Answer: 1.37
Explanation:
The basic earnings per share" if after-tax earnings are $780,000 would be calculated as the after tax earning divided by the outstanding shares. This will be:
= $780000 / $570000
= 1.3684211
= 1.37
he Boxwood Company sells blankets for $37 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1. Date Blankets Units Cost May 3 Purchase 10 $15 10 Sale 4 17 Purchase 15 $17 20 Sale 5 23 Sale 3 30 Purchase 11 $24 Assuming that the company uses the perpetual inventory system, determine the cost of goods sold for the sale of May 20 using the LIFO inventory cost method.
Answer:
The correct answer is $85
Explanation:
According to the given scenario, the calculation of the cost of the goods sold using the LIFO method is as follows:
= Sale units as on May 20 × price per unit
= 5 units × $17
= $85
Basically we multiplied the sales units with the price per unit so that the cost of goods sold could come
Hence, the cost of the goods sold using the LIFO method is $85
The Jordan Company is considering purchasing a new machine which will have fixed costs of $100,000 per year. The operating cash flow at a production level of 10,000 units is $400,000. If units sold increase from 10,000 to 15,000 units, what will the operating cash flow be at the 15,000 unit level
Answer:
$650,000
Explanation:
Operating cash flow = Total sales - Total variable cost - Fixed cost
Operating cash flow = Contribution - Fixed cost
Contribution = Total sales - Total variable cost. Let x be the contribution per unit
For 10,000 units
400,000 = 10,000x - 100,000
x = 500,000/10,000
x = 50
Contribution per unit = $50
Fore 15,000 units
Operating cash flow = 15,000(x) - 100,000
Operating cash flow = 15,000(50) - 100,000
Operating cash flow = 750,000 - 100,000
Operating cash flow = $650,000
Mayer Company leased equipment from Lennon Company on July 1, 2010, for an eight-year period expiring June 30, 2018. Equal annual payments under the lease are $300,000 and are due on July 1 of each year. The first payment was made on July 1, 2010. The rate of interest contemplated by Mayer and Lennon is 8%. The cash selling price of the equipment is $1,861,875 and the cost of the equipment on Lennon's accounting records was $1,650,000. Assuming that the lease is appropriately recorded as a sale for accounting purposes by Lennon, what is the amount of profit on the sale and the interest income that Lennon would record for the year ended December 31, 2010
Answer:
c) $211,875 and $62,475
Explanation:
Options are "a)$0 and $0, b)$0 and $62,475, c) $211,875 and $62,475, d) $211,875 and $74,475"
Cash Selling Price $1,861,875
Less: Cost of the equipment $1,650,000
Profit on sale $211,875
Opening Lease Receivable Balance $1,861,875
Less: First installment received $300,000
Lease Receivable Balance for $1,561,875
interest computation
Interest expense up to Dec 31, 2010 = (1561875*8%*6/12) = $62,475
On January 1, 2019, Woodstock, Inc. purchased a machine costing $30,900. Woodstock also paid $1,700 for transportation and installation. The expected useful life of the machine is 5 years and the residual value is $4,600. How much is the annual depreciation expense, assuming use of the straight-line depreciation method
Answer:
Annual depreciation= $5,600
Explanation:
Giving the following information:
Total Purchase price= 30,900 + 1,700= $32,600
Useful life= 5 years
Residual value= $4,600
To calculate the depreciation expense under the straight-line method, we need to use the following formula:
Annual depreciation= (Total Purchase price - salvage value)/estimated life (years)
Annual depreciation= (32,600 - 4,600) / 5
Annual depreciation= $5,600
preparing a budget is an example of which of the following types of managment skills?.
A. advertising skills
B. human resource skills
C. technical skills
D. conceptual skills.
the correct answer is c. technical skills
Preparing a budget is an example of technical skills under several management skills.
What is budget?A budget is a financial plan that projects future earnings and costs. A budget, put simply, forecasts future spending and saving in addition to anticipated income and expenses.
However Budgeting is the act of estimating a company's income and expenses for a given time period. Examples include the sales budget created to project the company's sales and the production budget created to predict the company's output, among others.
There are four sorts of budgets that businesses typically employ: incremental, activity-based, value-based, and zero-based are the first four.
Therefore, One of the most crucial competencies for someone working in business management is budgeting. The fundamentals of budgeting involve setting goals and making choices on particular spending patterns. Understanding the fundamentals of business is the most crucial component of finance.
Learn more about budget:
https://brainly.com/question/15683430
#SPJ2
On January 1, 2018, Crane Corporation issued $5400000, 10-year, 9% bonds at 102. Interest is payable annually on January 1. The journal entry to record this transaction on January 1, 2018 is
Answer and Explanation:
The journal entry is as follows;
Cash ($5,400,000 × 102%) $5,508,000
To Bonds Payable $5,400,000
To Premium on Bonds Payable $108,000
(Being issuance of the bond payable is recorded)
Here the cash is debited as it increased the assets and credited the bond payable and premium on bond payable as it increased the liabilities
If the minimum attractive rate of return is 7%, which alternative should be chosen assuming identical replacement (like kind exchange)
A B
First Cost $5000 $9200
Uniform Annual Benefit $1750 $1850
Useful life ,in years 4 8
Answer:
The alternative that should be chosen assuming identical replacement is:
Alternative B.
Explanation:
a) Data and Calculations:
Alternatives:
A B
First Cost $5,000 $9,200
Uniform Annual Benefit $1,750 $1,850
Useful life, in years 4 8
Rate of return 7% 7%
Annuity factor 3.387 5.971
Present value of annuity $5,927.25 $11,046.35
Net cash flow $927.25 $1,846.35
b) Alternative B yields a higher return than Alternative A. Since the two alternatives are based on the same rate of return, Alternative B will bring in a higher annual benefit, even when discounted to the present value.
python for data Science and al
Answer:
This is line 1
Explanation:
The function would read the first line of the file. To read all the lines, you need to make a for loop and then print every line in the file.
Hope this helps!
_____ comprises a range of practices concerned with increasing awareness, fostering learning, speeding collaboration and innovation, and exchanging insights of individuals, teams, or entire organizations.
a. Knowledge management
b. Sales management
c. Resource management
d. Disaster management
Answer:
A. Knowledge management.
Explanation:
This is said to be an organisational approach that explains, retain and structure the dispatch of knowledge amongst employees within an organisational setting. This approach is seen to posses different goals but primarily it is seen to maintain a reasonable amount of knowledge within the said organisation and also improvement in efficiency of the said workers ranging from the top management to the least in the core organisational settings. It is mostly seen to consist of varieties of initiatives, strategies and value creation through this process when been carried out judiciously.
Assuming that money is worth 10%, compute the present value of:
a. $15,000 received 15 years from today.
b. The right to inherit $4,250,000 14 years from now.
c. The right to receive $11,000 at the end of each of the next six years.
d. The obligation to pay $10,000 at the end of each of the next 10 years.
e. The right to receive $9,000 at the end of the 7th, 8th, 9th, and 10th years from today.
Answer:
a. ($3,590)
b. ($1,119,158)
c. ($47,908)
d. ($61,446)
e. $17,714
Explanation:
We use the Time Value of Money to compute the Present Value. Present Value is the Worth in Today`s Money of the Cash Flow Streams expected or to be received in the future.
Calculation of the Present Value for each case is shown below :
a.
FV = $15,000
N = 15
P/YR = 1
PMT = $0
I = 10 %
PV = ?
Using a Financial Calculator to Inpute the Values as above, the Present Value will be ($3,590)
b.
FV = $4,250,000
N = 14
P/YR = 1
PMT = $0
I = 10 %
PV = ?
Using a Financial Calculator to Inpute the Values as above, the Present Value will be ($1,119,158)
c.
FV = $ 0
N = 6
P/YR = 1
PMT = $11,000
I = 10 %
PV = ?
Using a Financial Calculator to Inpute the Values as above, the Present Value will be ($47,908)
d.
FV = $ 0
N = 10
P/YR = 1
PMT = - $10,000
I = 10 %
PV = ?
Using a Financial Calculator to Inpute the Values as above, the Present Value will be ($61,446)
e.
$ 0 CFj
$ 0 CFj
$ 0 CFj
$ 0 CFj
$ 0 CFj
$ 0 CFj
$9,000 CFj
$9,000 CFj
$9,000 CFj
$9,000 CFj
Shift NPV $17,714
This part of the question has uneven Cash Flows, so i used the CFj Function on the Financial to calculate the Net Present Value (NPV)
On December 30, 2018, Varsity Corporation sold available for sale marketable securities costing $800,000 for $860,000 cash. The securities were purchased on January 2, 2016 and the market value of the securities on December 31, 2016 and December 31, 2017 was $820,000 and $780,000, respectively. How much gain or loss will Varsity report in its income statement for the year ending December 31, 2018
Answer:
The gain reported is $60,000
Explanation:
The computation of the gain or loss reported is as follows;
Book value as on December 31 2017 $780,000
Add: balance of unrealized loss ($40,000 loss - $20,000 gain) $20,000
Total $800,000
Gain (sale value - total) ($860,000 - $800,000) $60,000
hence, the gain reported is $60,000
A self-insurance activity that is accounted for in an Internal Service Fund pays $365,000 in claims during the year. Because the Internal Service Fund is a proprietary fund, the claims will be reported on the statement of revenues, expenses, and change in net assets as A. An operating expense. B. As a contra-revenue to premiums charged. C. A non-operating expense. D. Another financing use. E. None of these answers is correct.
Answer:
A. An operating expense.
Explanation:
Since in the question it is mentioned that the self insurance activity i.e. accounted for an internal service fund that paid the amount of $365,000. Also as we know that the internal service fund is a proprietary fund so the claim should be reported as an operating expenses in the revenues, expenses and change in net asset statement
Therefore the correct option is a.
Global Exporters wants to raise $29.6 million to expand its business. To accomplish this, it plans to sell 20-year, $1,000 face value, zero coupon bonds. The bonds will be priced to yield 7.75 percent. What is the minimum number of bonds it must sell to raise the money it needs
Answer:
135,436 bonds
Explanation:
Calculation for the minimum number of bonds it must sell to raise the money it needs
First step is to calculate the Bond price
Bond price = $1,000 / [1 + (.0775 / 2)](20 × 2)
Bond price = $218.554
Second step is to calculate the Number of bonds
Number of bonds = $29,600,000 / $218.544
Number of bonds= 135,436 bonds
Therefore the minimum number of bonds it must sell to raise the money it needs will be 135,436 bonds
give the meaning of office machine
Answer: Equipment
Explanation:The equipment used in an office; for example: phones, computers, and printers. ... These markets cover computers and other machines for workplaces.
Hope this helps! Brainlist?
Answer:
What are office machines? The Cambridge Dictionary defines office machinery as the equipment used in an office for example: phones, computers, and printers These markets cover computers and other machines for workplaces.
Explanation:
Suppose you are holding a long position in a French franc futures contract that matures in 76 days. The agreed upon price is $0.15 for FF 250,000. At the close of trading today, the futures price has risen to $0.155. Under marking to market, you now a. hold a futures contract that has risen in value by $1,250 b. hold a futures contract that has fallen in value by $625 c. will receive $1,250 and a new futures contract priced at $0.155 d. must pay over $1,250 to the seller of the futures contract
Answer: c. will receive $1,250 and a new futures contract priced at $0.155.
Explanation:
Based on the information given in the question, Under marking to market, since we've been informed that the future price has increased from $0.150 to $0.155, then a profit of $125 will be made.
= $0.005 x 250,000
= $1,250,
Since the futures price has risen to $0.155, under marking to market, you now will receive $1,250 and a new futures contract priced at $0.155
Q1. Big Money Monster is a business school. The school bases its budgets on two measures of activity: number of students and number of courses. The school uses the following data in its budgeting: Fixed cost per month Variable cost per student Variable cost per course Faculty wages $4,000 $0 $20 Course supplies $1,000 $10 $50 Administrative expenses $2,000 $20 $30 In July, the school budgeted for 300 students and 15 courses. Actual results for the month appear below: Number of Students 280 Number of Courses 18 Faculty wages $4,200 Course supplies $4,800 Administrative expenses $8,300 What is the spending variance for course supplies (choose the closest answer)
Answer:
Big Money Monster
The spending variance for course supplies is:
$50 Unfavorable.
Explanation:
a) Data and Calculations:
Fixed cost Variable cost Variable cost Total
per month per student per course
Faculty wages $4,000 $0 $20
Course supplies $1,000 $10 $50
Administrative expenses $2,000 $20 $30
Budgeted number of students = 300
Budgeted number of courses = 15
Actual number of students = 280
Actual number of courses = 18
Actual Faculty wages = $4,200
Actual Course supplies = $4,800
Budgeted Costs:
Fixed cost Variable cost Variable cost Total
per month per student per course
Faculty wages $4,000 $0 $20 $4,300
Course supplies $1,000 $10 $50 4,750
Administrative expenses $2,000 $20 $30 8,450
Budgeted costs:
Faculty wages = $4,000 + $0 + $20 * 15 = $4,300
Course supplies = $1,000 + $10 * 300 + $50 * 15 = $4,750
Administrative expenses = $2,000 + $20 * 300 + $30 * 15 = $8,450
Budgeted Cost of Course Supplies = $4,750
Actual Cost of Course Supplies = 4,800
Spending variance for Course Supplies = 50 Unfavorable
Accounts receivable arising from sales to customers amounted to $84,000 and $74,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $320,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is
Answer:
$330,000
Explanation:
Change in WC = Opening receivables - Closing receivables
Change in WC = $84,000 - $74,000
Change in WC = $10,000
The decrease in working capital is $10,000
Cash from operating activities = Net income + Decrease in Working Capital
Cash from operating activities = $320,000 + $10,000
Cash from operating activities = $330,000
Thus, the cash from operating activities is $330,000
jefferson recently paid an annual dividend of $2 per share. the dividend is expecte to decrease by 1% each year. how much should you pay for this stock today if your required
Answer: $11.65
Explanation:
You did not include the required return so I will assume a required return of 16% and you can use that as reference.
Using the Gordon Growth model, the intrinsic value is;
= Next dividend / ( required return - growth rate)
Growth rate = -1%
Next dividend = 2 * ( 1 + growth)
= 2 * (1 - 1%)
= $1.98
Value of stock = 1.98 / (16% + 1%)
= $11.65
Lily Products Company is considering an investment in one of two new product lines. The investment required for either product line is $540,000. The net cash flows associated with each product are as follows: Year Liquid Soap Body Lotion 1 $170,000 $ 90,000 2 150,000 90,000 3 120,000 90,000 4 100,000 90,000 5 70,000 90,000 6 40,000 90,000 7 40,000 90,000 8 30,000 90,000 Total $720,000 $720,000 a. Recommend a product offering to Lily Products Company, based on the cash payback period for each product line.
Answer and Explanation:
The computation of the payback period for each product line is as follows
(in dollars)
Year Liquid Soap Cumulative Body lotion Cumulative
1 170,000 170,000 90,000 90,000
2 150,000 320,000 90,000 180,000
3 120,000 440,000 90,000 270,000
4 100,000 540,000 90,000 360,000
5 70,000 610,000 90,000 450,000
6 40,000 650,000 90,000 540,000
7 40,000 690,000 90,000 630,000
8 30,000 720,000 90,000 720,000
So, the Payback period for Liquid soap is 4 years and Payback Period for Body Lotion is 6 Years respectively
Therefore we suggest liquid soap as it contains better paypack period as compared with the body lotion
In January 2021 Boxer Corporation purchased a patent at a cost of $219,000. Legal and filing fees of $59,000 were paid to acquire the patent. The company estimated a 10-year useful life for the patent and uses the straight-line amortization method for all intangible assets. In January 2024, Boxer spent $40,000 in legal fees for an unsuccessful defense of the patent and the patent is no longer usable. The amount charged to income (expense and loss) in 2024 related to the patent should be: Multiple Choice $234,600. $ 67,800. $219,000. $ 40,000.
Answer:
$234,600
Explanation:
The computation of the amount charged is shown below;
Cost of patent os
= $219,000 + $59,000
= $278,000
Now
Amortization for 3 years i.e from 2021 to 2024
= ($278,000 ÷ 10) × 3
= $83,400
Now
Net cost of patent is
= $278,000 - $83,400
= $194,600
And, finally
Amount charged to income is
= $194,600 + $40,000
= $234,600
Soar Incorporated is considering eliminating its mountain bike division, which reported an operating loss for the recent year of $3,000. The division sales for the year were $1,047,000 and the variable costs were $860,000. The fixed costs of the division were $190,000. If the mountain bike division is dropped, 30% of the fixed costs allocated to that division could be eliminated. The impact on operating income for eliminating this business segment would be:
Answer:
$130,000 decrease
Explanation:
Multiple Choice $57,000 decrease $130,000 decrease $54,000 decrease $187,000 increase $187,000 decrease
Calculation of Financial advantage / Disadvantage
Decrease in contribution margin $187,000
(1,047,000-860,000)
Decrease in fixed expenses $57,000
(190000*30%)
Decrease in Net Operating Income $130,000 (Financial disadvantage)
Beginning balance of capital Rs. 40,000 and liabilities Rs. 10,000. Accounting equation
Answer:
Assets = Rs. 50,000
Explanation:
The accounting equation is expressed as below.
Assets= Liabilities + Owner’s Equity
If capital is Rs, 40,000 and liabilities, RS. 10,000, then assets will be
Assets = Rs. 40,000 + Rs, 10,000
Assets = Rs. 50,000
Ivanhoe Industries collected $104,000 from customers in 2020. Of the amount collected, $24,800 was for services performed in 2019. In addition, Ivanhoe performed services worth $41,600 in 2020, which will not be collected until 2021. Ivanhoe Industries also paid $72,200 for expenses in 2020. Of the amount paid, $30,200 was for expenses incurred on account in 2019. In addition, Ivanhoe incurred $40,800 of expenses in 2020, which will not be paid until 2021.
Answer:
Accrual-basis net income in 2020 = $38,000
Explanation:
Note: This question is not complete as its requirement is omitted. The complete question is therefore provided before answering the question as follows:
Ivanhoe Industries collected $104,000 from customers in 2020. Of the amount collected, $24,800 was for services performed in 2019. In addition, Ivanhoe performed services worth $41,600 in 2020, which will not be collected until 2021. Ivanhoe Industries also paid $72,200 for expenses in 2020. Of the amount paid, $30,200 was for expenses incurred on account in 2019. In addition, Ivanhoe incurred $40,800 of expenses in 2020, which will not be paid until 2021. Compute 2020 accrual-basis net income.
The explanation of the answer is now provided as follows:
In accounting, accrual basis states that revenues should be recorded when they are earned and expenses should be recorded when they are incurred.
Based on this, the 2020 accrual-basis net income of Ivanhoe Industries can be computed as follows:
Total revenue in 2020 = (Amount collected in 2020 - Amount for Services performed in 2019) + Worth of services performed in 2020 but to be collected in 2021 = ($104,000 - $24,800) + $41,600 = $120,800
Total expenses in 2020 = (Amount paid for expenses in 2020 - Amount of expenses incurred in 2019) + (Amount of expenses incurred in 2020 but to be paid in 2021) = ($72,200 - $30,200) + $40,800 = $82,800
Accrual-basis net income in 2020 = Total revenue in 2020 - Total expenses in 2020 = $120,800 - $82,800 = $38,000
The cost slope of an activity $ 250/day. The normal duration of this activity is 15 days, the crash cost is $1,500 and the maximum crashing possible for the activity is 10 days beyond the normal duration. What is the normal cost of this activity
Answer: $1000
Explanation:
To calculate the normal cost of this activity, we will use the formula:
Cash slope = (Crash cost - Normal cost) / (Normal duration - Crash duration)
250 = (1500 - Normal cost) / (15 - 5)
250 = (1500 - Normal cost) / 10
Cross multiply
(250 × 10) = 1500 - Normal cost
2500 = 1500 - Normal cost
Normal cost = 2500 - 1500
Normal cost = $1000
Total assets $800,000 $1,000,000Net sales 720,000 650,000Gross profit 352,000 320,000Net income 108,000 117,000Weighted average number of common shares outstanding 90,000 90,000Market price of common $42 $39The return on assets for 2022 is
Answer:
$5000
Explanation:
Consider the exchange rate between Lebanon and Canada. Typically, exchange rates vary over time, sometimes quite dramatically. The scenarios present various changes that may affect the exchange rate. Identify whether each scenario will tend to cause an appreciation, depreciation, or have no effect on the exchange rate of Lebanese pounds relative to Canadian dollars. The magazine The Economist publishes an article indicating that analysts expect the value of Canadian dollars to rise relative to Lebanese pounds. The central bank in Lebanon announces that it is going to raise interest rates on government bonds. Based on a World Bank report, the inflation rate in Lebanon is going to be 5% next year, whereas the inflation rate in Canada is going to be 9.5% . The price of a specific basket of goods in Lebanon is roughly 1.3 times higher than the price of an identical basket of goods in Canada even after adjusting for the exchange rate.
Answer and Explanation:
1. The magazine The Economist publishes an article indicating that analysts expect the value of Canadian dollars to rise relative to Lebanese pounds: if the expectation from analysts is that the value of Canadian dollars will rise relative to Lebanese pounds then the demand for Canadiam dollars will increase therefore increasing the value/appreciate relative to Lebanese pounds.
2. The central bank in Lebanon announces that it is going to raise interest rates on government bonds: This will bring about appreciation in Lebanese pounds relative to Canadian dollars since increase in interest rate in bonds increases investment in government bonds in Lebanese pounds.
3. Based on a World Bank report, the inflation rate in Lebanon is going to be 5% next year, whereas the inflation rate in Canada is going to be 9.5%: A high inflation rate is a negative for the economy. Since inflation rate increases for both economies, there is likely to be a counter effect hence no effect on exchange rates.
4. The price of a specific basket of goods in Lebanon is roughly 1.3 times higher than the price of an identical basket of goods in Canada even after adjusting for the exchange rate: if this basket of goods is used in calculation of consumer price index(CPI) which is representative of the rate of inflation in the economy, then Lebanese pounds will depreciate relative to Canadian dollars since inflation rate has increased relative to the Canadian economy.
Bob is angry at his company XYZ Corp. since his annual bonus was too small. Bob who has authority to sign checks on behalf of XYZ decides to get even by creating an employee, Steven Even. Bob writes a check to Steven on XYZ's checking account, signs it and then he indorses it with Steven's name and deposits it an account he has opened in Steven Even's name and the check clears. XYZ finds out and wants to hold the bank liable for paying the check since there was a forged indorsement. Which of the following is true?
1. The bank needs to pay because of the imposter rule.
2. The bank only needs to pay if the check was for more than $500.
3. The bank needs to pay because when there is a forged indorsement, the first person
to take the instrument with the forged indorsement is liable.
4. The bank does not need to pay because of the fictitious payee rule.
Answer: The bank does not need to pay because of the fictitious payee rule
Explanation:
The fictitious payee rule states that in a scenario whereby a person or a bank collects a negotiable instrument like a check and then pays the check to the fictitious person, the drawer of the check is responsible and the loss doesn't fall on the third party who accepted the instrument or in this case, the bank that cashed the check.
Therefore, based on the explanation above, the option that is true is that "the bank does not need to pay because of the fictitious payee rule".
Carla Vista Company purchased equipment that cost $3980000 on January 1, 2020. The entire cost was recorded as an expense. The equipment had a 9-year life and a $122000 residual value. Carla Vista uses the straight-line method to account for depreciation expense. The error was discovered on December 10, 2022. Carla Vista is subject to a 40% tax rate. Before the correction was made and before the books were closed on December 31, 2022, retained earnings was understated by
Answer:
$1,800,402
Explanation:
Cost = $3,980,000
Lifespan = 9 yrs
Residual Value = $122,000
Depreciation per year = (Cost - Residual Value)/life
Depreciation per year = (3,980,000 - 122,000)/9
Depreciation per year = 3,858,000 / 9
Depreciation per year = $428,667
So, Tax saved = 40% of $428,667 = $171,467
Depreciation per year not considered = 3 yrs * $428,667 = (+)$1,286,001
Tax saved due to Depreciation = 3 yrs * $171,467 = (+)$514,401
So, retained earnings was understated by $1,286,001 + $514,401 = $1,800,402
Consider the AD/AS framework seen in lectures. Say that, given the recent data on jobs added to the economy, firms feel confident that the economy will improve, and as a result investment in the economy increases. Compared to the initial equilibrium, in the long run equilibrium Prices fall, the nominal interest rate rises. None of the other answers. Prices rise, the nominal interest rate falls. Prices and the nominal interest rate fall. Prices and the nominal interest rate rise.
Answer:
Price fall , the nominal interest rate rises.
Explanation:
Since in the short run, the effect of these investment is that price level increase and nominal interest fall due to increase in the money supply and there is a increase in the real output but when the economy self correct in long run, the price level will fall and nominal interest rate rises to its original equilibrium level.
As a result of the investment in the country increasing, the result will be Prices fall, the nominal interest rate rises.
Why would this be the result?As a result of there being more investment, there will be more production of goods and services. This increase in supply of goods will lead to a fall in price.
The increase in investment will also mean that more loans are being taken by people which will increase the interest rate because loans are being demanded more.
Find out more on increases in interest rate at https://brainly.com/question/26521559.
Suppose Goodyear Tire and Rubber Company is considering divesting one of its manufacturing plants. The plant is expected to generate free cash flows of $1.5 million per year, growing at a rate of 2.5% per year. Goodyear has an equity cost of capital of 8.5%, a debt cost of capital of 7%, a marginal corporate tax rate of 35%, and a debt-equity ratio of 2.6. If the plant has average risk and Goodyear plans to maintain a constant debt-equity ratio, what after-tax amount must it receive for the plant for the divestiture to be profitable
Answer:
$47.77 million
Explanation:
We can calculate levered value of the plant using Weighted Average Cost of Capital
rWACC = E/E+D*rE + D/E+D*rd(1-rc)
Equity cost of capital (rE) = 8.5%, Debt cost of capital (rc) = 7%, Marginal corporate tax rate (tc) = 35%, Debt equity ratio = 2.6
Goodyear's WACC = 1/1+2.6*8.5% + 2.6/1+2.6 * 7% *(1-35%)
= 0.0236 + 0.0328
= 0.0564
= 5.64%
The free cash flow of $1.5 million growing at a rate of 25% per year for the plant can be valued as a growing perpetuity.
Divestiture(Vl) calculation is as follows
Vl = Cash flow / rWACC - G
Vl = 1.5 million / 5.64% - 2.5%
Vl = 1.5 million / 3.14%
Vl = $47.77 million
So, Goodyear Tire and Rubber Company must receive $47.77 million for the divestiture to be profitable.