The allocation of overhead and the management of interest costs are the two crucial accounting concerns pertaining to self-constructed assets.
The distribution of indirect expenses to manufactured commodities is known as overhead allocation. The regulations of several accounting frameworks mandate it. The overhead allocation method may be significant in many firms where the quantity of overhead to be allocated is significantly more than the direct cost of goods.
Examples include office utilities and rent, administrative pay, marketing expenses, general liability insurance, and many more. G&A helps you take on and bill work; yet, despite variations in your job development and labor, they are, in one sense, rather consistent.
Typically, interest costs are added to the profit and loss statement. However, such interest expenditure (borrowing cost) should be capitalized to cost of the underlying asset if specific conditions stated for capitalization as per AS 16 Borrowing Costs are met.
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twin-cities, inc., purchased a building for $600,000. straight-line depreciation was used for each of the first two years using the following assumptions: 25-year estimated useful life, with a residual value of $100,000. a. calculate the annual depreciation for the first two years that twin-cities owned the building. b. calculate the book value of the building at the end of the second year.
For $120,000 cash, Bridge City Consulting purchased a building as well as the land it is situated on. An estimated 70% of the purchase price will go toward the land.
Before it was suitable for usage, the facility required $10,000 in renovations from the corporation. $120,000 is the total cost of the land and the building.
Land Cost (70%) = $84,000
Building Cost (30%) = $36,000
Renovations to the building will cost $10,000.
Building Cost = $36,000 Plus $10,000.
$46,000 is the building's total cost.
1. Annual Depreciation (Year End Depreciation) = (Building Cost - Residual Value)/Number of Years Annual Depreciation = $46,000 - $16,000 / 10 Annual Depreciation = $30,000 / 10 Annual Depreciation = $3,000
2. At the end of two years, the land's book value is $84,000.
At the end of two years, the building's book value will be $46,000 - ($3,000) 2year) = $46,000 - $6,000 = $40,000
So, at the end of two years, the Book Value of the Land and Building is = $84,000 + $40,000 = $124,000.
The cost of annual depreciation is land.
Estimated usable life for [equipment cost-residual value]
Depreciation costs each year
(20,500−2,500)÷4=4,500
Depreciation accumulated after two years I
4,500×2=9,000
After two years, the book value is
20,500−9,000=11,500
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if an unforeseeable event occurs which makes it unreasonably difficult or expensive for one party to perform the contract, the contract might be discharged on the grounds of:
If an unexpected occurrence occurred after the contract was signed that made performance unreasonably onerous or expensive, impracticability may apply. The event must not be something that the parties could have controlled and that they could not have reasonably expected occurring.
What is an example of terminating a contract when performance is impossible?A contract could specify a number of acts or delivery together with the associated payment. There is no entire performance; only partial completion may be provided or performed. In accordance with contract law, impossibility is a defense that a seller may raise when an unforeseeable circumstance arises after the contract is signed and renders performance impossible. When the responsibilities of the contract between the contract's parties are fulfilled, the contract is discharged. This also renders the contract's legal validity null and void. The contract is sometimes referred to as being discharged or being terminated.
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market power a. is the capability to increase price without losing all sales. b. exists whenever the firm faces a downward-sloping demand curve. c. is greater the less elastic is demand. d. is smaller the more positive is the cross-price elasticity of demand with respect to rival goods. e. all of the above.
E) Market power encompasses all of the aforementioned.
How does market power work?Market power is the ability of a company to influence supply, demand, or both in order to change the price of a product in the marketplace. A company with significant market power has the power to control its profit margin by manipulating the market price.
It may also be able to raise barriers for potential new entrants into the market. Because they can set or change the retail price of an item without giving up market share, companies with market power are frequently referred to as "price makers." Pricing power is another name for market power.
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An entrepreneur wants to start a new business. her most important priorities are having full control over her company and keeping all the profits for herself. which type of business would best suit her needs?
An entrepreneur wants to start a new business. her most important priorities are having full control over her company and keeping all the profits for herself. Sole proprietorship type of business would best suit her needs.
A sole proprietorship, often known as a business owner or a sole ownership, is an independent business with just one owner who is responsible for paying personal tax on the company's profits. Due to the lack of need for a distinct business or trade name, many lone owners conduct their operations under their own names.
Due to the absence of governmental regulation, a sole proprietorship is the most straightforward kind of business to start or terminate. As a result, consultants, single proprietors, and other freelancers frequently operate these kinds of enterprises. The majority of company begin as sole proprietorships and either continue in that format or grow and convert to a corporation or limited liability structure.
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widgets, inc., plans to produce 8,000 widgets during the upcoming year. each widget requires four direct labor hours at $25 per hour and $110 in direct material costs. manufacturing overhead is assigned based on direct labor hours and is estimated to be $625,000 for the upcoming year. compute the predetermined overhead rate per direct labor hour.
The predetermined overhead rate per direct labor hour is $19.53.
Predetermined overhead rate:
Direct labor hours= 4×8,000
Direct labor hours= 32,000 hours
Predetermined overhead rate=Estimated overhead costs/Direct labor hours
Predetermined overhead rate=$625,000/32,000
Predetermined overhead rate=$19.53 per direct labor hour
Inconclusion the predetermined overhead rate per direct labor hour is:$19.53.
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comparative advantage is group of answer choices a local responsiveness solution. similar to competitive advantage. where the company can produce the cheapest. advantages of nations over other nations.
Comparative advantage is advantages of nations over other nations.
What do you mean by comparative advantage?
In an economic model, agents have a comparative advantage over others if they can provide that good at a lower relative opportunity cost and autarky pricing. Comparative advantage refers to the financial reality of trade advantages for people, firms, or nations as a result of disparities in their factor endowments or technological progress.
When a country can produce at a lower opportunity cost than in its trading counterparts, it has a comparative advantage. A country cannot have a comparative advantage in all commodities and services, but it can have an absolute advantage in all goods production.
So, the right answer is D.
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a chain of appliance stores, app corporation, purchases inventory with a net price of $300,000 each day. the company purchases the inventory under the credit terms of 1/15, net 30. app always takes the discount but takes the full 15 days to pay its bills. what is the average accounts payable for app? round your answer to the nearest dollar.
The value of inventory must be multiplied by 15 days in order to compute the accounts payable for that period. Consequently, $4,500,000 is the average amount of accounts payable.
It goes without saying that the inventory is worth $300,000. The purchase price must be paid within 15 days. The inventory's daily worth is. The inventory value must be multiplied by 15 days to determine the accounts payable for that period of time. The average amount of accounts payable is $4,500,000.
The sum that must be paid for the purchase is represented by the accounts payable. Cash purchases are those that are made right away. Credit purchases occur when cash is paid after a specific period of time. Accounts payable is considered to be the amount due on inventory a credit purchase.
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What is a technique where a business offers a free basic product giving the customer an option to use an advanced version for a premium cost?.
A technique that offers a free basic product giving the customer an option to use an advanced version for a premium cost is called as a Freemium pricing. In Freemium pricing, customers will get a taste of what the service or product can do for them.
Freemium pricing is popular strategy for membership-based organizations and also software businesses. There are several models of freemium pricing, such as:
Traditional freemium pricingFreeware 2.0 Freemium PricingNetwork Effect Freemium PricingEcosystem Freemium PricingFreemium pricing has some advantages, one of the advantages is acquiring a large set of initial users.
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jacquie is bidding against several other people on an item at an auction. she knows the bid is already higher than what she originally wanted to pay, but she doesn't want to give up, so she keeps bidding. what type of decision-making problem does this demonstrate?
The type of decision-making problem does this demonstrate is an escalation of commitment.
Escalation of commitment, Takes place when individuals maintain a failing direction of movement after information well-known shows this can be a negative path to follow. It is sometimes referred to as sunk prices fallacy due to the fact the continuation is regularly based on the concept that one has already invested in this path of motion.
As an example, if a person publicly commits to their intentions (like going to the gym 3 instances a week) in order that they come to be much more likely to observe thru on their plans. Marketplace researchers may also experience commitment bias whilst study members refuse to contradict themselves and stubbornly keep on with their initial reviews.
The escalation of dedication (or the related sunk-cost fallacy) is whilst we behave completely irrationally and hold to pursue something that promises more and more terrible effects (monetarily, psychologically, emotionally, and many others.) in preference to changing course.
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historically, technology firms have been the most aggressive users of stock-based compensation in the form of stock options granted to almost all employees of the firms. what is the rationale for offering stock options as compensation? why has this form of compensation been particularly popular with technology firms in the past?
The rationale for offering stock options as compensation as to keep and attract talented employees. this form of compensation been particularly popular with technology firms in the past because it keeps employees dedicated.
An employee is someone who receives paid to paintings for someone or organization. people do not want to work complete time to be taken into consideration personnel—they surely need to be paid to work through an organization (the man or woman or enterprise that pays them).
Employment most normally manner the kingdom of having a paid task—of being employed. To hire someone is to pay them to paintings. An employer provides employment to personnel. Employment also can consult with the act of employing people, as in we are running to growth our employment of ladies.
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A celebrity tells the paparazzi where to be so they can be photographed with their newest date: the son of a
politician who opposes the type of media the celebrity appears in. What marketing concept MOST closely describes
the celebrity's actions?
push marketing
pull marketing
O
buzz
O
hype
In case whereby A celebrity tells the paparazzi where to be so they can be photographed with their newest date and the son of a politician who opposes the type of media the celebrity appears the marketing concept that describes celebrity's actions is Push marketing.
What is Push marketing?Push marketing can be described as the type of marketing which is been considered as the traditional avenues of advertising and marketing, which can make use of the series of television ads so tat they can promotion about the products for more sales in the company.
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payment posting is where the insurance company pays the claim that was submitted, and then once the facility receives payment, they can post the payment to the open accounts receivable. this posting: group of answer choices reduces accounts receivable. increases the cash account. allows the biller to write off any nonpayment or short payment. both reduces accounts receivable and increases the cash account. none of these is correct.
Payment posting, additionally referred to as money posting, permits the viewing of payments whereas providing a glimpse of the activities of the monetary image by creating it straightforward to get problems and fleetly resolve them.
Payment posting is the act of viewing payments and a medical practice's overall monetary image. In addition, it alludes to the recording of payments within the medical request program. It offers a perspective on patient payments, insurance checks from ERAs, and insurance payments in EOBs.
Payment posting in RCM permits viewing of payments. Additionally, it provides an in-depth image of the monetary structure of the attention following, creating it versatile to identify issues and address them promptly.
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What does ceteris paribus mean?
Answer:
rat
Explanatio
swedish chef has been selling meatballs at a rate of 5,000 kilograms meatballs annually. the chef procures his meatballs locally for $3.3 per kilogram. it costs the chef $78.7 in labor and paperwork to place an order. the holding costs are based on 7.87 percent annual interest rate. what is the average annual cost of holding and setup for the meatballs?
Demand, D = 5000 Order cost, S = $ 78.83 Holding cost, H = 12.3 12.3% * 2.84 = 0.34932 EOQ = SQRT(2 * 5000 * 78.83 / 0.34932) = 1502.221 ANNUAL HOLDING COST = (1502.221 / 2) * 0.34932 = 262.38
ANNUAL ORDERING COST = (5000 / 1502.221) * 78.83 = 262.38 TOTAL COST = AHC + AOC = 262.38 + 262.38 = 542.76 Thus the average annual cost of holding and setup for the meatballs is 542.76
A meatball is floor meat rolled into a ball, on occasion together with other elements, inclusive of bread crumbs, minced onion, eggs, butter, and seasoning. Meatballs are cooked by frying, baking, steaming, or braising in sauce. There are many styles of meatballs that use of exceptional kinds of meats and spices. The term is now and again extended to meatless variations based totally on greens or fish; the latter is also usually referred to as fish balls.
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because of ethical considerations, a firm that offers a packaged service can use its experience to provide measures obtained from previous research to allow direct comparisons and make sense of results. true false
A company that provides bundled services might draw on its expertise to offer metrics derived from earlier research to enable direct comparisons and make sense of findings : True
Define marketing.Marketing as a field covers all the things a company does to draw customers and maintain connections with them. Examples of networking with potential or past clients that can be done as part of the job include sending thank-you cards, playing golf with potential clients, swiftly returning calls and emails, and setting up coffee or dinner encounters with clients.
All three of these marketing operations involve selling and distributing goods to consumers or other businesses. In some instances, affiliates assist a company's marketing initiatives.
Examples of focused promotions include celebrity endorsements, appealing taglines or slogans, attractive packaging or graphic designs, and general media exposure.
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using a perpetual inventory system, the effect on the accounting equation of purchasing merchandise on account includes a(n) . (check all that apply.)
Using a perpetual inventory system, the effect of purchasing products on account on the accounting equation includes a rise in liabilities and assets.
A perpetual inventory system is a program that constantly assesses your inventory using computer information rather than a physical inventory. This method starts with a physical inventory as a baseline and adjusts based on sales and shipments.In business and accounting, a perpetual inventory system or continuous inventory system refers to inventory systems in which data on inventory quantity and accessibility is refreshed on a continual basis as a result of doing business.A perpetual inventory system continuously monitors your inventory levels. Updates are conducted automatically when you receive or sell merchandise. Purchases and returns are reflected in your inventory accounts promptly. A supermarket, for example, might use a perpetual inventory system.Thus this is the meaning of perpetual inventory system.
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what is the amount of taxes paid for 2014 for $65,000 of taxable income for a single person? (rounded to the nearest dollar and no dollar sign $ or comma needed)
A single person's taxable income of 12,106.
What Is the Marginal Rate for Taxes?The marginal tax rate is the amount of additional tax that must be paid for each dollar of increased income produced. The total amount of tax paid divided by the total income earned is the average tax rate. With a marginal tax rate of 10%, 10% of every subsequent dollar earned would be taxed.
What is the 2022 marginal tax rate?Rates at Margin: Individual single taxpayers with incomes greater than $539,900 will continue to pay the highest tax rate, which is 37% for the tax year 2022 (or 647,850 for married couples filing jointly). For incomes over $215,950, the tax rate is 35% or $431,900 for married couples filing jointly.
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the difference between what the total sales should have been, given the actual level of activity for the period, and the actual total sales is a(n) variance.
The difference between what total sales should have been given the actual level of activity for the period and the actual total sales is a revenue variance.
What do we know as revenue variance?Basically, a revenue variances is an accounting tool that is used to measure the difference between expected and actual sales. This information are often needed to determine the success of an organization's selling activities and the perceived attractiveness of its products. There are three types of revenue variances which can be used to develop insights into the reasons why actual sales differ from expectations, they include the Sales Volume Variance, Selling Price Variance and Sales Mix Variance.
Most time, the typical favorable revenue variance occurs when the actual revenues exceed budgeted revenues while the opposite is true for an unfavorable variance. Therefore, the revenue variance results from the differences between budgeted and actual selling prices, volumes or a combination of the two.
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which of the following would not cause a shift in aggregate demand? a. a fall in the cost of production b. a reduction in income tax c. a reduction in interest rates d. an increase in government spending
The correct option is a. Fall in the cost of production would not cause a shift in aggregate demand.
The total quantity of demand for all products and services generated in an economy is measured as aggregate demand. The total amount of money spent on those services and goods at a particular price level and time is known as aggregate demand. A macroeconomic concept known as "aggregate demand" refers to the total demand for products and services during a specific time period at any given price level. Since the two indicators are computed in the same way, aggregate demand is equal to GDP over the long run. Aggregate demand is the desire or demand for those products, whereas GDP is the total value of goods and services produced in an economy.
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to be workable, insurance must have which of the following characteristics? group of answer choices a. pooling of losses b. payment only for random losses c. risk transfer d. indemnification e. all of the above
Option (e) is the best choice. Insurance must possess all of the qualities outlined in the options in order to be practical.
What functions and significance does insurance serve?Out of the wealth that has been collected, insurance makes beneficial investments. Insurance also makes loss prevention, financial stability, and the promotion of trade and business activity possible, all of which support long-term economic growth and development. The ability of an economy to grow sustainably depends on insurance.
What guidelines govern insurance?There are six fundamental rules that must be followed in the insurance industry: insurable interest, utmost good faith, proximate cause, indemnification, subrogation, and contribution.
What does insurance cover?If the insured event occurs, the insurer must pay the insured's expenditures for restoring the situation to its original state in order to make up for any property or health harm the insured is responsible for.
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expressed or implied representations by management regarding the recognition, measurement, presentation, and disclosure of information in the financial statements and related disclosures are referred to as
The account balance must be accurately measured as well as adequately described and disclosed. Assertions concerning presentation and disclosure focus on whether certain components of the financial statements are correctly classified, described, and revealed.
The creators of financial statements adequately often make five accounting assertions. They are existence, completeness, rights and obligations, accuracy and valuation, and presentation and disclosure. To check whether the transactions have been recorded in the correct accounting period, utilize the cut-off assertion. To confirm that the activity that occurred was recorded in the right period, payroll and inventory balances are frequently verified for cut-off accuracy. Aspects like occurrence, completion, authorisation, accuracy, cutoff, and classification. a suitable method for verifying the integrity and completeness of internal data used in financial statements.
The process of incorporating economic events into accounting, or changes in resources resulting from transactions or other events that raise or lower an entity's assets, is represented by the recognition principles. The principles of asset, liability, income, and expense recognition serve as the foundation for this procedure.
The ideas of historical cost and fair value, or market exit price, can be used to summarize the measuring principles financial statements. International guidelines for the presentation of IFRS-IFRS financial reports mandate that accounting be done in accordance with the historical cost principle and that some items be adjusted at fair value, provided that it can be shown that a market measure is more beneficial to users of financial statements.
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The element lanthanum has an isotope with an atomic mass of 138. 9 amu and an abundance of 99. 91%. A second isotope has an atomic mass of 137. 9 amu and an abundance of 0. 9%. What is the average atomic mass of lanthanum?.
If the element lanthanum has an isotope with an atomic mass of 138. 9 amu and an abundance of 99. 91%. A second isotope has an atomic mass of 137. 9 amu and an abundance of 0. 9%. the average atomic mass of lanthanum is 138.9 amu.
Average atomic mass of lanthanumUsing this formula to find the average atomic mass of lanthanum
X= f1m1 + f2m2
Where:
X = Average atomic mass
f = Atomic mass of the isotope
m = Natural abundance of the isotope in decimal
Now let plug in the formula
Average mass of lanthanum= ( 138.9 amu × 0.9991 ) + ( 137.9 amu × 0.0009)
Average mass of lanthanum = 138.77499 amu + 0.12411 amu
Average mass of lanthanum = 138.89 amu
Average mass of lanthanum = 138.9 (Approximately)
Therefore we can conclude that 138.9 amu is the average mass of lanthanum.
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The correct question is:
The element lanthanum has an isotope with an atomic mass of 138. 9 amu and an abundance of 99. 91%. A second isotope has an atomic mass of 137. 9 amu and an abundance of 0.09%. What is the average atomic mass of lanthanum?.
at december 31 of the prior year and current year, jet corp. had 100,000 shares of common stock and 10,000 shares of 5%, $100 par value noncumulative preferred stock outstanding. no dividends were declared on either the preferred or the common stock in the prior year and current year. net income for the current year was $1,000,000. compute basic earnings per common share for the current year.
The amount of dividends that common investors will get this year is $950,000.
Detailed solution
as evidence
10,000 shares
rate = 5%
each worth $100
dividend = $1 million
finding out
amount of dividends that common investors have received
solution
First Annual Preferred Stock Dividend received, that is
(10000 x $100) 5% annual preferred stock dividend
$50000 is the annual preferred stock dividend.
and we are aware that the prior year saw no dividends declared.
hence, the dividend paid to holders of common stock will be
$1,000,000 - $50000 is the dividend paid to common stockholders.
$950,000 was the dividend paid to common stockholders.
therefore, the ordinary stockholders received $950,000 in dividends this year.
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flower co., which is operating at capacity, desires to add a new service to its rapidly expanding business. the service should be added as long as service revenues exceed:
As long as service revenues outweigh the total of variable costs and any associated opportunity costs, the service should be added.
What is the sum of all variable costs associated with each individual product?The total of all the variable costs for each distinct product you developed is your total variable cost. By dividing the price to produce one unit of your product by the number of products you have created, you can determine the total variable cost.Costs that change as the volume changes are known as variable costs. Raw materials, piece-rate labor, production supplies, commissions, delivery costs, packaging costs, and credit card fees are a few examples of variable costs. The "Cost of Goods Sold" is the name given to the variable costs of production in some accounting statements.To learn more about : Variable costs
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riverland shoes and boots inc. manufactures three styles of steel-toed work boots. they are currently transitioning to the abc method of costing. they are currently working on calculating the cost driver rate. what formula would they be using to calculate the rates needed to assign moh to the boots?
A system of cost estimation and cost accounting is referred to as the method of costing. Different industries have different natures, create different goods, and provide different services. As a result, different industries employ various costing techniques.
Explain about the method of costing?The costing method is the strategy used by an organization to gather cost information in a more acceptable way. The types of products being made dictate the various approaches that are used by various firms.
In order to assign a cost to a manufactured good, product costing techniques are used. Process costing, job costing, direct costing, and throughput costing are the primary costing techniques accessible. Each of these approaches can be used in various production and decision-making situations.
Process costing, job costing, and direct costing are the three main costing techniques. Each of these approaches can be used in various production and decision-making settings.
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ariable whole life includes all of the following features, except: a cash value that varies based on the market b a fixed, level premium c a guaranteed minimum death benefit d annual renewable term insurance
Variable all inclusive life could be a sort of changeless life protections arrangement. With highlights that incorporate cash esteem, speculation assortment, adaptable premiums and a adaptable passing benefit.
Does variable life have level premium?
Both variable life protections and entirety life protections are shapes of lasting scope. Premiums are level and not one or the other arrangement can be canceled due to changes in your wellbeing. Both sorts of life protections moreover have a passing advantage and collect cash esteem on a tax-deferred premise over time.
A variable life protections approach may be a contract between you and an protections company. It is planning to meet certain protections needs, investment goals, and charge arranging goals. It may be a arrangement that pays a indicated sum to your family or others (your recipients) upon your death.
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which statement best characterizes international market segmentation? multiple choice it makes it easy to compare characteristics across nations. it is easier to conduct than domestic market segmentation. it is a challenging process to complete. it typically does not provide any useful data. it is a relatively inexpensive process.
International Market segmentation is a challenging process to complete.
There are six main international segmentation techniques that this bankruptcy discusses: geographic/region; financial factors; political/criminal factors; cultural elements; move-market segmentation; and micro-marketing.
Agencies can normally use 3 standards to discover exclusive market segments: Homogeneity, or not unusual needs inside a section. distinction, or being particular from different groups. reaction, or a comparable response to the marketplace.
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g if the mexican nominal exchange rate (foreign currency per peso) does not change, but prices rise faster in mexico than in all other countries, then the mexican real exchange rate a. rises. b. cannot be determined without more information. c. does not change. d. declines.
Mexican real exchange rate increases if the nominal exchange rate (foreign currency per peso) stays the same but prices increase faster in Mexico than in any other nation. Here option A is the right answer.
The value of one currency will increase as the exchange rate changes, while the value of the other currency will decrease. A currency is considered to have appreciated when its value rises. On the other side, a currency is said to have depreciated when its value falls.
An increase in REER indicates a decline in trade competitiveness since it indicates that exports are becoming more expensive while imports are becoming more affordable.
Growth in demand for a currency causes the demand curve to move to the right, ultimately raising the value of the currency sought and driving up the exchange rate.
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which of the three major u.s. labor relations laws is considered to be the most pro-management? the taft-hartley act the landrum-griffin act the wagner act
The Taft-Hartley Act, the Landrum-Griffin Act, and the Wagner Act are all key labor relations acts in the United States that are considered to be the most pro-management.
What is National Labor Relations Act?Congress approved the National Labor Relations Act ("NLRA") in 1935, making it clear that the United States objective is to foster collective bargaining by safeguarding employees' complete freedom of organization. The National Labor Relations Act (NLRA) safeguards workplace democracy by granting employees in the private sector the fundamental freedom to seek improved working conditions and designation of representation without fear of punishment.
The Taft-Hartley Act- The Taft-Hartley Act, often known as the Labor Management Relations Act of 1947, is a United States federal legislation that restricts labor unions' operations and power. The 80th United States Congress passed it over President Harry S. Truman's veto. The Landrum-Griffin Act- The Landrum-Griffin Act safeguarded employees' union membership rights against unfair union activities, and the National Labor Relations Act safeguarded employee rights against unreasonable employer or union practices.The Wagner Act - Section 7 of the Wagner Act granted employees the freedom to establish and join unions, and it required employers to bargain collectively with unions chosen by a majority of employees in an authorized bargaining unit.To know more about Labour Act, click
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financial analysts forecast abc incorporated growth for the future to be 12 percent. abc's recent dividend was $1.60. what is the value of abc stock when the required return is 15 percent? multiple choice $59.73 $63.72 $79.81 $91.02
From the given information, The value of ABC stock when the required return is 15 percent is $59.73
As per dividend discount model,
Value of ABC stock = D0 × (1+g) / (K-g)
= 1.60 × (1+0.12) / (0.15-0.12)
= $ 59.73
Where,
D0 Recent paid dividend $ 1.60
g Growth rate in dividend 12%
K Required return 15%
The dividend discount model (DDM), a mathematical technique for forecasting stock prices, is based on the idea that, when discounted back to their present value, the price of a company's shares today is equal to the total of all of its future dividend payments. It aims to determine a stock's fair value regardless of the current market conditions and takes into account the dividend distribution considerations and the anticipated market returns. The stock is cheap and should be purchased if the value derived from the DDM is more than the price at which shares are currently trading, and vice versa.The minimal return an investor will take for owning a company's shares, in exchange for a specific amount of stock-holding risk, is known as the required rate of return (RRR). To assess the profitability of new investment projects, the RRR is widely employed in corporate finance.A corporation pays dividends to its investors in order to distribute earnings to them. They're paid on a regular basis and are one of the ways stock investors can profit from their investments.Learn more about Growth rate, here
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