In: Finance
41) If you have 100 shares of Google Inc. The stock is traded at $1,200. We assume that the firm will announce 10:1 stock split. What’s the total number of shares you will have after the stock split?
answer is | ||
1,000 shares |
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42) Based on the information in Question 41, what will be the total value of your holdings of Google stock after the stock split?
a) $120,000 |
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b) $1,200,000 |
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c) $12,000 |
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d) $1,200 |
45) A company purchased $25,000 worth of inventory. The terms of sale were 2/5, net 45. What’s the implicit interest if a buyer does not take the cash discount?
$250 |
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$300 |
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$500 |
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$800 |
41 ) 10: 1 split shares means, for 1 share there will be 10 shares to be issued, however price / Share wont change.
Hence, for 1000 shares, total nummber of shares = 1000 x 10 = 1000
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42) For issuing 10 shares for 1 each share now, the price / share has reduced by 1/10th.
New price / share = 1200 / 10 = 120 $ / share
Total holding value = 120 x 1000 = 120,000 ( Ans - (a))
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43) 2/5 , net 45 means - if paid within 5 days there will be 2 % discount on account payableor otherwise full ampunt to paid within or by 45 days.
upto 5 days, amount payable = 25000 x ( 1- 2%) = 24500
but 6th to 45 days amount payable = 25000 { interest charged = 45-5 = 40 day}
implicit interest rate = i / day compounded daily
24500 (1 + i)40 = 25000
i = 0.0505 % / day
Annual Interest = 0.0505 % / day x 365 days = 18.44%
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For simple interest = i/ year
24000 x ( 1+ i * 40/365) = 25000
i = 18.62%
[ since <1 year period simple interest is always higher than compound interest - hence, simple interest is ideally shuld be taken]
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