Answer:
A) Management development
Explanation:
Management development is the process of training and educating employees to become good managers and then developing their managerial skills over time.
Personnel management can be defined as an administrative task or function which primarily involves the process of hiring employees and developing or training them to become beneficial and valuable for the growth and development of the company.
Hence, the main purpose and focus of personnel management is to provide a quality workforce necessary to successfully achieve the organizational set goals and objectives.
This ultimately implies that, the main purpose of a training focuses is to improve an employee's performance in his or her place of work while development is focused on preparing an employee for higher positions available in an organization.
J-Pac Co. uses the Allowance Method to account for uncollectible Accounts Receivable. If they determine that $900 of the balance owed by Matt Evans is uncollectible, the correct entry to write it off would be:
Answer and Explanation:
The correct entry to write off is shown below:
Allowance for Doubtful Accounts $900
To Accounts Receivables $900
(Being written off is recorded)
Here the allowance for doubtful accounts is debited as it increased the assets and the account receivable is credited as it decreased the assets. Also, the assets contains the normal debit balance
You are the strategic leader of a highly competitive electronics company, Anderson Inc. Anderson Inc. is a global leader in electronics sales to corporate and international customers. The competitive nature of the market is creating the need to implement new and well researched strategies and online tools in order to compete with another company that is taking contracts from your organization daily. This other company, Henkerson Inc., is offering products at a slightly lower cost. Their customer service ratings, however, are much lower than Anderson Inc.
Anderson’s customer service could be superior as a result of :_________
Answer:
The options are missing, so I looked for similar questions. The option that I believe is correct is:
A good reputation for having few OOS (out-of-stock) problems when fulfilling large orders.Customer service is extremely important in today's world were competition is fierce and global. The less competition, the less value customer service has, but companies from around the world compete against each other. E.g. if you do not like how some salespeople treat you at a certain store, you can go online and buy the same products from a retailer 2,000 miles away. You must always remember that keeping old customers happy and loyal is always much easier and cheaper than getting new customers.
In a B2B environment, costs are important, and any difference in costs is much more important because the quantities sold are larger. But if the company that sells the lower priced products offers a terrible customer service and is not able to fulfill orders in time, then B2B clients will leave them because time is money. Th elonger the lead time, the higher the stockout probabilities and you require a larger safety stock which costs money.
why is the period from late 20s to early 40s the best time for becoming an entreprnur?
Late 20s to late 40s: This is almost the perfect time for would-be entrepreneurs, for many reasons: At this point in life, they know what they like, and what they don't like. They have obtained business and life skills. They have some assets and credit.
The period from late 20s to early 40s the best time for becoming an entrepreneur is the creative and innovative ideas are the used is the startup new business.
What is entrepreneur?
The term “entrepreneur” refers to the person who launches a new business at their own risk and profit basis. The starting up of a new business with a new idea and logic is called entrepreneurship. The entrepreneur's main motive is to set up a business to generate employment.
The period from the early 20s to the early 40s is ideal for an entrepreneur since technology is evolved enough to start a new business. The business owner works on websites, blogs, digital media, photo editing, television, and radio. The inventive and creative ideas that comprise the most effective company plans.
As a result, the 20s to early 40s are the best period to entrepreneur.
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Trent is a skilled sketch artist who wants to create images for his online portfolio. He is even
toying with including live "watch me draw" videos for audiences, but he doesn't want to use a
webcam. Which piece of technology will most quickly and efficiently allow him to translate the
physical act of him drawing into a digital image?
O a scanner
o a digital tablet
O a stock image
O photo editing software
Answer:
A digital tablet
Explanation:
These items are taken from the financial statements of Cullumber Company at December 31, 2022.
Buildings $88,872
Accounts receivable 10,584
Prepaid insurance 2,688
Cash 9,946
Equipment 69,216
Land 51,408
Insurance expense 655
Depreciation expense 4,452
Interest expense 2,184
Common stock 50,400
Retained earnings (January 1, 2022) 33,600
Accumulated depreciation—buildings 38,304
Accounts payable
Answer:
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The basic principle involved with expense recognition is: Multiple Choice All costs that are used to generate revenue are recorded in the period the revenue is recognized. All transactions are recorded at the exchange price. The business is separate from its owners. The business will continue to operate indefinitely unless there is evidence to the contrary.A company orders office supplies in June. Those supplies are received and paid for in July. The supplies are used in August. In which month should the company record supplies expense
Answer:
All costs that are used to generate revenue are recorded in the period the revenue is recognized
Supplies expense is recorded in August
Explanation:
Expenses are the cost that a company incurs in the process of generating revenue from an asset. As such when a business is paying cost like wages, rent, and office materials it is generating revenue from sales and services provided.
The expense recognition principle requires that a business records expenses when revenue associated with them are recognised.
An office that orders office supply and uses them in August will only recognise supply expense when there is use of the office supply.
So supply expense will be recognised in August
Customer groups represent different segments if: ___________.a. Their needs require different products/services or different prices. b. Other elements of the canvas need to change in order to reach them. c. They can be categorized into different groups. d. Distinctions only matter if tailoring parts of the business to reach some customers makes it more difficult to reach other customers.
Answer:
a. Their needs require different products/services or different prices
Explanation:
A customer segment is a term in business that is used to describe a group of consumers with identical or related needs, behaviors, or other characteristics. For example Mass Market, Niche Market, etc.
However, customer groups represent separate segments based on the following:
1. their needs mandate and justify a distinct offer
2. they are sold through various distribution means.
3. they need different types of connection or arrangement.
4. they are ready to pay for various items of the offer
Suppose currently, there is free trade with no government intervention. Suppose now the government in Econland wants to intervene in this market and bring widget prices back to the pre-trade free market price of F. What could they do achieve this?A. The government cannot do anything to bring widget prices back to FB. Set a quota on imports of LNC. Set a quota on imports of 0D. Tax imports by KRE. Tax imports by $0
Answer:
Tax imports by KRE
Explanation:
When there is complete, unregulated free trade in the economy, the price of widgets in any local economy is the same as the world price.
In this case, i the government in Econland wants to bring back the price of widgets, from world price, to previous domestic price, all it has to do is to impose a tax on imports equal to the value of the difference between the world price and the previous price. This tax on imports is known in economics as a tariff, and it is the most commonly tool of protectionist economic policy.
For example, suppose that the world price of widgets, under free trade is $2 each, and the previous price was $4, so in order to raise the price for world price to previous price, all the government has to do is to impose a tariff of $2, like this, widgets in the domestic market will be $4 again.
If there is free trade without the intervention of the government, the way that the government can intervene would be to Tax imports by KRE.
What is free trade?
This is the type of trade in an economy where the government of the country would not intervene in the market.
In this market system, the government would not use tariffs on the exports or try to discriminate against imports in the country.
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Courageous, Inc. just paid a dividend of $1.80per share on its stock. The dividends are expected to grow at a constant rate of 3 percent per year, indefinitely. If investors require a 12 percent return on Courageous stock, what is the current price? What will the price be in 3 years? In 15 years?
PART A:
Current Price: $____________.
PART B:
Price in Three Years: $____________.
PART C:
Price in Fifteen Years: $____________.
Answer:
P0 = $20.6
P3 = $22.5101762 rounded off to $22.51
P15 = $32.09412 rounded off to $32.09
Explanation:
Using the constant growth model of dividend discount model, we can calculate the price of the stock today. The DDM values a stock based on the present value of the expected future dividends from the stock. The formula for price today under this model is,
P0 = D0 * (1+g) / (r - g)
Where,
D0 * (1+g) is dividend expected for the next period /year g is the growth rate r is the required rate of return or cost of equity
Current Price
P0 = 1.8 * (1+0.03) / (0.12 - 0.03)
P0 = $20.6
Price in three years
To calculate the current price of P0 we use the dividend for Year 1 or D1. Similarly, to calculate the price in three years or P3, we will use D4.
P3 = 1.8 * (1+0.03)^4 / (0.12 - 0.03)
P3 = $22.5101762 rounded off to $22.51
Price in fifteen years
We will use D16.
P15 = 1.8 * (1+0.03)^16 / (0.12 - 0.03)
P15 = $32.09412 rounded off to $32.09
Stephen is a day trader who constantly buys and sells only medical-related stocks. Stephen has _____ asset allocation strategy and a(n) _____ security selection strategy.
Answer: a passive; active
Explanation:
When a person or institution is said to have a passive asset allocation strategy it means that they either trade the same assets over and over or apply the same weighting to the asset class every time. Stephen only trades medical-related stocks so is using passive allocation.
An active security selection strategy means that the person or institution constantly changes and trades the stocks in their portfolio much like Stephen does when he constantly trades stock. Stephen is therefore using an active security selection strategy.
For the first week of the month, the Flour Shop Bakery budgeted to sell 100 cakes at $35 each. They actually sold 105 cakes at $40 each. The selling-price variance is:_________.a) $525 favorable.b) $525 unfavorable.c) $700 favorable.d) $700 unfavorable.
Answer:
a) $525 favorable
Explanation:
The computation of the selling price variance is shown below:
The Selling price variance is
= Actual quantity sold × (actual selling price - expected selling price)
= 105 cakes × ($40 - $35)
= 105 cakes × $5
= $525 favorable
Hence, the selling price variance is $525 favorable
Therefore the correct option is a.
We simply applied the above formula so that the correct value could come
And, the same is to be considered
A change in which of the following will cause the aggregate demand curve to shift?
A)
energy costs
B)
productivity of workers
C)
regulations
D)
consumer spending
Answer:
D) consumer spending
Explanation:
The aggregate demand is the total of all goods and services that consumers are willing and able to buy in the economy in a given period. It is the demand for all goods and services in the entire country per period. Price variation usually causes movements along the demand curve.
Other factors that influence governments, firms, and household expenditures cause the aggregate demand curve to shift. A change in consumer spending will reduce the number of goods demanded. The aggregate demand will shift inwards.
Why is credit an important part of the economy?
A. It allows people and businesses to pay off expensive purchases
over time.
B. It helps workers find higher-paying jobs that take advantage of
their skills.
C. It encourages businesses to sell products both domestically and
internationally
D. It prevents banks from charging companies interest on long-term
loans.
Answer:
A. It allows people and businesses to pay off expensive purchases
over time.
Explanation:
A credit facility is an arrangement where a buyer obtains goods or services and pays for them over a long time. Credit contrasts cash payment, where the buyer pays make full payment for a product when acquiring it.
Credit allows a business to acquire expensive items and assets. Should a business be in need of something that it cannot afford to pay on a cash basis, it can negotiate favorable credit terms with the seller. Payments for such an item are spread over an agreed period. The buyer pays through small and affordable installments until they clear the debt.
(TCO B) WordPerfect Corporation noticed that the more of its word processing software packages it sold, the more customers complained or suggested improvements. In such a situation, WordPerfect Corporation has the opportunity to:_________.
a. steadily improve its word processor software.
b. be acquired by a larger company that can take over the development of the product.
c. develop a completely new program.
d. discontinue production.
Answer:
a. steadily improve its word processor software.
Explanation:
Remember, although we are told WordPerfect Corporation customers complained they also suggested improvements. Meaning, the product isn't entirely bad but needs some improvements.
Instead of developing a completely new program or discontinue production, It makes logical sense for them to improve the word processor software to fit the needs of the customers.
Explain the importance of feedback in the communication process.(3marks)
A company's income before interest expense and income taxes is $350,000 and its interest expense is $100,000.Its times interest earned ratio is:_________.A) 0.29B) 3.50C) 2.50D) 1.75E) 0.50
Answer:
B) 3.50
Explanation:
The computation of the times interest earned ratio is shown below:
As we know that
Times interest earned ratio is
= Income before interest expense and income taxes ÷ interest expenses
= $350,000 ÷ $100,000
= 3.50
Hence, the times interest earned ratio is 3.50
Therefore the correct option is b.
We simply applied the above formula so that the correct value could come
And, the same is to be considered
A partially amortizing mortgage is made for $180,000 for a term of 30 years. The borrower and lender agree that a balance of $40,000 will remain and be repaid as a lump sum at that time. If the interest rate is 6.50%, what must the monthly payment be over the 30 year period?
a. $1,101.56
b. $1,137.72
c. $5,285.36
d. $11,700.00
Answer:
Monthly payment= $1,137.8
Explanation:
Giving the following information:
PV= 180,000
n= 30*12= 360
i= 0.065/12= 0.005417
To calculate the monthly payment, we need to use the following formula:
Monthly payment= (PV*i) / [1 - (1+i)^(-n)]
Monthly payment= (180,000*0.005417) / [1 - (1.005417^-360)]
Monthly payment= $1,137.8
Blankenship Company operates a factory with two departments, X and Y. The utilities to heat and light the manufacturing facility would most likely be allocated to departments X and Y on the basis of:a. Square Footage occupiedb. Machine Hoursc. Direct labor hoursd. Units sold
Answer:
a. Square Footage occupied
Explanation:
Machine hours is the cost drive of utilities (cost object); it is not the basis of allocation. Direct labor hours is the cost drive of utilities (cost object); it is not the basis of allocation. Unit sold is the basis of allocation of advertising; it is not the allocation bases of utilities.
Utilities expenses such as heat, water, and lighting are generally allocated based area occupied by the department. Hence, the option “square footage occupied” is the correct answer.
Suppose that the average P/E multiple oil industry stocks are 18. is an integrated oil company and analysts at expected the company to earn $5.25 in the coming year. What is the intrinsic value of stock?
Answer:
$94.50
Explanation:
Calculation for the intrinsic value of stock
Using this formula
Intrinsic value of stock=Average P/E multiple oil stock*Amount to earn
Let plug in the formula
Intrinsic value of stock=18*$5.25
Intrinsic value of stock=$94.50
Therefore the Intrinsic value of stock will be $94.50
Sarah's dog had purebred puppies that she decided to sell on www.puppyfind.com. She ships them using an airline. If a puppy dies and the buyer decides to sue, who can he sue?
Sarah
the sole proprietorship
the airline carrier
all of the above
Answer:
The buyer should sue the airline carrier
Explanation:
Because it is the airlines job to make sure that the puppy are safe and health
Calculate the yield to maturity of a zero coupon bond with a face value (par value) of $1,000, maturing in 15 years and selling for a price of $525.75.a. 5.62%.b. 4.38%.c. 8.74%.d. 15.26%.e. 16.27%.
Answer:
YTM = 0.043793 or 4.3793% rounded off to 4.38%
Explanation:
The yield to maturity or YTM is the yield or return that an investor can earn on the bond if the bond is purchased today and is held till the bond matures. The formula to calculate the Yield to maturity of a zero coupon bond is as follows,
YTM = [ (( F / PV)^1/n) - 1 ]
Where,
F is the Face value of the bond
PV is the current value of the bond
n is the number of years to maturity
YTM = [ (( 1000 / 525.75)^1/15) - 1 ]
YTM = 0.043793 or 4.3793% rounded off to 4.38%
Why is it important to know the cost of inspection in a particular areas of business organization?
Explanation:
Every regulated organization understands the need to implement a quality system. In fact, it’s a “shall” clause for all life sciences companies to ensure they are in compliance with industry regulations. The focus of any effective quality system is, and rightly so, all about ensuring patient safety. From there, as the organization matures, its people, processes and technology evolve from a compliance, to a correction, to a prevention mindset, eventually resulting in increased quality brand recognition and shareholder value.
In the real world, companies need to engage quality system processes, such corrective and preventive action (CAPA), as the lifeline to feed improvements through the change management processes into the product lifecycle, from design inputs to manufacturer and supplier outputs.
Defining the cost of quality
As we look at process and product improvements, quantifying the “quality” costs to the organization is defined as the Cost of Quality (COQ). Why quantify the quality data? The COQ categorizes these costs so the organization can see how moving from a quality assurance (control and correction) focus to a focus on prevention helps to reduce the cost of nonconformances.
The American Society of Quality (ASQ) uses the following formula to calculate the COQ:
Cost of Quality (COQ) = Cost or Poor Quality (COPQ) + Cost of Good Quality (COGQ)
The COPQ contains all the costs of nonconformances that are both internal and external to the organization; whereas, the COGQ contains the cost of quality conformance, including any costs associated with both appraisal and prevention.
Some examples would be:
COPQ – Internal Costs (defects occurring and managed within the organization)
Scrap, Rework, Re-inspection
COPQ – External Costs (defects that reach the consumer)
Adverse Event Reporting, Warranty, Corrections and Removals, Product Liability, loss of brand reputation
COGQ – Appraisal Costs (controls put in place by the organization)
Inspection (purchased, manufactured), Testing (acceptance, field), Quality Audits, Calibration
COGQ – Prevention Costs (activities to eliminate defects from ever occurring)
SPC (statistical process control), Quality Planning, Quality Training, investment in quality-related information systems
What is the cost to your organization?
In the life sciences industry, analysts have stated that less than 50 percent of companies really know what the COQ is for their organization. However, ASQ, Crosby, and FDA Case for Quality show that the COQ for an organization can range from 3 – 25% of a company’s revenue. The good news is that there are known strategies that can be put in place to drive down the COQ which will have a direct positive impact on the profitability of your organization, and it’s all within your control.
Strategies for cost improvements
Every company is at a different point in the evolution of its people, processes and technology implementations, and even its understanding of its key metrics/performance indicators or COQ. Management could consider leveraging the following strategies to reduce their company’s COPQ and positively impact its quality and profitability performance.
Improve supplier relationships for both product and process improvements
Collaborate during design process, engage suppliers in the corrective action process (from incoming, manufacturing or customer-reported problems), develop supplier scorecards, audit suppliers based on their product/process risk levels
Do you agree or disagree with the following statements
a. The demand curve facing a monopolistic competitor in a market where all producers charge different prices becomes less elastic when it engages in international trade
b. According to the gravity equation, countries closer to each other trade more
c. The only gain from trade in monopolistic competition in trade is lower prices
d. The closer to 1 the index of intra industry trade is, the greater the difference between exports and imports of the same goods.
Answer:
a. The demand curve facing a monopolistic competitor in a market where all producers charge different prices becomes less elastic when it engages in international trade - Disagree
This statement is not true. If a monopolistic competitor engages in international trade, it will meet more competition, meaning that the audience (demand) that it has is more sensitive to prices, because they have more options available.
b. According to the gravity equation, countries closer to each other trade more - Agree
The gravity equation tells us that the volume of international trade is correlated with geographical proximity and economic size. That is to say, the closer and larger two economies are, the more international trade they engage with each other.
c. The only gain from trade in monopolistic competition in trade is lower prices - Disagree
Gains are the most important in lower prices, but there are also gains in competitiveness and quality.
d. The closer to 1 the index of intra industry trade is, the greater the difference between exports and imports of the same goods. - Disagree
An index of intra industry trade of 1 indicates that the country imports and exports roughly the same amount for a particular type of goods (the goods that belong to that industry). Hence, the statement is not true.
Consider the following probability distribution of returns for Alpha Corporation:________. Current Stock Price ($) Stock Price in One Year ($) Return R Probability PR $25 $35 40% 25% $25 0% 50% $20 -20% 25% The standard deviation of the return on Alpha Corporation is closest to:_______. a. 22.4% b. 19.0% c. 21.8% d. 19.4%
Answer:
c. 21.8%
Explanation:
Note: B = Year beginning stock, C = Year end stock price, D = Dividend, E = Holding Period return, F= Holding Period return*Probability, G = (Holding Period return - Expected return)^2, H= Probability * (Holding Period return - Expected return)^2
Probability B C D E F G H
25% $25 $35 - 40% 10% 0.12250 0.03063
50% $25 $25 - 0% 0% 0.00250 0.00125
25% $25 $20 - -20% -5% 0.06250 0.01563
Expected return = 5% 4.75%
Holding period return = (Price at year end +dividend -Price at year beginning)/Price at year beginning
Variance = 4.75%
Standard deviation = √(variance)
Standard deviation = √4.75%
Standard deviation = 21.8%
Flexible Budget for Selling and Administrative Expenses for a Service Company. Cloud Productivity Inc. uses flexible budgets that are based on the following data:
Sales commissions 14% of sales
Advertising expense 18% of sales
Miscellaneous administrative expense $7,000 per month plus 12% of sales
Office salaries expense $29,000 per month
Customer support expenses $13,000 per month plus 20% of sales
Research and development expense $30,000 per month
Prepare a flexible selling and administrative expenses budget for March for sales volumes of $400,000, $500,000, and $600,000.
Cloud Productivity Inc.
Flexible Selling and Administrative Expenses Budget
For the Month Ending March 31, 2016
Total sales $400,000 $500,000 $600,000
Variable cost:
Sales commissions
Advertising expense
Miscellaneous administrative expense
Customer support expense
Total variable cost
Fixed cost:
Miscellaneous administrative expense
Office salaries expense
Customer support expense
Research and development expense
Total fixed cost
Total selling and administrative expenses
Answer:
Total selling and administrative expenses budget for March are as follows:
For sales volumes of $400,000 = $327,000
For sales volumes of $500,000 = $389,000
For sales volumes of $600,000 = $451,000
Explanation:
Note: See the attached excel file for the flexible selling and administrative expenses budget for March
A flexible budget can be described as a budget that changes with the level or volume of activity of a company.
In this question, sales volume is used as the level of activity and a flexible selling and administrative expenses budget for March for sales volumes of $400,000, $500,000, and $600,000 is prepared in the attached excel file.
You own a bond that pays $64 in interest annually. The face value is $1,000 and the current market price is $1,062.50. The bond matures in 30 years. What is the yield to maturity? (round your answer to two decimal places)
Answer:
the yield to maturity of this bond is 5.7%
Explanation:
given data
pays interest annually C = $64
face value F = $1,000
current market price P = $1,062.50
bond matures n = 30 years
solution
we get here yield to maturity that is express as
yield to maturity =
yield to maturity = [C+ (F-P) ÷ n] ÷ [(F+P) ÷ 2 ] .................1
put here value and we get
yield to maturity = [tex]\frac{64+(1000-1062.50)}{11}[/tex] ÷ [tex]\frac{(1,000+1,062.50)}{2}[/tex]
yield to maturity = 0.057
so that the yield to maturity of this bond is 5.7%
On June 1, 2018, Marigold Company and Swifty Company merged to form Nash Inc. A total of 769,000 shares were issued to complete the merger. The new corporation reports on a calendar-year basis. On April 1, 2020, the company issued an additional 599,000 shares of stock for cash. All 1,368,000 shares were outstanding on December 31, 2020. Nash Inc. also issued $600,000 of 20-year, 8% convertible bonds at par on July 1, 2020. Each $1,000 bond converts to 36 shares of common at any interest date. None of the bonds have been converted to date. Nash Inc. is preparing its annual report for the fiscal year ending December 31, 2020. The annual report will show earnings per share figures based upon a reported after-tax net income of $1,688,000. (The tax rate is 20%.)
Determine the following for 2020:
a. Basic earnings per share.
b. Diluted earnings per share.
c. The earnings figures to be used for calculating:
d. Basic earnings per share.
e. Diluted earnings per share.
Answer:
a. Basic earnings per share.
weighted average outstanding:
January 1 = 769,000 stocks
April 1 = 599,000 x 9/12 = 449,250 stocks
total weighted average outstanding stocks = 1,218,250 stocks
basic earnings per share = $1,688,000 / 1,218,250 = $1.3856 ≈ $1.39
b. Diluted earnings per share.
diluted shares = ($600,000 / $1,000) x 36 stocks x 1/2 = 10,800
diluted earnings per share = $1,707,200 / (1,218,250 + 10,800) = $1,707,200 / 1,229,050 = $1.389 ≈ $1.39
c. The earnings figures to be used for calculating:
Basic earnings per share
= net income = $1,688,000
Diluted earnings per share
= net income + interests saved - taxes on interests saved = $1,688,000 + $24,000 - $4,800 = $1,707,200
In 2010, real GDP was $13.2 trillion and nominal GDP was $14.6 trillion. What was the GDP deflator for that year?a. 9.6% lower b. 9.6% higher c. 10.6% lower . d. 10.6% higher
Answer:
d. 10.6% higher
Explanation:
Given that;
Real GDP = $13.2 trillion
Nominal GDP = $14.6 trillion
GDP deflator = (Nominal GDP/Real GDP)× 100)
Hence,
GDP deflator = (14.6 / 13.2 ) × 100
GDP deflator = 110.6%
Thus,
= 110.6 - 100
= 10.6% higher
Which of the following summarizes the AIDA steps in the persuasive process? A. Get attention, insinuate action, create desire, initiate acceptance B. Get acceptance, invite questions, designate action, encourage attention C. Get attention, arouse interest, create desire, encourage action D. Get attention, initiate action, discuss benefits, create acceptance
Answer:
C. Get attention, arouse interest, create desire, encourage action
Explanation:
Remember, AIDA which stands for Awareness, Interest, Desire, Action refers to a step process that explains the main thought process an individual passes through before they finally decide to buy a product or service.
The persuasive process begins:
First with getting attention or awareness for the product or service. Next, arouse interest in the minds of potential customers, this, in turn, creates desire, which leads to the final step; encourage action to buy the product or service.
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