depreciation= (36,500 - 3,500) / 6
Annual depreciation= $5,500
Now, the accumulated depreciation and book value:
Accumulated depreciation= 5,500*2= $11,000
Book value= 36,500 - 11,000
Book value= $25,500
Show the effect of each transaction on the three basic accounting elements by indicating the dollar amount of the increase or decrease under the proper element heading. Compute the resulting accounting equation.
a. Owner invested $16,500 cash in the business.
b. Paid premium for two-year insurance policy, $1,500.
c. Purchased a van valued at $35,000 with $5,000 down payment; the balance to be paid over three years.
d. Paid the rent for the month, $900.
e. Purchased $470 of supplies for cash.
f. Cash sales for the month, $8,750.
g. Billed credit customers $14,200 for monthly services.
Answer:
Assets = Liabilities + Owner’s Equity = $67,800
Explanation:
Note: See the attached excel file for the Effect of Each Transaction on the Three Basic Accounting Elements.
From attached excel file, the resulting accounting equation can be computed as follows
Assets = Total Cash + Total Insurance Prepaid + Total Van + Total Supplies + Total Accounts Receivable = $17,380 + $750 + $35,000 + $470 + $14,200 = $67,800
Liabilities = Total Accounts Payable = $30,000
Owner’s Equity = Total Capital + Total Retained earnings = $16,500 + $21,300 = $37,800
Liabilities + Owner’s Equity = $30,000 + $37,800 = $67,800
Therefore, we have:
Assets = Liabilities + Owner’s Equity = $67,800
what is consumer surplus
Which of the following lies primarily within the realm of macroeconomics? a study of the demand for gasoline a study of how tax cuts stimulate aggregate production an analysis of supply and demand conditions in the electricity market a study of the impact of "mad cow" disease on the price of beef worldwide
Answer:
study of how tax cuts stimulate aggregate production
Explanation:
Compared to microeconomics, macroeconomics is known to deal with the big issues such as the GDP of nations, inflation and employment. I t is focused on how an entire nations economy is performing, structured or behaving. It uses such variables such as interest rate, taxes and government expenditures in the regulation of an economy to help it attain economic growth and to be stable
Bundling:__.
A. is illegal in most U.S. states.
B. increases transaction costs for consumers.
C. is when firms sell multiple separate goods together for a single price.
D. is where a firm wraps its fragile goods in special packaging and charges a higher price than if the goods are put into regular packaging.
Answer:
c
Explanation:
Bundling is when separate products of a company are combined together and sold to customers usually at a lower price
Jenny Manufactures sold toys listed at $360 per unit to Jack Inc. for $306, a trade discount of 15 percent. Jack Inc. in turn sells the toys in the market at $335. Jenny should record the receivable and related sales revenue (per unit) at: Group of answer choices $360 $335 $306 $285
Answer:
$306
Explanation:
Based on the information given Jenny should record the receivable and related sales revenue (per unit) at $306 reason been that we were told JENNY MANUFACTURES SOLD TOYS THAT WAS LISTED AT THE AMOUNT OF $360 PER UNIT TO JACK INC. FOR THE AMOUNT OF $306.
Hence, Jenny will record the RECEIVABLE AND RELATED SALES REVENUE (per unit) at $306.
Logan owns a horse ranch. Logan dislikes horses, but he opened the ranch because he heard it was a lucrative business and he wanted to make money. Logan’s horse ranch has lost money every year for the past 5 years (including this year), but Logan has made some changes to business operations, including hiring a consultant and increasing his prices. Logan anticipates that as a result of these changes, his horse ranch will generate a profit in the next year or two. This year, Logan hired his brother, Luke, to work at the horse ranch. Logan pays Luke $500/hr to clean the horse stalls. Logan also hired his best friend, Lucy, to do Logan’s grocery shopping and other personal errands. He pays Lucy $15/hr. Which of the following is most accurate?
a. Logan cannot deduct any of the costs associated with the horse ranch because the horse ranch would be classified as a hobby, not a business
b. Logan can deduct the full salary paid to Luke because Luke works in Logan’s horse ranch business
c. Logan can deduct the full salary paid to Lucy because the amount of the expense is reasonable
d. Logan can deduct the full salary paid to Lucy because grocery shopping is ordinary and necessary
e. None of the above are correct
Answer:
Logan Horse Ranch
The most accurate is:
e. None of the above are correct
Explanation:
Logan's payment to his brother, Luke, of $500 per hour, is not a reasonable business expense that can be deductible. Surely, $500 per hour is not a going rate for cleaning the horse stalls per hour. With Lucy doing grocery shopping for Logan, it does not resonate like an ordinary and necessary expense for the business. Therefore, options A to D are not correct. This leaves only option E as the most accurate.
If a make-to-stock manufacturing firm with highly seasonal demand follows a level production strategy, which of the following is likely to be true?
A) Inventory will fluctuate significantly during the year.
B) The production rate must be set equal to the demand in the heaviest demand period, and stay at that level all year.
C) It will be difficult to keep the workforce size stable.
D) The firm must make sure that its maximum capacity is at least as high as the heaviest demand period.
Answer: Inventory will fluctuate significantly during the year
Explanation:
If a make-to-stock manufacturing firm with highly seasonal demand follows a level production strategy, then the inventory will fluctuate significantly during the year.
When using a level production strategy, it should be noted that there will be an increase in the inventory during when there are low demand while there'll be a reduction in the inventory during the periods of high demand.
Waterways is thinking of mass-producing one of its special-order sprinklers. To do so would increase variable costs for all sprinklers by an average of $0.70 per unit. The company also estimates that this change could increase the overall number of sprinklers sold by 10%, and the average sales price would increase $0.20 per unit. Waterways currently sells 481,000 sprinkler units at an average selling price of $25.20. The manufacturing costs are $5,811,160 variable and $2,155,660 fixed. Selling and administrative costs are $2,673,680 variable and $798,370 fixed. If Waterways begins mass-producing its special-order sprinklers, how would this affect the company
Answer:
Waterways Corporation
If Waterways begins mass-producing its special-order sprinklers, its net operating income would almost double, increasing by $680,202.
Explanation:
a) Data and Calculations:
Increase in variable costs per unit = $0.70
Increase in number of sprinklers sold = 10%
Increase in average sales price = $0.20
Current sales = 481,000 sprinkler units
Selling price = $25.20
New selling price = $25.40 ($25.20 + $0.20)
New quantity of sprinkler units = 529,100 (481,000 * 1.1)
Increase in variable cost = $370,370 (529,100 * $0.70)
New variable cost = $6,181,530 ($5,811,160 + $370,370)
Income Statements Normal Mass Production
Sales revenue $12,121,200 $13,439,140
Variable manufacturing costs $5,811,160 $6,181,530
Variable selling and admin. costs 2,673,680 2,941,048
Total variable costs $8,484,840 $9,122,578
Contribution margin $3,636,360 $4,316,562
Fixed costs:
Manufacturing costs $2,155,660 $2,155,660
Selling and administrative costs 798,370 798,370
Total fixed costs $2,954,030 $2,954,030
Net operating income $682,330 $1,362,532
Increase in net operating income = $680,202 ($1,362,532 - $682,330)
Mới ra trường nên làm công ty nhỏ của người quen lương 8 triệu, hay công ty lớn lương 7 triệu
Answer:
small company
Explanation:
As the company grows, I also have the experience of being an important part of the company, that's my opinion
Angelina's made two announcements concerning its common stock today. First, the company announced that its next annual dividend has been set at $2.16 a share. Secondly, the company announced that all future dividends will increase by 4% annually. What is the maximum amount you should pay to purchase a share of Angelina's stock if your goal is to earn a 10% rate of return?
A. $21.60
B. $22.46
C. $27.44
D. $34.62
E. $36.00
Describe an important difference in the way an economist and a businessperson might view a monopoly.
Answer:
An economist would view a monopoly as not beneficial and optimal to society. A businessperson would view monopolies as a great idea to maximize profits due to the lack of competitionExplanation:
hope it's helps you if i am sorry if my answer is wrong
true or false
Macroeconomics deals with the behaviour of individual economic units.
Answer:
false. it deals with ecomonics as a whole. it's in the name dude
Answer:
False
Explanation:
Macroeconomics looks at the economy as a whole. It focuses on broad issues such as growth of production, the number of unemployed people, the inflationary increase in prices, government deficits, and levels of exports and imports.
The New Fund had average daily assets of $2.2 billion in the past year. New Fund's expense ratio was 1.1% and the management fee was .7%.a. What were the total fees paid to the fund's investment managers during the year?b. What were the other administrative expenses?
Answer: A. $15.4 Million
B. $8.8 million
Explanation:
a. What were the total fees paid to the fund's investment managers during the year?
This will be:
= Average daily assets × Management fee
= $2.2 billion × 0.7%
= $15.4 million
b. What were the other administrative expenses?
The total expense that's incurred for managing the fund will be:
= $2.2 billion × 1.1%
= $24.2 million
Therefore, the other administrative expenses will be:
= $24.2 million - $15.4 million
= $8.8 million
National Bank quotes the following for the British pound and the New Zealand dollar:
Quoted Bid Price Quoted Ask Price
Value of a British pound (£) in $ $1.61 $1.62
Value of a New Zealand dollar (NZ$) in $ $.55 $.56
Value of a British pound in New Zealand dollars NZ$2.95 NZ$2.96
Assume you have $10,000 to conduct triangular arbitrage. What is your profit from implementing this strategy?
A) $13.43.
B) $17.53.
C) $12.54.
D) $11.80.
E) None of the above.
Answer:
E) None of the above
Explanation:
Calculation to determine What is your profit from implementing this strategy
Profit={[($10,000/$1.62)*$2.95]*$.55}-$10,000
Profit =[( £6,172.84 *2.95) *$.55]-$10,000
Profit=( NZ$18,209.88 x $.55)-$10,000
Profit = $10,015.43-$10,000
Profit=$15.43
Therefore your profit from implementing this strategy is $15.43
Break-Even Point
Nicolas Inc. sells a product for $59 per unit. The variable cost is $30 per unit, while fixed costs are $171,564.
Determine (a) the break-even point in sales units and (b) the break-even point if the selling price were increased to $64
per unit.
a. Break-even point in sales units
units
b. Break-even point if the selling price were increased to $64 per unit
units
Answer:
The right answer is:
(a) 5916 units
(b) 5046 units
Explanation:
Given:
Sales,
= $59
Variable cost,
= $30
Fixed cost,
= $171,564
Increased sale,
= $64
Now,
(a)
Contribution margin will be:
= [tex]Sales - Variable \ cost[/tex]
= [tex]59-30[/tex]
= [tex]29 \ per \ unit[/tex] ($)
hence,
Breakeven will be:
= [tex]\frac{Fixed \ cost}{Contribution \ margin}[/tex]
= [tex]\frac{171564}{29}[/tex]
= [tex]5916 \ units[/tex]
(b)
Contribution margin will be:
= [tex]Sales-Variable \ cost[/tex]
= [tex]64-30[/tex]
= [tex]34 \ per \ unit[/tex] ($)
hence,
Breakeven will be:
= [tex]\frac{Fixed \ cost}{Contribution \ margin}[/tex]
= [tex]\frac{171564}{34}[/tex]
= [tex]5046 \ units[/tex]
Consider a firm with a 2018 net income of $20 million, revenue of $60 million, and cost of goods sold of $25 million. If the balance sheet amounts show $2 million of inventory and $500,000 of property, plant, and equipment, how many weeks of supply does the firm hold
Answer: 4.16 weeks
Explanation:
From the information given in the question, the number of weeks of supply that the firm hold will be:
= (average inventory/ cost of goods sold) × 52 weeks
= (2/25) × 52
= 4.16 weeks
Therefore, the weeks of supply that the firm hold is 4.16 weeks
Marko, Inc. is considering the purchase of ABC Co. Marko believes that ABC Co. can generate cash flows of $6,600, $11,600, and $17,800 over the next three years, respectively. After that time, they feel the business will be worthless. Marko has determined that a rate of return of 13 percent is applicable to this potential purchase. What is Marko willing to pay today to buy ABC Co.?
a. $39,420.00.b. $24,876.50.c. $28,896.22.d. $36,000.00.e. $27,261.50.
Answer:
e. $27,261.50
Explanation:
Calculation to determine What is Marko willing to pay today to buy ABC Co.
Present value (PV) = $6,600 / (1 + 0.13) + $11,600 / (1 + 0.13)^2 + $17,800 / (1 + 0.13)^3
Present value (PV) = $6,600 / (1 .13) + $11,600 / (1.13)^2 + $17,800 / (1 .13)^3
Present value (PV) =$27,261.50
Therefore the amount that Marko his willing to pay today to buy ABC Co will be $27,261.50