Green Mountain Producers Inc. is an oil drilling company. the company paid a dividend of $3.10 last year, and, in the past, its dividend has increased steadily by about 4% a year. Green Mountain just announced that its dividend will increase to $4.20 this year, and its share price rose from $38 per share to $40 per share immediately after the announcement.
Which of the following best explains why Green Mountain's stock price increased as it did?
The clientele effect
Dividend irrelevance theory
The signaling hypothesis
Which of the following statements is true?
Taxes on dividend income are paid in the year that they are received.
Taxes on dividend income s are paid when the stock is sold.
As a result, the U.S. tax code encourages many individual investors to prefer to receive _____
Some researchers and analysts have noticed a trend in which firms that increase their dividends see an increase in their stock price. the theory of_______ explains this phenomenon.
In some cases, analysts notice that groups of similar investors tend to flock to stocks that have dividend policies consistent with their needs. This circumstance is an illustration of:________.
the information content effect
the clientele effect
Answer:
answer to the first question:
The signaling hypothesisThis theory basically states that when a company announces higher dividends, it means that it is performing better than expected and the company's management believes that it will grow more in the future.
answer to the second question:
Taxes on dividend income are paid in the year that they are received.Dividends are taxed as ordinary income, so they will be taxed on the year that they are received.
fill in the blanks:
As a result, the U.S. tax code encourages many individual investors to prefer to receive long term capital gains.
Some researchers and analysts have noticed a trend in which firms that increase their dividends see an increase in their stock price. the theory of signaling explains this phenomenon.
In some cases, analysts notice that groups of similar investors tend to flock to stocks that have dividend policies consistent with their needs. This circumstance is an illustration of: the clientele effect.
Explain how the circular flow of income operates making reference to the injections and withdrawals and physical and monetary flows.
Answer:
It shows flows of goods and services and factors of production between firms and households
The circular flow shows how national income or Gross Domestic Product is calculated
Businesses produce goods and services and in the process of doing so, incomes are generated for factors of production (land, labour, capital and enterprise) – for example wages and salaries going to people in work.
Leakages (withdrawals) from the circular flow
Not all income will flow from households to businesses directly. The circular flow shows that some part of household income will be:
1.Put aside for future spending, i.e. savings (S) in banks accounts and other types of deposit
2.Paid to the government in taxation (T) e.g. income tax and national insurance
3.Spent on foreign-made goods and services, i.e. imports (M) which flow into the economy
Withdrawals are increases in savings, taxes or imports so reducing the circular flow of income and leading to a multiplied contraction of production (output)
Injections into the circular flow are additions to investment, government spending or exports so boosting the circular flow of income leading to a multiplied expansion of output.
Capital spending by firms, i.e. investment expenditure (I) e.g. on new technology
The government, i.e. government expenditure (G) e.g. on the NHS or defence
Overseas consumers buying UK goods and service, i.e. UK export expenditure (X)
An economy is in equilibrium when the rate of injections = the rate of withdrawals from the circular flow.

Building up the model
In this next series of images we build up the circular flow model from just having a domestic sector and then adding in an external sector (exports and imports) before including the financial sector which channels savings and hopefully provides the finance available to fund investment.
The Domestic Circular Flow of Income and Spending
The external sector involves businesses exporting goods and services overseas (X) and consumers and business buying imported products from other countries (M)
Explanation:
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When leakage equals injections, the nation's economic cycle is said to be in balance.
What is economic cycle?The term "economic cycle," usually referred to as a "business cycle," describes the swings in the economy's growth and decline.
The present stage of the economic cycle can be determined using variables like gross domestic product (GDP), interest rates, total employment, and consumer expenditure.
Since the economic cycle directly affects stocks, bonds, profits, and corporate earnings, understanding it can help investors and businesses decide whether to invest and when to withdraw their funds.
An economy travels in a circular motion from expansion to recession and back again, which is referred to as an economic cycle. Growth is a sign of an expanding economy.
Learn more about economic cycle, here
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A medical doctor is involved in a $1 million malpractice suit. He can either settle out of court for $250,000 or go to court. If he goes to court and loses, he must pay $825,000 plus $175,000 in court costs. If he wins in court the plaintiffs pay the court costs. Identify the actions of this decision-making problem. Remember, what an action is, something that the decision maker decides to do...
Answer:
there are two different actions in this decision making problem:
action 1: go to court and defend himselfaction 2: settle out of court and pay money to the plaintiffExplanation:
When you are solving a problem and need to make to a decision, the actions are the result of what decision you finally decided to make. In this case, the doctor can decide to go to court or not. If he decides to go to court, he will have to defend himself in court. If he decides not to go to court, he will need to settle with the plaintiff without engaging in a court trial.
An early 1970s government study ("Work in America") identified three chief sources of worker dissatisfaction. Which of the following is one of those sources?
Answer:
The right approach is "The rigidity of rules and regulations".
Explanation:
Laws, as well as regulations throughout the red tape, are also rigid as well as unyielding. Clear, simple to comprehend. Because once we speak about administrative management, there have been many disadvantages to something like the mere implementation of that kind of principle to administer any organization.Maybe that's why the aforementioned is indeed the easiest alternative.
During the taking of its physical inventory on December 31, Barry's Bike Shop incorrectly counted its inventory as $222,138.00 instead of the correct amount of $184,409.00. The effect on the balance sheet and income statement would be:______.
a. assets overstated by $52,094.00; retained earnings understated by $52,094.00; and net income statement understated by $52,094.00.
b. assets overstated by $223,182.00; retained earnings understated by $171,088.00; and no effect on the income statement.
c. assets, retained earnings, and net income all overstated by $52,094.00.
d. assets and retained earnings overstated by $171,088.00; and net income understated by $223,182.00.
Answer:
c. assets, retained earnings, and net income all overstated by $37,729.
Explanation:
since the ending inventory was overstated by $222,138 - $184,409 = $37,729, it means that cost of goods sold was understated by that same amount. Since COGS were less, that resulted in higher operating income and net income.
Merchandise inventory will be overstated by $37,729 (current asset), while retained earnings will also be overstated by $37,729 since net income increases retained earnings.
Sheridan Company incurred research and development costs of $93000 and legal fees of $33000 to develop a patent. The patent has a legal life of 20 years and a useful life of 10 years. What amount should Sheridan record as Patent Amortization Expense in the first year
Answer:
$3,300
Explanation:
Patent Amortization expense in first Year = Amount of legal fees / Useful life
= $33,000 / 10 years
= $3,300
Note: The amount of patent amortized is equal to the amount of Legal fees over the useful life of years. i.e $33,000 should be considered as amortization of patent expense and it is amortized over the useful life of the asset.
Which method of project selection gives consideration to the time value of money in a capital budgeting decision?
A. Payback method.
B. Average rate of return.
C. Accounting rate of return.
D. Discounted cash flows method.
Answer:
D. Discounted cash flows method.
Explanation:
The discounted cash flow method is the method in which it discounted all the cash flows to their their present value
Also it provides the consideration with respect to the times value of money while taking decision related to capital budgeting
hence, the correct option is D
And all the other options are incorrect
A capital budgeting decision is a financial commitment and an investment, As by asking a project the business is taking commitments.
TMV in capital budgeting is a decision through the discounting cash flow. The DFC is a method of valuing the social projects of the company along with the assets. They are estimated and discounted using the cost of capital.Hence the option D is correct.
Learn more about the project selection gives consideration to the time value.
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If you decide not to spend $1,000 you earned at your summer job but instead intend to buy shares in a mutual fund, in terms of aggregate economic accounting you would be:_______.
A) consuming.
B) saving.
C) investing.
D) transferring.
Answer:
B)saving
Explanation:
Savings in accounting can be regarded as the amount that remains when the
individual's consumer spending is removed from disposable income that is earned by a consumer at a particular iperiod of time. For instance you decide not to spend $1,000 you earned at your summer job but instead intend to buy shares in a mutual fund, in terms of aggregate economic accounting you would be saving.
Starbucks wants to use the subjective approach to evaluate a new project. They are considering expanding their stores and renting office space to small business owners. They will have a separate reception area and online scheduling for those that want to use the office space. Starbucks has a WACC of 12%. What would be the WACC for this new project?
Category Examples Adjustment Factor
High risk New products 6%
Moderate risk Cost savings,
Expansion of existing products 0
Low risk Replacement of existing
equipment (4)
Mandatory Safety equipment n/a
Multiple Choice
A) 16%.
B) 12%.
C) 24%.
D) 18%.
E) It cannot be determined.
Answer:
D) 18%.
Explanation:
The WACC for this new project = Current WACC + Adjustment Factor (High Risk)
WACC for this new project = 12% + 6%
WACC for this new project = 18%
Note: Attached as picture shows the reason for the chosen Adjustment factor
Which method might allow a company to make significant inventory purchases at year end for the purpose of manipulating income?
Answer:
LIFO
Explanation:
LIFO is an abbreviation of “Last-In, First-Out”. It can be regarded as a method that is devices in cost flow assumption purposes which is used to calculate cost of goods sold , it works with assumption that latest product is added to Inventory of a company can be first sold out. It should be noted that LIFO method might allow a company to make significant inventory purchases at year end for the purpose of manipulating income.
Financial markets make the process of borrowing large amounts of money easier because they simplify the negotiation process between borrowers and lenders. This is an example of:
Answer:
Reducing risk
Explanation:
The two ways by which risk can be managed are;
✓ Risk avoidance
✓ risk reduction
risk reduction are activities needed to bring about lower likelihood of risk as well as severity of loss. We can reduce risk through reduction of allocation of our resources to risky situation. An example of reducing risk is in the instance of Financial markets that are making the process of borrowing large amounts of money easier because they simplify the negotiation process between borrowers and lenders.
Alpha Sounds Corp., an electric guitar retailer, was organized by Michele Kirby, Paul Glenn, and Gretchen Northway. The charter authorized 1,000,000 shares of common stock with a par of $1. The following transactions affecting stockholders’ equity were completed during the first year of operations:
Issued 100,000 shares of stock at par to Paul Glenn for cash.
Issued 3,000 shares of stock at par to Michele Kirby for promotional services provided in connection with the organization of the corporation, and issued 45,000 shares of stock at par to Michele Kirby for cash.
Purchased land and a building from Gretchen Northway in exchange for stock issued at par. The building is mortgaged for $180,000 for 20 years at 6%, and there is accrued interest of $5,200 on the mortgage note at the time of the purchase. The corporation agreed to assume responsibility for paying the mortgage note and accrued interest. It is agreed that the land is to be valued at $60,000 and the building at $225,000 and that Gretchen Northway will be issued stock at par.
Journalize the entries to record the transactions.
Burke tires just paid a dividend of $2.42. analysts expect the company's dividend to grow by 30% this year, 20% next year (year 2), 10% the following year (year 3), and then 5% in each subsequent year. if the required return to the stock is 8.3%, what is the best estimate of the stock's current market value (please enter the value to the penny)?
a. $60.34.
b. $59.48.
c. $59.91.
d. $58.62.
e. $59.05.
Answer:
There is no correct answer is these options. But the correct answer is $113.41
Explanation:
The formula to solve this is:
Po = D1/r - g
Po is the Current price of the common stock
D1 is the future dividend payment
r is the rate of return
g is the growth rate.
This is quite different from the usual(single stage). This is Two-stage Dividend Discount Model. To solve this;
D1(Dividend in year 1) is $3.15( $2.42 x 1.3)
D2(Dividend in year 2) is $3.78(3.15 x 1.2)
D3(Dividend in year 3) is $4.15($3.78 x 1.1)
D in subsequent years is $4.36(4.15 x 1.05)
P3(price of stock in year 3) = $4.36/0.083 - 0.05
=$132.12
Now the stock's current market value is
$3.15/1.08 + $3.78/1.08^2 + $4.15/1.08^3 + $132.12^3
The price of the stock is $113.41
As a discipline, Governance is most closely related to:
Answer:
control
Explanation:
governance is the action or manner of governing.
1. Park Co. is considering an investment that requires immediate payment of $31,500 and provides expected cash inflows of $12,000 annually for four years. What is the investment's payback period?
2. Park Co. is considering an investment that requires immediate payment of $21,530 and provides expected cash inflows of $6,500 annually for four years. If Park Co. requires a 7% return on its investments. What is the internal rate of return?
3. Peng Company is considering an investment expected to generate an average net income after taxes of $3,400 for three years. The investment costs $50,400 and has an estimated $10,200 salvage value. Assume Peng requires a 10% return on its investments. Compute the net present value of this investment. Assume the company uses straight-line depreciation.
Answer:
1. Park Co. is considering an investment that requires immediate payment of $31,500 and provides expected cash inflows of $12,000 annually for four years. What is the investment's payback period?
payback period = $31,500 / $12,000 = 2.625 years
2. Park Co. is considering an investment that requires immediate payment of $21,530 and provides expected cash inflows of $6,500 annually for four years. If Park Co. requires a 7% return on its investments. What is the internal rate of return?
using a financial calculator, the IRR = 8%
the IRR is the discount rate that makes a project's NPV = 0
3. Peng Company is considering an investment expected to generate an average net income after taxes of $3,400 for three years. The investment costs $50,400 and has an estimated $10,200 salvage value. Assume Peng requires a 10% return on its investments. Compute the net present value of this investment. Assume the company uses straight-line depreciation.
depreciation per year = ($50,400 - $10,200) / 3 = $13,400
net cash flows:
year 0 = -$50,400cash flow year 1 = $3,400 + $13,400 = $16,800cash flow year 2 = $3,400 + $13,400 = $16,800cash flow year 3 = $3,400 + $13,400 + $10,200 = $27,000NPV = -$50,400 + $16,800/1.1 + $16,800/1.1² + $27,000/1.1³ = -$50,400 + $49,442.52 = -$957.48
A recipe for macaroni and cheese calls for 18 ounces of cheddar cheese to make 32 four-ounce portions. How much would cheddar would be needed to produce 40 eight-ounce portions?
Answer: 45 ounces of cheddar cheese is required to make 40 eight-ounce portions.
Explanation:
To find : Quantity of cheddar cheese required to make 40 eight-ounce portions.
Given: Quantity of cheddar cheese required to make 32 four-ounce portions. = 18 ounces
⇒ Quantity of cheddar cheese required to make 1 four-ounce portions. = [tex]\dfrac{18}{32}[/tex] ounces.
⇒ Quantity of cheddar cheese required to make 1 eight-ounce portions. = [tex]2\times \dfrac{18}{32}[/tex] ounces.
[tex]=\dfrac{18}{16}[/tex] ounces.
⇒ Quantity of cheddar cheese required to make 40 eight-ounce portions =
[tex]40\times\dfrac{18}{16}=45[/tex]
Hence, 45 ounces of cheddar cheese is required to make 40 eight-ounce portions.
If a company invests in production improvement option D that will boost labor productivity by 50%, while its annual depreciation costs will rise by an amount equal to 10% of the investment costs associated with installing option D, it is accurate to say that its labor costs per pair produced will decline
Answer: from $8.00 per pair to $5.33 for a production facility in North America that currently has labor productivity of 5000 pairs per worker and total regular compensation (which does not include overtime pay) of $40,000 annually.
Explanation:
Since we have been informed that the labor productivity be boosted by 50%, since the production facility in North America currently has labor productivity of 5000, then the new labor productivity will be:
= 5000 (1 + 50%)
= 5000 (1 + 0.5)
= 5000 (1.5)
= 7500
Also, since total regular compensation was given s $40,000 annually, the labor cost will then be:
= 40,000 / 7500
= $5.33
If you become nervous in an interview and lose your train of thought, you should _____.
just keep talking
pause and take a deep breath
laugh it off
ask for a glass of water
Explanation:
pause and take a deep breath
We opened the doors to Data Driven Donuts last year. What type of analysis tells us how we performed the first year?
Answer:
Descriptive
Explanation:
Any company,business or organization that want to know how well they performed in the first year of their business or first year of operation will have to make use of DESCRIPTIVE ANALYSIS reason been that this type of ANALYSIS will help to collect data, analysed and summarize the data in details in order to interprete and present the data in a more useful way.
Therefore the type of analysis tells us how we performed the first year is called DESCRIPTIVE ANALYSIS
Mary's team is located in different countries. Because of the time zone differences, it is difficult for the team to meet all together so their meetings are conducted ________.
Answer:
Asynchronously
Explanation:
With regards to the above, the meeting would be conducted asynchronously due to the different time zone in each team member's country. What this means that the meeting will not be taken place at the same time or in a real time due to the differences in time zones.
Where a meeting is conducted asynchronously, such would be easy to schedule because attendees would have to adjust their own time unlike synchronous meeting where everyone would be expected to clear their schedule for a specific time to hold the meeting.
The Chester Company has just purchased $40,900,000 of plant and equipment that has an estimated useful life of 15 years. The expected salvage value at the end of 15 years is $4,090,000. What will the book value of this purchase (exclude all other plant and equipment) be after its third year of use? (Use FASB GAAP
a) $32,720,000
b) $29,448,000
c) $35,446,667
d) $33,538,000
Answer: d) $33,538,000
Explanation:
Use straight line depreciation and find the annual depreciation.
= (40,900,000 - 4,090,000) / 15
= $2,454,000
In 3 years, the depreciation is;
= 2,454,000 * 3
= $7,362,000
Net book value = 40,900,000 - 7,362,000
= $33,538,000
Rentarama is considering a 4:1 stock split. The stock current trades as $150 a share. Using the pre-split number of shares outstanding, the CFO has estimated the total dividend for the next year will be $6.40 per share. Assuming the stock split is implemented immediately, shareholders should expect the quarterly dividend to be closest to:__________.
A) $0.40
B) $1.60
C) $6.40
Answer:
A) $0.40
Explanation:
Stock split implies that a single share is divided into multiples which means that 4:1 stock split means that after the stock a single share prior to the stock split is divided into 4.
Total dividend per share expected next year=$6.40
Now that a single share now commands 4
Revised dividend per share expected next year=$6.40*1/4=$1.60(annual dividend)
quarterly revised per share dividend expected in the coming year=$1.60/4=$0.40
You sold one corn future contract at $2.29 per bushel. What would be your profit (loss) at maturity if the corn spot price at that time were $2.10 per bushel? Assume the contract size is 5,000 bushels and there are no transactions costs.
A) $950 profit.
B) $95 profit.
C) $950 loss.
D) $95 loss.
E) None of the options are correct.
Answer:
A) $950 profit.
Explanation:
the spot price is $2.10, but you are selling at $2.29. This means that you are making a $2.29 - $2.10 = $0.19 profit per bushel. Since the contract is for 5,000 bushels, then your total profit = 5,000 bushels x $0.19 per bushel = $950
on the other hand, if you had purchased the futures contract, you would have lost the $950.
Zoom, Inc. makes a sale for $600. The company is required to collect sales taxes amounting to 7%. The journal entry to record the sale will include a: ___________.
a. credit to Cash for $642.
b. credit to Sales Revenue for $600.
c. debit to Cash for $600.
d. credit to Sales Revenue for $642.
e. debit to Sales Tax Payable for $42.
Answer:
b. credit to Sales Revenue for $600.
Explanation:
The sales tax is 7% of the sales price which is $600
Sales tax=7%*$600=$42
The journal entries for this transaction would have a debit of $642(sales price plus sales tax i.e $600+$42=$642) in the cash account and not credit as shown by option a.
Also, sales revenue would be credited with sales price of $600 while sales tax payable is credited with the amount of sales tax which is $42( not a debit as shown by option e)
On January 2, 2017, Hannah Company sold a machine for $1,000 that it had used for several years. The machine cost $12,000, and had accumulated depreciation of $8,000 at the time of sale. What gain or loss will be reported on the income statement for the sale of the machine?
Answer:
Loss= -$3,000
Explanation:
Giving the following information:
Selling price= $1,000
Purchase price= $12,000
Accumulated depreciation= $8,000
First, we need to calculate the book value:
Book value= 12,000 - 8,000= $4,000
If the book value is higher than the selling price, the company loses from the sale:
Gain/loss= selling price - book value
Gain/loss= 1,000 - 4,000
Loss= -$3,000
Question 3 of 10
When a nation's standards of financial reporting are transparent and effective:
OA. citizens tend to have greater confidence in the economy.
B. businesses are unable to foster good relationships with
customers
DC. businesses in the country tend to lose profits and resources.
OD. the country's laws can be more easily violated.
Answer:
A. citizens tend to have greater confidence in the economy.
Explanation:
When a nation's standards of financial reporting are transparent and effective, by extension, the citizens tend to have greater confidence in the economy.
This is because when the government are transparent about the financial affairs of the nation, the citizens are confident in the economy
If you are falling behind on your student loan payments, which of the following steps should you take to avoid default?
Answer:
These are the answer choices for the question:
A. Transfer your balance to a credit card
B. File for bankruptcy
C. Contact your lender
D. You cannot default on student loans
And this is the correct answer:
C. Contact your lender
Explanation:
If you are about to default on your student loans, the best alternative you have is to contact your lender in order to renegotiate the terms of the loan. This is because you cannot default on student's loan, so filing for bankruptcy is not an option, and transferring the debt to a credit card is not a good idea because credit card debt usually has higher interest.
g Obligations to be paid within one year or the company's operating cycle, whichever is longer, are:
Answer:
Current liabilities
Explanation:
Liabilities are debts that a company owes to other parties. They are classified based on when payment is due.
Those due within a short period are called current liabilities while those due in the distant future are called long term liability.
Current liability payments falls within one year or the operating cycle of a business whichever is longer.
They occur as a result of purchases made on credit payable in a short period
Vault cash is equal to $1 million, deposits by depository institutions at the central bank are $1 million, the monetary base is $15 million, and bank deposits are $30 million. The total currency in circulation is:__________.
Answer:
The total currency in circulation is $13 million.
Explanation:
This can be calculated using the following formula:
Total currency in circulation = Monetary base - Vault cash - Deposits by Depository institutions at the central bank ................ (1)
Where;
Total currency in circulation = ?
Monetary base = $15 million
Vault cash = $1 million
Deposits by depository institutions at the central bank = $1 million
Substituting the values into equation (1), we have:
Total currency in circulation = $15 million - $1 million - $1 million = $13 million
Therefore, the total currency in circulation is $13 million.
Marginal revenue: A) is the slope of the average revenue curve. B) equals the market price in perfect competition. C) is the change in quantity divided by the change in total revenue.
Answer:
B) equals the market price in perfect competition.
Explanation:
Marginal revenue can be defined as the amount of money (revenue) generated from the sales of an additional unit of a product.
In a perfectly competitive market in long-run equilibrium, a long-run equilibrium avails firms the opportunity to adjust all inputs and all fixed costs are maximized. Also, it's characterized by free entry and exit, as such there isn't a fixed number of firms. This simply means that, since the number of firms in a long-run equilibrium can change, a firm must exit the market as a result of losses i.e when the firm is unable to cover its fixed costs in the long-run while new firms are allowed entry into the market when it anticipates potential profits or gains.
Hence, marginal revenue equals the market price in perfect competition.