Answer:
a)
$34.4
b)
$37.20
c) $59.57
Explanation:
Given:
Dividend paid = $2.15
Growth rate = 4% = 0.04
Required return = 10.5% = 0.105
Now,
a) Present value = 
for the current price n = 1
thus,
Current price = 
= 
= $34.4
b) Price in 3 years
i.e n = 3
=
= 
=
$37.20
c) Price in 15 years
i.e n = 15
=
= 
= $59.57
Answer:
1. GAAP is the term used to indicate the whole body of FASB authoritative literature. <u>TRUE</u>.
The Financial Accounting Standards Board are the authors of the GAAP and as such GAAP is used to indicate the whole body of their literature.
2. Any company claiming compliance with GAAP must comply with most standards and interpretations but does not have to follow the disclosure requirements. <u>FALSE. </u>
To claim compliance with GAAP, all standards and interpretations including Disclosure requirements should be followed.
3. The primary governmental body that has influence over the FASB is the SEC. <u>TRUE.</u>
The Securities and Exchange Commission (SEC) is the Government body that is meant to oversee the application of Accounting standards and as such, they have influence over the FASB.
4. The FASB has a government mandate and therefore does not have to follow due process in issuing a standard.<u> FALSE. </u>
Even though they have a Government mandate, the FASB must follow due process when establishing principles so that people might be able to contribute to or criticize the guidelines should they please.
Answer:
b. 6 pairs of jeans per crate of olives; and
c. 4 pairs of jeans per crate of olives
Explanation:
Olives Jeans Trade off Ratio (Olives:Jeans)
Spain 1 3 1:3 or 0.33:1 (1/3 = 0.33)
Denmark 1 11 1:11 or 0.09:1 (1/11= 0.09)
Spain & Denmark have less opportunity cost & hence comparative advantage than each other, in Olive & Jeans respectively.
Spain will export Olives to Denmark (importer). Denmark will export Jeans to Spain (Importer). Trade will be gainful if they get exchange ratio better than domestic exchange ratio.
- '2 jeans pairs per olive crate' not gainful trade ratio for Spain, as it is getting more i.e 3 jeans pair per olive crate at its own domestic ratio.
- '13 jeans per olive' not gainful for Denmark, as 0.07 = (1/13) olive per jeans is worse than its own domestic ratio i.e 0.09 = (1/11) olive per jeans
'4 jeans pairs per olive crate' is gaining trade ratio for:
- Spain: As it gets 4 i.e more than 3 pairs of jeans per olive crate
- Denmark : As it gets 0.25 = (1/4) i.e more than 0.09 olive crates per pair of jeans
'6 jeans pairs per olive crate' is gaining trade ratio for:
- Spain: As it gets 6 i.e more than 3 pairs of jeans per olive crate
- Denmark : As it gets 0.16 = (1/6) i.e more than 0.09 olive crates per pair of jeans
Both of them are gainful trade ratios, but:
- 1olive:4 jeans is more gainful for Denmark, as it is gaining relatively more than domestic exchange rate (0.25 is more > 0.09 than 4 > 3).
- 1olive:6jeans is more gainful for Spain as it is gaining relatively more than domestic exchange rate (6 is more > 3 than 0.16 > 0.09)
Answer:
Net income for a merchandiser is computed as:
Net sales - cost of goods sold - other expenses.
Explanation:
Net sales are the sales revenue after deducting sales discounts and allowances. The cost of goods sold represent the beginning inventory of merchandise and current period's purchases less the ending inventory. The difference between the net sales and the cost of goods sold is called the gross profit. From this, other expenses incurred in running the business and generating sales are deducted, including income taxes to arrive at the net income.
