Question

In: Finance

41) If you have 100 shares of Google Inc. The stock is traded at $1,200. We...

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

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

b) $1,200,000

c) $12,000

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

$300

$500

$800

Solutions

Expert Solution

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

------------------------------------------

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))

------------------------------------------

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%

-------------------------------------------------------------

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]

-------------------------------------------------------

Please provide feedback on final ans.........Plz get back for question, clarification...........All the best


Related Solutions

Sweet Company’s outstanding stock consists of 1,200 shares of noncumulative 4% preferred stock with a $100...
Sweet Company’s outstanding stock consists of 1,200 shares of noncumulative 4% preferred stock with a $100 par value and 10,200 shares of common stock with a $10 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends. Dividend Declared year 1 $ 2,200 year 2 $ 6,400 year 3 $ 33,000 The total amount of dividends paid to preferred and common shareholders over the three-year period is: Multiple Choice $14,400 preferred;...
You bought 100 Google Shares for $400 each. You also bought 1 put option on Google...
You bought 100 Google Shares for $400 each. You also bought 1 put option on Google with a strike of $395 for $20. a)         What is the maximum loss on your position? b)         What is the profit on your position when the stock hits $440? c)        Draw the profit/loss diagram for this position clearly marking the maximum loss, and breakeven
Cullumber Inc. issues 500 shares of $10 par value common stock and 100 shares of $100...
Cullumber Inc. issues 500 shares of $10 par value common stock and 100 shares of $100 par value preferred stock for a lump sum of $121,000. (a) Prepare the journal entry for the issuance when the market price of the common shares is $164 each and market price of the preferred is $205 each. (b) Prepare the journal entry for the issuance when only the market price of the common stock is known and it is $212 per share. (Round...
ndigo Inc. issues 500 shares of $10 par value common stock and 100 shares of $100...
ndigo Inc. issues 500 shares of $10 par value common stock and 100 shares of $100 par value preferred stock for a lump sum of $121,000. (a) Prepare the journal entry for the issuance when the market price of the common shares is $164 each and market price of the preferred is $205 each. (b) Prepare the journal entry for the issuance when only the market price of the common stock is known and it is $212 per share. (Round...
Martinez Inc. issues 500 shares of $10 par value common stock and 100 shares of $100...
Martinez Inc. issues 500 shares of $10 par value common stock and 100 shares of $100 par value preferred stock for a lump sum of $120,000. (a) Prepare the journal entry for the issuance when the market price of the common shares is $164 each and market price of the preferred is $205 each. (b) Prepare the journal entry for the issuance when only the market price of the common stock is known and it is $210 per share. (Round...
Waterway Inc. issues 500 shares of $10 par value common stock and 100 shares of $100...
Waterway Inc. issues 500 shares of $10 par value common stock and 100 shares of $100 par value preferred stock for a lump sum of $112,000. (a) Prepare the journal entry for the issuance when the market price of the common shares is $168 each and market price of the preferred is $210 each. (b) Prepare the journal entry for the issuance when only the market price of the common stock is known and it is $194 per share.
Oriole Inc. issues 500 shares of $10 par value common stock and 100 shares of $100...
Oriole Inc. issues 500 shares of $10 par value common stock and 100 shares of $100 par value preferred stock for a lump sum of $108,000. (a) Prepare the journal entry for the issuance when the market price of the common shares is $164 each and market price of the preferred is $205 each. (b) Prepare the journal entry for the issuance when only the market price of the common stock is known and it is $186 per share.
Sandhill Inc. issues 500 shares of $10 par value common stock and 100 shares of $100...
Sandhill Inc. issues 500 shares of $10 par value common stock and 100 shares of $100 par value preferred stock for a lump sum of $101,000. (a) Prepare the journal entry for the issuance when the market price of the common shares is $176 each and market price of the preferred is $220 each. (b) Prepare the journal entry for the issuance when only the market price of the common stock is known and it is $172 per share.
Sweet Inc. issues 500 shares of $10 par value common stock and 100 shares of $100...
Sweet Inc. issues 500 shares of $10 par value common stock and 100 shares of $100 par value preferred stock for a lump sum of $113,000. (a) Prepare the journal entry for the issuance when the market price of the common shares is $172 each and market price of the preferred is $215 each. (b) Prepare the journal entry for the issuance when only the market price of the common stock is known and it is $196 per share. (Round...
Flounder Inc. issues 500 shares of $10 par value common stock and 100 shares of $100...
Flounder Inc. issues 500 shares of $10 par value common stock and 100 shares of $100 par value preferred stock for a lump sum of $105,000. (a) Prepare the journal entry for the issuance when the market price of the common shares is $172 each and market price of the preferred is $215 each. (b) Prepare the journal entry for the issuance when only the market price of the common stock is known and it is $180 per share.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT