A small company wishes to set up a fund that can be used for technology purchases over the next 6years.Their forecast is for $24,000 to be needed at the end of year1,decreasing by $2,000 each year there after.The fund earns 15 percent peryear.Howmuch money must be deposited to the fund at the end of year 0 to just deplete the fund after the last withdrawal
Answer:
The company should deposit $74,954.02
Explanation:
We have an annuity with a variable installment with arithmetic progression.
[tex](a_1+\frac{d}{r} +d \times n) \times \frac{1-(1+r)^{-time} }{rate} - \frac{d \times n}{r}[/tex]
We plug our values:
C = 24,000
r = -2,000
r = 0.15
n = 6
And we get a PV of 74,954.02
We can build the table to verify:
Beginning Interest Tech payment Endng
1 74,954.02 11,243.11 24,000.00 62,197.14
2 62,197.14 9,329.58 22,000.00 49,526.72
3 49,526.72 7,429.01 20,000.00 36,955.73
4 36,955.73 5,543.36 18,000.00 24,499.09
5 24,499.09 3,674.87 16,000.00 12,173.96
6 12,173.96 1,826.10 14,000.00 0.06
(there is a 6 cent mistake due to rounding but without it It will be zero-out)
A new competitor has entered the market to compete against Particles, and you’ve noticed that the customer defection rate had a sharp increase last month. The percentage of repeat customers buying Particles from us declined suddenly. You know that the cost of acquiring a new customer is higher and less efficient than continuing to sell to an existing customer. What would you do?
Answer: Conduct a quick market research study to learn directly from customers if they’re buying Mobile Strategies Enterprise’s (MSE) product Chipz instead of Particles and why.
Explanation:
The options to the question are:
do?
A.Conduct a quick market research study to learn directly from customers if they’rebuying Mobile Strategies Enterprise’s (MSE) product Chipz instead of Particles and why.
B.Pull together a cross-discipline team to discuss the internal perspectives on theParticles. The team should include R&D, sales, and production.
From the question, we are informed that the arrival of a new competitor against Particles, has led to huge customer defection rate.
Based on further information provided in the question, what should be done is " to conduct a quick market research study to learn directly from customers if they’re buying Mobile Strategies Enterprise’s (MSE) product Chipz instead of Particles and why".
Market research simply helps in the identification and and analysis of market needs, market size and its competition. When marketing research techniques like consumer surveys, focus groups, interviews, etc are all carried out, Particles can get the necessary information required to stop its competitors from collecting its customers and gaining a competitive edge.
In a market economy, decisions about which goods are produced are based on: A. what the local community has made for generations. B. what the government decides is important for society. C. what health care organizations suggest will be best for citizens. D. what businesses believe will generate the most profits.
Answer:
D.
Explanation:
Business run the economy not the government
D. What businesses believe will generate the most profits.
What is market economy?In a market economy, the producer gets to decide what to produce, how much to produce, what to charge customers for those goods, and what to pay employees. These decisions in a free-market economy are influenced by the pressures of competition, supply, and demand.
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In a general partnership, each partner is liable for the partnership's obligations only up to a percentage of the obligation equal to that partner's percentage of ownership of the partnership.
a. True
b. False
Nevan’s gross pay was $45,150 last year. The federal income tax withholding from his pay was 16% of his gross pay. Nevan determined the federal income tax he owes is $6,150. Which of the following is true?
Answer:
Nevan will receive a refund of $1,074.
Explanation:
The true statement from the following options is that the refund of amounting to $1,074 being receive to Nevan.
Option D is correct.
What is an income tax?An income tax is the liability paid by the taxpayer in respect of its taxable income. The taxable income is determined as the difference between gross income and the applicable exemptions.
From the provided case, the amount of tax withheld from the income of Nevan is $7,224 ($45,150 X 16%) and the amount of Income tax paid by him is $6,150, so the amount of difference, that is, $1,074 is considered to be refund. This is because the tax liability is lesser than the tax amount being withheld.
Question's missing part:
The options are given as follows:
A) Nevan owes an additional $1,074 in federal tax.
B) Nevan owes an additional $984 in federal tax.
C) Nevan will receive a refund of $1,074.
D) Nevan will receive a refund of $984.
Therefore, the refund of $1,074 is being earned by Nevan in the provided situation.
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Which cost is not relevant in making financial decisions?
A) Sunk costs.
B) Opportunity costs.
C) Incremental costs.
D) Out-of-pocket costs.
On January 1 of the current year, Jimmy's Sandwich Company reported total stockholders’ equity of $125,000. During the current year, total revenues were $100,000 while total expenses were $89,500. Also, during the current year the company paid $24,000 in dividends. No other changes in equity occurred during the year. The change in total equity during the year was:
Answer: ($13,000)
Explanation:
Closing balance of Equity = Opening Balance + Retained earnings
Retained earnings = Net Income - dividends
Formula above shows that equity changes as a result of Retained earnings which is the net of Net Income and Dividends.
Change in equity will be = Net Income - Dividends
= (100,000 - 89,500) - 24,000
= -$13,500
Equity reduces by $13,500
What is the most effective learning theory in your opinion? Explain how does it modify one’s behavior? Support your answer with relevant examples.
Answer:
Experiential Learning Theory
Explanation:
I think that the experiential learning theory is the most effective learning theory. This learning theory projects experience as a crucial factor that promotes learning. It also explains that people learn better when they initiate their learning and not when they are forced to learn.
I think this theory is very effective as it makes the lessons learned to stick better and also cause the needed changes. For example, a teenager who is constantly reminded by his parents to avoid late night partying, but rejects the counsel, might learn better if he gets into trouble as a result of the experience. Also, a student who finds it difficult to understand a topic taught by a teacher, might get better at it when he initiates the learning himself by actively researching and studying on his own.
If the government decides to raise the minimum wage,ceteris paribus:_________.
A) All workers are better off.
B) All workers are worse off.
C) Some workers are better off and some are worse off.
D) Workers are not affected by a minimum wage increase,only by a decrease.
Answer:
C) Some workers are better off and some are worse off.
Explanation:
If the government raises minimum wages, the cost of hiring labour increases and as a result, some firms would lay off some workers especially those that are low skilled labours.
As a result some would lose their jobs while others would benefit from the increased wages
Angel Corporation reported pretax book income of $1,006,000. During the current year, the net reserve for warranties increased by $25,900. In addition, tax depreciation exceeded book depreciation by $101,500. Finally, Angel subtracted a dividends received deduction of $26,200 in computing its current year taxable income. Angel's hypothetical tax expense in its reconciliation of its income tax expense is:
Answer:
$211,260
Explanation:
Calculation for Angel's hypothetical tax expense in its reconciliation of its income tax expense
Using this formula
Angel's hypothetical tax expense=Pretax book income × Tax rate
Let plug in the formula
Angel's hypothetical tax expense=$1,006,000×21%
Angel's hypothetical tax expense=$211,260
Therefore Angel's hypothetical tax expense in its reconciliation of its income tax expense will be $211,260
g After preparing a bank reconciliation, a journal entry would be required for which of the following: Group of answer choices None is correct. A deposit in transit A deposit made by a company with a similar name and credited to your account. Interest earned on the company's checking account. A check for $48 given to a supplier but not yet recorded by the company's bank.
Answer:
After preparing a bank reconciliation, a journal entry would be required for which of the following:
Interest earned on the company's checking account.
Explanation:
This interest was not recorded in the company before receiving the bank statement. A journal entry would record this by debiting Cash account and crediting Interest Earned account. The other transactions do not require the company to make any entry in its journals because they had earlier being recorded. The bank will make the necessary adjustment and not the company for the 'deposit made by a company with a similar name.'
At the beginning of the year, Shinedown, Corp., had a long-term debt balance of $45,505. During the year, the company repaid a long-term loan in the amount of $10,880. The company paid $3,845 in interest during the year, and opened a new long-term loan for $9,695. How much is the ending long-term debt account on the company's balance sheet?
Answer:
$44,320
Explanation:
The below will be used to calculate the ending long term debt.
Ending long-term debt = Beginning long-term debt + New long-term debt - Repaid a long-term loan
Ending long-term debt = $45,505 + $9,695 - $10,880
Ending long-term debt = $44,320
Which of the following activities also contributes to your financial success? Check all that apply. Self-awareness and knowledge of your own values, as well as attitudes and behaviors regarding money, spending, and saving. Knowledge of the general condition and events occurring in the local, state, regional, national, and international economic environments. The development of an effective plan that is consistently applied until it is revised in accordance with changes in your goals and life circumstances. Knowledge of what other average people believe and how they behave, because they affect the same financial markets and economic conditions that affect you.
Answer:
The correct answers are the first, second and third options. All of them but the last one.
Explanation:
To begin with, when it comes to terms of financial success regarding someone personal matters, the majority of activities that can strength up those financial thoughts are the ones that improve yourself as a financial thinker, like the self-awareness and knowledge of the person's own values when it comes to money and its spending and saving because that will make the person see the importance of keeping it sometimes to spending it other times for better thing that can give him better future opportunities. Moreover, the development of an effective plan that shows to him how he must spend those saving and how he must control himself from the waste of money will also help as well as the fact that he knows and understand the conditions and circumstances that affect the local, national and international economy that will eventualy end up affecting the person's financial life.
The activities that contribute to financial success include the following:
A. Self-awareness and knowledge of your own values, as well as attitudes and behaviors regarding money, spending, and saving.
B. Knowledge of the general condition and events occurring in the local, state, regional, national, and international economic environments.
C. The development of an effective plan that is consistently applied until it is revised in accordance with changes in your goals and life circumstances.
What is financial success?
Financial success involves making consistent financial efforts to achieve a better financial position.
Thus, to achieve financial success, one must not know the belief and behavior of other average people but must become self-aware, know the economic environments, and develop an effective plan.
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Barnes Corporation manufactures two models of office chairs, a standard and a deluxe model. The following activity and cost information has been compiled: Number of Number of Number of Product Setups Components Direct Labor Hours Standard 22 8 375 Deluxe 28 12 225 Overhead costs $20,000 $40,000 Number of setups and number of components are identified as activity-cost drivers for overhead. Assuming an activity-based costing system is used, what is the total amount of overhead costs assigned to the standard model?
Answer:
Standard= $24,800
Explanation:
Giving the following information:
Number of: Setups Components
Standard 22 8
Deluxe 28 12
Overhead costs $20,000 $40,000
First, we need to calculate the predetermined overhead rate for each activity:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Setups= 20,000 / (22+28)= $400per setup
Components= 40,000 / (8+12)= $2,000 per component
Now, we can allocate overhead:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Standard= 400*22 + 2,000*8
Standard= $24,800
2006 2005 Total current assets $600,000 $560,000 Total investments 60,000 40,000 Total property, plant, and equipment 900,000 700,000 Total current liabilities 150,000 80,000 Total long-term liabilities 350,000 250,000 Preferred 9% stock, $100 par 100,000 100,000 Common stock, $10 par 600,000 600,000 Paid-in-Capital in excess of par-common stock 60,000 60,000 Retained earnings 325,000 210,000 If Net Income is $115,000 and interest expense is $30,000 for 2006, what is the return on stockholders' equity for 2006 (round percent to one decimal place)
Answer:
Return on stockholder equity = 11.2%
Explanation:
Average Stockholder equity
2006 2005
Deferred 9% stock 100,000 100,000
Common stock 600,000 600,000
Paid in capital - 60,000 60,000
Common stock
Deferred earnings 325,000 210,000
Stockholder equity $1,085,000 $970,000
Average stockholder equity = $1,085,000 + $970,000 / 2
Average stockholder equity = $1,027,500
Return on stockholder equity = Net Income / Average stockholder equity
Return on stockholder equity = $115,000 / $1,027,500
Return on stockholder equity = 0.11192
Return on stockholder equity = 11.192%
Return on stockholder equity = 11.2%
Annuities are a series of constant cash flows that have been received over a certain period of time. However, not all annuities are created equal. Some annuities adjust the payments based on certain macroeconomic factors. Growing annuities are a series of payments that grow at aconstant rate. You invested in an aggressive growth fund and expect to earn 14.84% annually over the next five years. However, due to strong growth, inflation is expected to be 7.35%. What should be your expected real rate of return
Answer:
Real interest rate= 0.0749= 7.49%
Explanation:
Giving the following information:
You invested in an aggressive growth fund and expect to earn 14.84% annually over the next five years. However, due to strong growth, inflation is expected to be 7.35%.
The inflation rate provokes the opposite effect than the interest rate. It decreases the value of money through time, reducing the purchasing price of the nominal value of money.
Real interest rate= nominal interest rate - inflation rate
Real interest rate= 0.1484 - 0.0735
Real interest rate= 0.0749= 7.49%
The agency problem exists primarily in companies of which:__________.
a. ownership is widely dispersed
b. common stock is closely held
c. management has stock ownership
d. both a & c
Answer: a. ownership is widely dispersed
Explanation:
When ownership of a company is widely dispersed, it means that there are few major holders of stock and no majority shareholder.
This can lead to more instances of the Agency problem ( managers acting for their own welfare instead of that of the shareholders) as there will be fewer people able to call the managers to book unilaterally. The managers will therefore feel more empowered to do as they please.
The percent change in multifactor productivity if Fok can reduce the energy bill by $1,000 per day without cutting production or changing any other inputs
Answer:
The answer is "2.45%".
Explanation:
The answer of option c:
Reduce power by 950 dollars:
In this question it will need to once again take the latest energy cost for analytical hierarchical productivity.
→ Total Input [tex]= 400 \times 12+21000 \times 1 +(5000-950)+10000[/tex]
[tex]= 4800 +21000 + (4050)+10000 \\\\ = 25800+4050+10000 \\\\ = 39850\\[/tex]
Consumer rates [tex]= \frac{1,000}{39,850}[/tex]
[tex]=0.0250[/tex]
Initial efficiency multi-factor= 0.0245
[tex]\to \text{percentage changes} = \frac{\text{New Multi Factor Productivity - Previous Multi-Factor Productivity}}{\text{Originbal Multi-Factor Productivity}}[/tex]
[tex]= \frac{(0.02450.0251)}{0.0245}\\\\ = 2.45 \ \ \%[/tex]
9.20% is the percent change in multifactor productivity if Fok can reduce the electricity bill by $1,000 per day without cut down production or changing any other inputs.
Computation of percentage change:According to the question,
Reduce power by $950,
For analytical hierarchical productivity, we need to calculate the latest energy.
Total New Input(TNI):
Summation of all the inputs:
[tex]\text{TNI}= 400\times12+\$21,000\times1+(\$5,000-950)+\$10,000\\\\\text{TNI}=\$4,800+\$21,000+\$4,050+\$10.000.\\\\\text{TNI}=\$25,800+\$4,050+\$10,000.\\\\\text{TNI}=\$39,850.[/tex]
[tex]\text{Consumer Rates}=\dfrac{\text{Energy bill per day}}{\text{TNI} }.\\\\\text{Consumer Rates}=\dfrac{1,000}{39,850}.\\\\\text{Consumer Rates}=0.0250.[/tex]
Initial efficiency factor: 0.0245 (as per question)
[tex]\text{Percentage changes}=\dfrac{\text{New multifactor productivity-Previous multifactor productivity}}{\text{Original multifactor productivity}}\\\\\text{Percentage changes}=\dfrac{0.2450-0.0194}{2.45}.\\\\\text{Percentage changes}=9.20\%.[/tex]
Hence, 9.20% is the percent change.
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If Lola Harper had the following itemized deductions, should she use Schedule A or the standard deduction? The standard deduction for her tax situation is $12,000. Tax Deductions Donations to church and other charities $6,180 Medical and dental expenses exceeding 10 percent of adjusted gross income 2,660 State income tax 4,820
Answer:
To determine whether she should use schedule A or standard deduction, we should add qualifying itemized deductions and should compare total standard deduction .
Therefore, Total itemized deductions = Donations + Medical and dental expenses + State income + Job expenses
Substitution of given values
Total itemized deductions = $1,200 + $6,180 + $2,660 + $4,820
Total itemized deductions = $14,860
Conclusion: in this case total itemized deduction of $14,860 is more than standard deduction of $12000 . So, Lola Harper should use schedule A compared to standard deduction.
why do you think wants is less important?
Answer:
Wants is less important because you don't need it/them to survive, you can live with only your needs, you should only get your wants only if you can afford it and still have enough money for needs.
Explanation:
I don't know if that made sense lol
Perform ratio analysis, and discuss change in financial position and operating results
Condensed balance sheet and income statement data for Jergan Corporation are presented here.
JERGAN CORPORATION
Balance Sheet
December 31
2017 2016 2015
Cash $30,000 $20,000 $18,000
Accounts receivable (net) 50,000 45,000 48,000
Other current assets 90,000 95,000 64,000
Investments 55,000 70,000 45,000
Plant and equipment (net) 500,000 370,000 358,000
$725,000 $600,000 $533,000
Current liabilities $85,000 $80,000 $70,000
Long-term debt 145,000 85,000 50,000
Common stock, $10 par 320,000 310,000 300,000
Retained Earnings 175,000 125,000 113,000
$725,000 $600,000 $533,000
JERGAN CORPORATION
Income Statement
For the Year Ended December 31
2017 2016
Sales revenue $740,000 $600,000
Less: Sales return and allowances 40,000 30,000
Net sales 700,000 570,000
Cost of goods sold 425,000 350,000
Gross profit 275,000 220,000
Operating expenses 180,000 150,000
Net income 95,000 70,000
Additional information:
1. The market price of Jergan's common stock was $7.00, $7.50, and $8.50 for 2012,
2016, and 2017, respectively.
2. You must compute dividends paid. All dividends were paid in cash.
Instructions
(a) Compute the following ratios for 2016 and 2017.
(1) Profit margin. 5. Price-earnings ratio.
(2) Gross profit rate. 6. Payout ratio.
(3) Asset turnover. 7. Debt to assets ratio.
(4) Earnings per share.
Answer:
Please see below
Explanation:
1. Profit margin = Net profit / Net sales
2016 - Profit margin
= (70,000 / 570,000) * 100
= 12.28%
2017 - Profit margin
= (95,000 / 700,000) * 100
= 13.57
2. Gross profit rate = Gross profit / Net sales
2016 - Gross profit rate
= (220,000 / 570,000) * 100
= 38.60%
2017 - Gross profit rate
= (275,000 / 700,000) * 100
= 39.29%
3. Asset turnover = Net sales / Average total assets
2016 - Asset turnover
= (570,000 / [(600,000 + 533,000) / 2 ]
= 570,000 / 566,500
= 1.01 times
2017 - Asset turnover
= (700,000 / [(725,000 + 600,000) / 2 ]
= 700,000 / 662,500
= 1.06 times
4. Earnings per share = Net income / Outstanding shares
2016 - Earnings per share
= 70,000 / (310,000/10)
= 70,000 / 31,000
= $2.26 per share
2017 - Earnings per share
= 95,000/ (320,000/10)
= 95,000 / 32,000
= $2.97 per share.
5. Price earnings ratio = Market value per share / EPS
2016 - price earnings ratio
= 7.50 /2.26
= 3.32 times
2017 - price earnings ratio
= 8.50/2.97
= 2.86 times
6. Payout ratio = Dividend per share / Net income or earnings per share × 100
2016 - payout ratio
=
7. Debts to assets ratio = Total liabilities / Total assets
2016 - Debts to assets ratio
=
Give one advantage and one disadvantage for a Command Economy.
Answer:
Command economy advantages include low levels of inequality and unemployment, and the common good replacing profit as the primary incentive of production. Command economy disadvantages include lack of competition and lack of efficiency.
Bayside, Inc. 2017 Income Statement ($ in thousands) Net sales $ 6,620 Cost of goods sold 4,240 Depreciation 355 Earnings before interest and taxes $ 2,025 Interest paid 30 Taxable income $ 1,995 Taxes 698 Net income $ 1,297 Bayside, Inc. 2016 and 2017 Balance Sheets ($ in thousands) 2016 2017 2016 2017 Cash $ 110 $ 215 Accounts payable $ 1,540 $ 1,885 Accounts rec. 990 830 Long-term debt 810 610 Inventory 1,680 2,070 Common stock 3,240 3,080 Total $ 2,780 $ 3,115 Retained earnings 880 1,130 Net fixed assets 3,690 3,590 Total assets $ 6,470 $ 6,705 Total liab. & equity $ 6,470 $ 6,705 What is the equity multiplier for 2017? Multiple Choice 1.59 times 2.08 times 2.18 times 1.02 times .53 times
Answer:
1.59 times
Explanation:
Average total assets = Beginning total assets + Ending Total assets / 2
Average total assets = 6,470 + 6,705 / 2
Average total assets = $6,587.5
Beginning Total equity = Common stock + Retained earnings
Beginning Total equity = $3,240 + $3,080
Beginning Total equity = $6,320
Ending Total equity = Common stock + Retained earnings
Ending Total equity= $880 + $1,130
Ending Total equity = $2,010
Average total equity = Beginning Total equity + Ending Total equity / 2
Average total equity = $6,320 + $2,010 / 2
Average total equity = $4,165
Equity multiplier for 2017 = Average total assets / Average total equity
Equity multiplier for 2017 = $6,587.5 / $4,165
Equity multiplier for 2017 = 1.581632653061224
Equity multiplier for 2017 = 1.5816 times
The exchange rate for a nation's currency will usually remain constant or increase if
the supply of currency increases, but the demand does not.
the balance of payments is favorable.
the balance of payments is unfavorable.
inflation increases.
Answer:
B. The balance of payments is favorable
Explanation:
Assume that the Accumulated Depreciation account has an unadjusted normal balance of $120,000. The company's list of adjusting entries includes one that debits Depreciation Expense and credits the Accumulated Depreciation account for $20,000. The adjusted balance in the Accumulated Depreciation account is a:
Answer:
$140,000
Explanation:
The computation of adjusted balance in the Accumulated Depreciation account is shown below:-
adjusted balance in the Accumulated Depreciation account = unadjusted normal balance + Credit Accumulated Depreciation account
= $120,000 + $20,000
= $140,000
Hence the adjusted balance in the Accumulated Depreciation account is $140,000.
1 Select the correct answer. If a news article contains bias, what should you do.PLS WILL MARK BRAINEIST
A.take it as a fact
B.READ ANOTHER ARTICLE ON THE SAME TOPIC
C.THROW THE ARTICLE AWAY
D.AUTOMATICALLY AGREE WITH THE REPORTER.
Answer:
I'm pretty sure the answer is B.
Explanation:
Answer:
here u can mark the other guy brainliest now. You have to have 2 answers on the question to mark brainliest
Explanation:
At the start of the current year, SBC Corp. purchased 25% of Sky Tech Inc. for $46 million. At the time of purchase, the carrying value of Sky Tech's net assets was $62 million. The fair value of Sky Tech's depreciable assets was $10 million in excess of their book value. For this year, Sky Tech reported a net income of $62 million and declared and paid $10 million in dividends. The total amount of additional depreciation to be recognized by SBC over the remaining life of the assets is:
Answer:
The total amount of additional depreciation to be recognized by SBC over the remaining life of the assets is $2,500,000
Explanation:
The total amount of additional depreciation to be recognized by SBC over the remaining life of the assets is:
= $10,000,000 * 25%
= $10,000,000 * 0.25
= $2,500,000
Below is the complete list of accounts of Cobras Incorporated and the related balance at the end of March. All accounts have their normal debit or credit balance. Supplies, $1,100; Buildings, $53,000; Salaries Payable, $300; Common Stock, $33,000; Accounts Payable, $2,100; Utilities Expense, $3,500; Prepaid Insurance, $1,100; Service Revenue, $19,300; Accounts Receivable, $4,000; Cash, $3,300; Salaries Expense, $6,200; Retained Earnings, $17,500. Required: Prepare a trial balance with the list of accounts in the following order: assets, liabilities, stockholders' equity, revenues, and expenses.
Answer:
Cobras Incorporated
Trial Balance
For the Month Ended March 31
Account Debit Credit
Cash $3,300
Account Receivable $4,000
Supplies $1,100
Prepaid Insurance $1,100
Buildings $53,000
Account Payable $2,100
Salaries Payable $300
Common stock $33,000
Retained earnings $17,500
Service Earnings $19,300
Salaries Expenses $6,200
Utilities Expenses $3,500
Total $72,200 $72,200
An example of a capital budgeting decision is deciding: Group of answer choices how many shares of stock to issue whether or not to purchase a new machine for the production line. how to refinance a debt issue that is maturing. how much inventory to keep on hand. how much money should be kept in the checking account.
Answer:
whether or not to purchase a new machine for the production line
Explanation:
Capital budgeting decision is the process by which a company sets aside money for the purchase of capital assets such as new machinery, new plants, research and development, and new product.
Capital budgeting is considered to be both a financial decision and an investment decision. Apart from cost incurred by making a purchase, the company considers the future cash flows the capital asset will generate.
Purchasing a new machine for the production line is a capital budgeting decision
A portfolio of non-dividend-paying stocks earned a geometric mean return of 5% between January 1, 2010, and December 31, 2016. The arithmetic mean return for the same period was 6%. If the market value of the portfolio at the beginning of 2010 was $100,000,what was the market value of the portfolio at the end of 2016
Answer: $140710
Explanation:
From the question, we are informed that the portfolio of non-dividend-paying stocks earned a geometric mean return of 5% between January 1, 2010, and December 31, 2016 and that the arithmetic mean return for the same period was 6%.
If the market value of the portfolio at the beginning of 2010 was $100,000, the market value of the portfolio at the end of 2016 will be calculated as:
= $100,000 × (1 + 5%)^7
= $140,710