Answer:
go north.
Explanation:
The potential dominant strategy in this game is to go north. This can be stated through the concept of dominant strategy, which means that the chosen strategy will be the most appropriate according to someone's perspective, that is, the strategy that will be most beneficial and useful.
In the case of the scenario above, it is possible to affirm that the dominant strategy is to go north because the statement provides information that the general, you prefer to go to the northern restaurant with Jocelyn, so this is configured as the correct option, regardless if the Jocelyn may or may not go, because in a dominant strategy what matters is to choose the most useful option for you, regardless of the actions of third parties.
The First National Bank recently acquired three mortgages from the failed Fargo Bank. It estimates that the chances of these mortgages being repaid are 0.6, 0.4, 0.25. Assuming independence, fine the probability that:_________.
Answer:
a. 0.06
b. 0.18
Explanation:
a) all of them will be repaid
b) none of them will be repaid
P1 = 0.6, P2= 0.4, P3 = 0.25
a. The Probability that all will be repaid = (P1∩P2∩P3)
= P1 * P2 * P3 (Since independent)
= 0.6*0.4*0.25
= 0.06
Thus, the Probability that all will be repaid is 0.06
b. The Probability that none of them will be repaid = (1-P1)*(1-P2)*(1-P3)
= (1-0.6)(1-0.4)(1-0.75)
= 0.4 * 0.6 * 0.75
= 0.18
Thus, the Probability that none of them will be repaid is 0.18
From the below-mentioned research paragraph, extract the following information:
I. Identify the research gap.
II. Identify the research objective of the study.
III. On the basis of the research, the objective suggests the research question of the study.
IV. Identify the theory used in the study.
V. Suggest a title for this research paragraph.
Retaining employees is one of the critical issues faced by the organization all over the globe for many years, that how to retain some of the skilled and knowledgeable employees in the organization who can add value to their organizational performance. However, this worry is explained well enough by the cost that indulges to substitute employees who leave the organization and problems that they face while attracting and hiring a new employee. Now, in most of the countries, some employees could not be able to fill out some vacancies which are with higher difficulty is the real sad back in the development of their career. Therefore, in such a scenario, human resource management practices gain vital importance to assist in reducing turnover intentions. (Fabi, Lacoursiere & Raymond, 2015)
In previous studies, AMO model (ability, motivation, and opportunity) the human resource practices were studied as in three other dimensions that are, the first bundle of the bundle of practice connected with the skill level of an employee, second bundle of practice was related with the motivation-enhancing and the third one was linked with the extent of opportunity one employee could get to contribute (Jiang, Lepak, Hu & Baer, 2012). Moreover, in this study, these 3 bundles of human resource practices are redefined as one set with the name of high-performance work practices. This research aims to study the impact of three sets of practices at the individual level on the employee intention to leave which explains a high-performance work system at the one side and employee intention to leave on the other side. Previously, researchers didn’t aim to study the whole effect of individual human resource practices on the employee quit intentions.
The banking sector of Pakistan is consists of thirty-one banks including five representing the public sector and four banks are from abroad, the remaining twenty-two banks are registered as private banks. Moreover, the majority of the banking business is derived from a few selected banks that have perfect competition among them. Six banks are having a major part of banking skills in Pakistan. Generally, these banks collectively hold 57% of deposits and contribute up to 53% of the economy of Pakistan. Additionally, the state bank of Pakistan is the regulatory authority of the banking sector in Pakistan, and further, it gives direction to commercial banks. Overall, the volume of this sector is on a larger scale but against 195 million of the population, only 43 million bank accounts are registered; this is considered a huge gap due to lack of technology knowledge, and some religious groups perceive the concept of conventional banking is against Sharia.
Answer:
Retaining employees is one of the critical issues faced by the organization all over the globe for many years is explained below in details.
Explanation:
The fundamental purpose of this research is to spin out the hollows recognized with measures for the dependability of delegates in the financial sector of Pakistan by examining the effect of an elite work structure (abilities growing, motivation upgrading, and opportunity upgrading) on operator goal to forget with the intermediary influence of procedural justice.
The investigation gap is how the banks in Pakistan going to continue the operators in the country and by employing what methods or models of research.
Answer-II
The primary investigation purpose is beyond, this investigation is zeroing in on the new concept of human asset the board practices. Before, we have seen.
This examination investigates the relationship between elite work structures on worker expectation to leave.
Answer-III
Opportunity promoting is commonly used with the AMO model, which is the proposed model of this examination however having said that open door as an independent variable changed client support directly with the interceding function of passionate performance in past research.
Answer-IV
This examination employs social trade theory, to quantify the problems concerning the standard for dependability in the monetary area of Pakistan.
Answer-V
"New Research to discover the worker maintenance in Pakistan banks"
Paul agrees to sell his clothing store to Michael and, as part of the sale, to execute a covenant not to compete promising not to open a similar store within one thousand miles for the next twenty years. A court reviewing the terms of the covenant would likely find that it is:________. a) unenforceable because all covenants not to compete are unreasonable. b) unreasonable as to both geographical scope and duration c) unreasonable with regard to duration d) enforceable
Answer:
d) enforceable
Explanation:
A court reviewing the terms of the covenant would likely find that it is enforceable. This is a standard clause found in many contracts and is also known as Non-compete clause. It is standard because a seller that has the experience of running a similar business can sell the business collect the profit from the sale and open create another similar business with little to no capital and quickly outperform their previous business due to the amount of experience that they have. In order to prevent this, many buyers require this clause to be added to the sales contract.
Which company is most easily able to outsource its operations and have its good or service produced in another country
Answer:
d. Queen’s Quilts
Explanation:
Options are "Hannah’s Hair Salons, Busker Baseball Team , Darling Dentistry , Penelope’s Fresh Pretzels , Queen’s Quilts"
a. Salons, Dentistry : these are services which cannot be outsourced partly or fully.
b. Baseball team: It is a sports team which cannot operate partly in another country.
c. Pretzels: These are freshly baked pastries or food items which needs to be made fresh , so cannot be outsourced.
d. Quilts: These are textile which can be produced in countries having cheap labor .
Countries belonging to a ________ maintain whatever policies they see fit against nonmember countries.a) economic union.b) customs union.c) common market.d) free trade area.
Answer:
d) free trade area.
Explanation:
A free trade area refers to a region which comprises of a group of countries that have signed a free trade agreement to eliminate or reduce (limit) tariffs and non-tariffs or quotas among them.
A trade agreement can be defined as a pact or treaty signed between two or more countries to encourage the free flow (import and export) of goods and services among its members, as well as eliminating or reducing trade barriers such as quotas, tariffs on goods traded.
Trade agreements can cause jobs to go to countries that provide those jobs efficiently because all business entities or firms want to have competitive advantage over its rivals. Thus, business owners who have signed a treaty with other countries would tend to outsource or recruit workers from countries that provide their services efficiently.
Hence, countries belonging to a free trade area maintain whatever policies they see fit against nonmember countries
Effective teams have confidence in themselves and believe they can succeed. This confidence is called ________.
A) social facilitation
B) goal congruence
C) social loafing
D) team efficacy
E) self-serving bias
Answer:
D) team efficacy
Explanation:
Team efficacy can be defined as the joint or collective beliefs that the members of a team have in its capacity to effectively execute a specific project or task, accomplish its organizational set goals and objectives through the use of team efforts and skills.
Hence, effective teams have confidence in themselves and believe they can succeed. This confidence is called team efficacy because all the members of the team bring their own skills, viewpoints, experience, knowledge to achieve success.
Gordon Company started operations on January 1 of the current year. It is now December 31, the end of the current annual accounting period. The part-time bookkeeper needs your help to analyze the following three transactions:
a. During the year, the company purchased office supplies that cost $2,300. At the end of the year, office supplies of $670 remained on hand.
b. On January 1 of the current year, the company purchased a special machine for cash at a cost of $23,500. The machine's cost is estimated to depreciate at $2,350 per year.
c. On July 1, the company paid cash of $840 for a two-year premium on an insurance policy on the machine; coverage began on July 1 of the current year.
Answer:
Gordon Company
Analysis of Transactions at December 31:
a. Office Supplies $670 (DR)
Office Supplies Expense $1,630 (DR)
b. Equipment $23,500 (DR)
Accumulated Depreciation on Equipment $2,350 (CR)
Depreciation Expense - Equipment $2,350 (DR)
c. Prepaid Insurance $630 (DR)
Insurance Expense $210 (DR)
Explanation:
1. The Office Supplies Account will be debited with $2,300 and credited with $1,630 ($2,300 - $670) as Office Supplies Expense (used supplies) for the year. This will leave a debit balance of $670 in the account.
2. The equipment account will be maintained at its cost, while a contra account (accumulated depreciation) is created to accumulate the depreciation expenses over the years. The useful life of the equipment is 10 years ($23,500/$2,350) with an annual depreciation expense of $2,350.
3. The Prepaid Insurance Account will be debited with $840 and credited with $210 ($840/4) representing Insurance that expired during the year for six months. The balance of $630 is carried forward for the remaining one and half years.
An annuity pays $500 every six months for 5 years. The annual rate of interest is 8% convertible semiannually. Find each of the following: (a) The PV of the annuity six months (one period) before the first payment, (b) the PV of the annuity on the day of the first payment, (c) the FV of the annuity on the day of the last payment, (d) and the FV of the annuity six months after the last payment.
Answer:
(a) The PV of the annuity six months (one period) before the first payment,
PV ordinary annuity = $500 x 8.1109 (PV annuity factor, 10 periods, 4%) = $4,055.45
(b) the PV of the annuity on the day of the first payment,
PV annuity due = $500 x 8.43533 (PV annuity due factor, 10 periods, 4%) = $4,217.67
(c) the FV of the annuity on the day of the last payment,
FV = $500 x 12.00611 (FV annuity factor, 4%, 10 periods) = $6,003.06
(d) and the FV of the annuity six months after the last payment.
FV = $6,003.06 x (1 + 4%) = $6,243.18
To make effective decisions in today's fast-moving world, managers need to ________.
A ________ is an unsecured bond, and most of the bonds sold today in the United States are of this type.A) mortgage bondB) debentureC) senior bondD) bond indenture
Answer:
B) debenture
Explanation:
A bond refers to a debt or fixed investment security, in which a bondholder (creditor or investor) loans an amount of money to the bond issuer (government or corporations) for a specific period of time.
Generally, the bond issuer is expected to return the principal at maturity with an agreed upon interest to the bondholder, which is payable at fixed intervals.
A debenture is an unsecured bond, and most of the bonds sold today in the United States are of this type because it's a long-term security that yields fixed rate of interest.
When you draw Refine marks, the lines essentially indicate __________ to keep or remove in the background.
Answer:
Colors
Explanation:
Dissatisfaction with public school education has led many parents to try home schooling for their children. If parents reduce their work from a full-time to a part-time load in order to spend time teaching their children at home, how will this affect GDP?
a. Real GDP will increase and nominal GDP will decrease a
b. Both real and nominal GDP will increase.
c. GDP will stay the same
d. GDP will decrease.
Answer:
d. GDP will decrease.
Explanation:
GDP: In economics, the term "GDP" is also referred to as "Gross domestic product", and is described as the standard measure of the value being added and is created via the production of services and goods in a particular country during a specific period. Along with this, GDP also measures the income received or earned by those production in the country, or the total amount that is being spent on the final services and goods.
In the question above, the correct answer is option-d.
Logano Driving Schoolâs 2017 balance sheet showed net fixed assets of $2.4 million, and the 2018 balance sheet showed net fixed assets of $3.3 million. The companyâs 2018 income statement showed a depreciation expense of $319,000.What was net capital spending for 2018? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.)
Answer:
$1,219,000
Explanation:
Calculation for the net capital spending for 2018
Using this formula
2018 Net capital spending=(2018 Net fixed assets-2017 Net fixed assets)+Depreciation expense
Let plug in the formula
2018 Net capital spending=($3,300,000-$2,400,000)+$319,000
2018 Net capital spending=$900,000+$319,000
2018 Net capital spending=$1,219,000
Therefore the 2018 Net capital spending will be $1,219,000
If a check correctly written and paid by the bank for $635 is incorrectly recorded on the company's books for $653, the appropriate treatment on the bank reconciliation would be to:_______
a. add $45 to the book's balance.
b. deduct $549 from the book's balance.
c. subtract $45 from the book's balance.
d. deduct $45 from the bank's balance.
Answer:
a. add $45 to the book's balance
Explanation:
In a situation where a check which was correctly written and as well paid by the bank for the amount of $638 was incorrectly recorded as the amount of $683 on the company's books which means that the appropriate treatment on the bank reconciliation statement would be to add the amount of $45 ( $683-$638) to the book's balance.
Suppose Shaan invested just $10,000 of his own money and had a $90,000 mortgage with an interest rate of 8.5 percent. After three years, he sold the property for $120,000.
(a) What is his gross profit?
(b) What is his net profit or loss? (Input the amount as a positive value.)
(c) What is the rate of return on investment? (Negative amount should be indicated by a minus sign. Enter your answer as a percent rounded to 2 decimal places.)
Answer:
a. $20,000
b. -$2,950
c. -29.50%
Explanation:
The computation is shown below:
a. Gross Profit is
= Sale value of Property - Invested amount - Mortgage amount
= $120,000 - $10,000 - $90,000
= $20,000
b. Net Profit
= Gross profit - number of years × mortgage amount × rate of interest
= $20,000 - 3 × $90,000 × 8.5%
= -$2,950
And,
c) Rate of return is
= Net profit ÷ invested amount
= -$2,950 ÷ $10,000
= -29.50%
For which capital component must you make a tax adjustment when calculating a firmâs weighted average cost of capital (WACC)?
a. Debt
b. Preferred stock
c. Equity
Answer:
a. Debt
Explanation:
For determining the weighted average cost of capital we used the after tax cost of debt as the interest expense is the tax deductible that represents that if there is any issue of debt so it would be decreased as of tax impact
Therefore as per the given situation, the debt is selected
hence, the option a is correct
And, all the other options are wrong
Sudoku Company issues 26,000 shares of $7 par value common stock in exchange for land and a building. The land is valued at $230,000 and the building at $374,000. Prepare the journal entry to record issuance of the stock in exchange for the land and building.
Answer:
Dr Land 230,000
Dr Building374,000
Cr Common stock $7 par value 182,000
Cr Paid-in capital in excess of parvalue, common stock 422,000
Explanation:
Preparation of the journal entry to record issuance of the stock in exchange for the land and building.
Dr Land 230,000
Dr Building374,000
Cr Common stock $7 par value 182,000
(26,000 shares x $7 par)
Cr Paid-in capital in excess of parvalue, common stock 422,000
Calculation for Paid-in capital in excess of par value, common stock
Paid-in capital in excess of par value, common stock=(230,000 + 374,000) – 182,000
Paid-in capital in excess of par value, common stock=604,000-182,000
Paid-in capital in excess of par value, common stock= 422,000
XYZ Corporation, whose common stock is currently selling for $40 per share, is having a rights offering. The terms of the offering require 10 rights plus $35 to subscribe to one share of stock. Compute the theoretical value of a right before the ex-rights date.
Answer:
$0.45
Explanation:
Computation for the theoretical value of a right before the ex-rights date
Using this formula
Theoretical value=(Common stock-Required offering subscription shares)÷(Offering require right+1)
Let plug in the formula
Theoretical value= ($40 ‒ $35) ÷ (10+1)
Theoretical value= $5.00 ÷ 11
Theoretical value=$0.45
Therefore the theoretical value of a right before the ex-rights date will be $0.45
Your company expects to receive 5,000,000 Japanese yen 60 days from now. You decide to hedge your position by selling Japanese yen forward. The current spot rate of the yen is .0089 USD/JPY, while the forward rate is .0095 USD/JPY. You expect the spot rate in 60 days to be .0090 USD/JPY. How many dollars will you receive for the 5,000,000 yen 60 days from now?
Answer:
$47,500
Explanation:
Calculation for How many dollars will you receive
Using this formula
Dollar to receive=Expected Japanese yen×Forward rate
Let plug in the formula
Dollar to receive= ¥5,000,000 x $.0095/¥
Dollar to receive= $47,500
Therefore the amount of dollars will you receive will be $47,500
5. Suppose you are working in a ceramics factory and you are constructing control chart for an critical feature with batches of very fragile parts that common get broken during the measurements. You always start with 8 parts, but sometimes a few of them are broken while measuring them. What type of control chart would you construct and why
Explanation:
Analyzing the above scenario, the ideal type of control chart for construction would be the EWMA control chart integrated with the VSS and VSI control, because unlike traditional charts, it considers the variable sample size (VSS) and the variable sampling interval ( VSI) and therefore are more effective in considering the variations in the process in the control, which was what happened in the question above, since during the process of building the control chart there are some changes resulting from the breaking of the ceramic pieces, so it is ideal to build a graph that detects the changes in a more complete way.
Which of the following is a type of liability?
Answer:
Accounts Payable
Explanation:
Accounts Payable is the amount of money owed to its investors/creditors. Thus creating debt for the company, creating a liability.
Do mountains last forever?
Answer:
no eventually they die
Answer:
no mountains do not last forever..
Explanation:
the reaseon for that is root wedging and weathering of rocks
Price discrimination: Multiple Choice tends to decrease the profits of the competitive firm. is more successful if one consumer can resell the product to another. can benefit consumers with a lower willingness to pay as compared to other consumers in the market. can be a successful strategy for any firm in a competitive market.
Answer:
can benefit consumers with a lower willingness to pay as compared to other consumers in the market.
Explanation:
Price discrimination occurs when a supplier sells a product to different customers at different prices.
The criteria for discrimination can be as a result of income, social class, demographics and so on.
Price discrimination is not a good strategy in a competitive market as consumers will move to other suppliers when the price is not conducive.
However a consumer who is less willing to buy the product can benefit from this because the supplier is open to lowering the price depending on certain criteria
In an effort to avoid recession, the government implements a tax rebate program, effectively cutting taxes for households. We would expect this to:_______. A. affect neither aggregate supply nor aggregate demand. B. increase aggregate demand. C. reduce aggregate demand. D. reduce aggregate supply.
Answer:
B. increase aggregate demand.
Explanation:
A recession can be defined as a period of significant fall in the economic performance such as employment, production, income level, sales of goods and services etc, of a particular country lasting over a few months.
In an effort to avoid recession, the government implements a tax rebate program, effectively cutting taxes for households. Thus, we would expect this to increase aggregate demand.
Aggregate demand (AD) can be defined as the total quantity of output (final goods and services) that is demanded by consumers at all possible price levels in an economy at a particular time.
On a standard Aggregate demand (AD)-Aggregate supply (AS) curve, the y axis denotes the Price (P) of goods and services while the x axis typically denotes the Output (Q) of final goods and services.
In the short-run, a rightward shift in the aggregate supply (AS) curve causes output to increase and result in a price fall (lower price) while a rightward shift in the aggregate demand (AD) curve also cause output to increase and rise in prices.
The short-run nominal fluctuations basically cause a change in the level of production. In the short-run, as a result of a shift in the aggregate supply; an increase in money consequently to result in increase the level of production (output).
Hence, more goods are produced as a result of the increased output (supply) and more goods would be purchased as a result of their lower prices.
Production Budget
Pasadena Candle Inc. projected sales of 72,000 candles for January. The estimated January 1 inventory is 3,600 units, and the desired January 31 inventory is 7,000 units. Prepare a production budget report in units for Pasadena Candle Inc.
Pasadena Candle Inc.
Production Budget
For the Month Ending January 31
Expected units to be sold 800,000
Desired ending inventory, December 31 20,000
Total units available 350,000
Estimated beginning inventory, January 1 35,000
Total units to be produced 785,000
Answer and Explanation:
The preparation of the production budget is presented below:
Production budget
Expected units to be sold 800,000
Add: Desired ending inventory, December 31 20,000
Total units available 820,000
Less: Estimated beginning inventory, January 1 -35,000
Total units to be produced 785,000
We simply added the ending inventory and deduct the beginning inventory to the units sold
Hutter Corporation declared a $0.50 per share cash dividend on its common shares. The company has 33,000 shares authorized, 16,800 shares issued, and 13,200 shares of common stock outstanding. The journal entry to record the dividend declaration is:
GAAP require state and local governments to include in their annual financial reports a budget-to-actual comparison showing actual results and original and final appropriated budgets. What are the advantages of requiring both the original and final appropriated budget amounts?
Answer:
The advantages of requiring both the original and final appropriated budget amounts are:
1. It enables comparison of original (static) budget with the final (flexible) budget.
2. From the comparison, management assesses performances based on actual performance versus original and final budgets respectively.
3. The significant changes based on the level of activity are easily determined.
Explanation:
The use of original and final budgets helps in the comparison with actual performance. It clearly shows the effect of the level of activity on budget performance.
Spiro Corp. uses the sum-of-the-years' digits method to depreciate equipment purchased in January year 1 for $20,000. The estimated salvage value of the equipment is $2,000 and the estimated useful life is four years. What should Spiro report as the asset's carrying amount as of December 31, year 3
Answer:
Carrying value on Dec 31, Year 3= $3,800
Explanation:
Depreciable amount = Cost - Salvage Value
Depreciable amount = 20,000-2,000
Depreciable amount = $18,000
Sum of years’ digits = 1+2+3+4 = 10
Depreciation for Year 1 = 18,000*4/10 = 7,200
Depreciation for Year 2 = 18,000*3/10 = $5,400
Depreciation for Year 3 = 18,000*2/10 = $3,600
Carrying value on Dec 31, Year 3 = Purchase cost - Depreciation
Carrying value on Dec 31, Year 3 = $20,000 - $7,200 - $5,400 - $3,600
Carrying value on Dec 31, Year 3= $3,800
Pina Corporation sells rock-climbing products and also operates an indoor climbing facility for climbing enthusiasts. During the last part of 2017, Pina had the following transactions related to notes payable.
Sept. 1 Issued a $16,800 note to Pippen to purchase inventory. The 3-month note payable bears interest of 8% and is due December 1. (Pina uses a perpetual inventory system.)
Sept. 30 Recorded accrued interest for the Pippen note.
Oct. 1 Issued a $21,600, 9%, 4-month note to Prime Bank to finance the purchase of a new climbing wall for advanced climbers. The note is due February 1.
Oct. 31 Recorded accrued interest for the Pippen note and the Prime Bank note.
Nov. 1 Issued a $26,400 note and paid $8,800 cash to purchase a vehicle to transport clients to nearby climbing sites as part of a new series of climbing classes. This note bears interest of 7% and matures in 12 months.
Nov. 30 Recorded accrued interest for the Pippen note, the Prime Bank note, and the vehicle note.
Dec. 1 Paid principal and interest on the Pippen note.
Dec. 31 Recorded accrued interest for the Prime Bank note and the vehicle note.
Required:
Prepare journal entries for the transactions noted above.
Answer:
Pina Corporation
Journal Entries:
Sept 1:
Debit Inventory $16,800
Credit Notes Payable (Pippen) $16,800
To record the issue of a 3-month note payable with interest of 8%
Sept. 30:
Debit Interest Expense on Note ($16,800 * 8%/12) $112
Credit Interest Payable $112
To accrue interest for the note payable.
Oct. 1:
Debit Equipment (Climbing Wall) $21,600
Credit Notes Payable (Prime Bank) $21,600
To record the issue of a 4-month note, with 9% interest.
Oct. 31:
Debit Interest Expense on Note ($16,800 * 8%/12) $112
Credit Interest Payable $112
To accrue interest for the note payable.
Debit Interest Expense on Note ($21,600 * 9%/12) $162
Credit Interest Payable $162
To accrue interest for the note payable.
Nov. 1:
Debit Vehicles $35,200
Credit Notes Payable $26,400
Credit Cash $8,800
To record the purchase of a vehicle via a 12- month notes payable at 7% interest.
Nov. 30:
Debit Interest Expense on Note ($16,800 * 8%/12) $112
Credit Interest Payable $112
To accrue interest for the note payable.
Debit Interest Expense on Note ($21,600 * 9%/12) $162
Credit Interest Payable $162
To accrue interest for the note payable.
Debit Interest Expense on Note ($35,200 * 7%/12) $205
Credit Interest Payable $205
To accrue interest for the note payable.
Dec. 1:
Debit Notes Payable (Pippen) $16,800
Debit Interest Payable $336
Credit Cash $17,136
To record the payment of Notes to Pippen with interest.
Dec. 31:
Debit Interest Expense on Note ($21,600 * 9%/12) $162
Credit Interest Payable $162
To accrue interest for the note payable.
Debit Interest Expense on Note ($35,200 * 7%/12) $205
Credit Interest Payable $205
To accrue interest for the note payable.
Explanation:
The general journal is used to record transactions as they occur while the general ledger records details about each account and summarizes the balances at the end of the accounting period into the trial balance. Accounting records are based on the double-entry system and follow the accounting equation of Assets = Liabilities + Equity. Every business transaction at Pina Corporation involves two or more accounts. One or two are debited or credited, as the case may be.
Burnett Corp. pays a constant $8.90 dividend on its stock. The company will maintain this dividend for the next 12 years and will then cease paying dividends forever. If the required return on this stock is 11 percent, what is the current share price?
Answer:
Price today = $57.78196973 rounded off to $57.78
Explanation:
The dividends paid by the stock can be said to be in the form of an annuity as the dividend payment is constant, it occurs after equal interval of time and it is expected for a finite or limited period of time. These satisfy the conditions of being an annuity. We assume that the dividend are paid at the end of the year and this is in form of an ordinary annuity.
To calculate the present value of the stock today, we will use the formula for present value of ordinary annuity. The formula for present value of annuity is attached.
Price today = 8.9 * [ (1 - (1+0.11)^-12) / 0.11 ]
Price today = $57.78196973 rounded off to $57.78