Question

19. Which of the following does NOT have limited liability?

Select one:

a. corporations

b. limited partnerships

c. sole proprietorships

d. none of the above

21. Plants, Inc. had sales of $200 million in 2017, and its cost of sales was $160 million in 2017. If sales are expected to grow at 20% in 2018, compute the forecasted cost of sales in 2018 using the percent of sales method.

Select one:

a. $96 million

b. $132 million

c. $176 million

d. $192 million

e. $204 million

22. The dividend just paid on Sun, Inc.’s common stock is $4.15, and dividends grow at 4%. If the required rate of return is 10%, then what is the value of common stock?

Select one:

a. $41.50

b. $43.16

c. $69.17

d. $71.93

e. $107.90

Answer 1

19. Ans- Option C. Sole Proprietorship.

Sole Proprietorship are Unlimited Liability business firm which is owned by a single person whose liabilities are not limited to capital invested by them in firm.

- Corporation and Limited partnerships are limited liabilities firms whose liabilities are limited to capital invested vy them.

21).

Cost of sale in 2017 = $ 160 million

Sales growth rate in 2018 = 20%

As per Percentage of sales method, Cost of sales increases in same proportion as of sales. SO, Cost of Sales will also grow in 2018 by 20%

Forecasted cost of sales in 2018 = $160 million(1+0.20)

= $ 192 milion

Hence, Option D

22). Dividend paid (D0) = $4.15

Constant Growt rate of dividend (g) = 4%

Required rate of return (Ke) =10%

calculating the Price of Stock:-

Price = $ 71.93

So, the value of common stock is $ 71.93

Hence, option D

If you need any clarification, you can ask in comments.     

If you like my answer, then please up-vote as it will be motivating