2. I utilized an “Acid Test Ratio” which shows us whether the entity could pay all its current liabilities if they became due now or sooner than expected. In 2011, the acid test ratio was 0.64. By 2012, it decreased to 0.43. Even though the acid-test ratio is less than 1 which rates in the lower third quartile in the industry of 1.6, 0.9 to 0.6, it indicates a concern with repaying current liabilities.
b. The incremental revenue associated with a price reduction of $0.40 is $100,000 as follows: Original Revenue (325,000 × $5.00) | $1,625,000 | Revenue with price change (375,000 × $4.60) | 1,725,000 | Incremental revenue associated with price change | $ 100,000 | c. Yes, the price should be lowered since the incremental cost of this action ($64,000 in part a) is less than the incremental revenue ($100,000 in part b). P4. [LO 3]. a.
c. What would their taxable income be if they had $0 itemized deductions and $6,000 of for AGI deductions? d. Assume the original facts except that they also incurred a loss of $5,000 on the sale of some of their investment assets. What effect does the $5,000 loss have on their taxable income? e. Assume the original facts except that the Jacksons owned investments that appreciated by $10,000 during the year. The Jacksons believe the investments will continue to appreciate, so they did not sell the investments during this year.
What is the expected dividend yield and expected capital gains yield? Explain the difference in the required return estimates from the ValueLine (see question 1a) to the WSJ price data. The company’s return on common stock using the constant growth model is 7.72%. The expected dividend yield is [pic]. The expected capital gains yield is the difference of the total yield, 7.72%, and the dividend yield of 2.22%, which give us 5.5% for the
Monopoly output: MR=400-4q MC=40 MR=MC 400 – 4q = 40 then q=90 unit The reason that producing on half the monopoly output (90*1.5 = 135) a Nash equilibrium outcome is that it will exceed the market demand of Nash equilibrium ($160). 4. Problem #8, p. 221-222 in text. (HINT: First calculate the profits of a market with two firms, and then continue this process for 3, 4, and 5 firms.) a.
“Another negative factor was a 6.6 percent drop, on an annualized basis, in federal defense spending.” She supports that the decrease in GDP is directly related to the decrease in government spending g which proves how fiscal policy can affect overall economic growth. Monetary policy can be defined as: A central banks changing of the money supply to influence interest rates and assist the economy in achieving price stability, full employment, and economic growth. The article discusses how decline in economic growth can in part be due to uncertainty of interest rates which is directly controlled by the Federal Reserve. The author supports this idea by showing that uncertainty of interest rates has affected business investments and the slowing of the housing
Cash flow per share= $3.00 Price /cash flow ratio= 8.0 8.0 x 3.00 = $24.00 $24.00 / $1.50 = 16 (P/E) 3-5 ROE $100millions (sales) x 3% (profit margin) = $30 million (Net income) Net Income/assets= ROE $30 millions/$50 millions (total assets) = 6% 6% x 2.0 (equity multiplier) = 12% (ROE) 3-6 Du Pont Analysis ROA=10% Profit margin= 2% ROE= 15% ROA x Equity Multiplier= ROE (Profit Margin) (Total asset turnover)= ROA 10/2=5 (this is the firm’s total asset turnover) 15/10=1.5 (this is the firm’s equity multiplier) 3-7 Current and Quick Ratios Current assets= $3 million Current ratio= 1.5 Quick ratio= 1.0 Current assets/ Current liability= current ratio $3million/1.5= $2 million (level of current liability) Current Assets - Current Liability= Inventory $3millions – $2 millions = $1 million (level of
That means 40 is 1.2195 standard deviations above the mean. Having converted 40 to a z-score you find the area to the right of 1.2195 under the standard curve. After that we have to use a Z table or a TI 84 calculator and we find : 0.1113. b. What is the probability a company will have a stock price no higher than $20? Here we are finding the area to the left of -1.2295.
Texaco stock is currently selling for $60 per share while Delta sells for $40 per share. You determine that the major factor that will impact your investment is the price of oil. After careful forecasting, you narrow the possible outcomes down to 3 major categories, each of which is equally likely to occur. Possibility Oil price increases Oil price unchanged Oil price decreases Texaco Stock pays a $4 per share dividend; stock price is $68 pays a $3 per share dividend; stock price is $60 pays a $2 per share dividend; stock price is $52 Delta Air Lines Stock pays no dividend; stock price is $32 pays a $2 per share dividend; stock price is $42 pays a $2 per share dividend; stock price is
5. What would be the impact on the brothers’ returns if the rate of interest charged by the broker increases to 10 percent? If the rate of interest charged is increased by 10 percent it would only impact Victor since he