Over time different financial institutions—state banks, national banks, S&Ls, MSBs, and credit unions—have lost some of their individual identities and have become more and more like each other. Is this an outcome that could have been predicted by an economist?
Edna Recording Studios, Inc., reported earnings available to common stock of $4,200,000\$ 4,200,000$4,200,000 last year. From those earnings, the company paid a dividend of $1.26\$ 1.26$1.26 on each of its 1,000,0001,000,0001,000,000 common shares outstanding. The capital structure of the company includes 40%40 \%40% debt, 10%10 \%10% preferred stock, and 50%50 \%50% common stock. It is taxed at a rate of 40%40 \%40%. a. If the market price of the common stock is $40\$ 40$40 and dividends are expected to grow at a rate of 6%6 \%6% per year for the foreseeable future, what is the company's cost of retained earnings financing?
British Columbia Lumber has a raw lumber division and a finished lumber division. The variable costs are as follows:
Raw lumber division: $100 per 100 board-feet of raw lumber
Finished lumber division:$125 per 100 board-feet of finished lumber
Assume that there is no board-feet loss in processing raw lumber into finished lumber. Raw lumber can be sold at $200 per 100 board-feet. Finished lumber can be sold at$275 per 100 board-feet.
Should British Columbia Lumber process raw lumber into its finished form? Show your calculations.
Assume that internal transfers are made at 110% of variable cost. Will each division maximize its division operating-income contribution by adopting the action that is in the best interest of British Columbia Lumber as a whole? Explain.
Assume that internal transfers are made at market prices. Will each division maximize its division operating-income contribution by adopting the action that is in the best interest of British Columbia Lumber as a whole? Explain.
Why are lines drawn in both the Ba lance Debit and Balance credit columns when an account has a zero balance?
