The Gondwanaland Chairman of Production reported that the new Altair chariots (most modern, horse drawn family chariot) had a PRICE elasticity of 3 and an INCOME elasticity of 2. The supply of these Altair chariots is elastic. Evaluate the following statements and explain why you think they are true, or false.
a. A 20% increase in the price of the Altair chariot will cause the quantity demanded to fall by an astounding 60%.
b. An increase in Gondwanaland consumers' incomes will cause prices to rise, but the total quantity demanded will also increase.
Answer:
a. true
The statement is true because the price elasticity is 3 .
Price elasticity = percentage change in quantity demanded / percentage change in price
= 60% / 20% = 3
This corresponds with the price elasticity given. Demand is elastic so a rise in price would lead to a greater change in quantity demanded
b. false
Income elasticity measures the relationship between income and quantity demanded. The income elasticity for luxury goods is usually greater than 1. If income of Gondwanaland consumers' increases, the quantity demanded increases. Prices are not affected
Explanation:
Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.
Price elasticity of demand = percentage change in quantity demanded / percentage change in price
If the absolute value of price elasticity is greater than one, it means demand is elastic. Elastic demand means that quantity demanded is sensitive to price changes.
Demand is inelastic if a small change in price has little or no effect on quantity demanded. The absolute value of elasticity would be less than one
Demand is unit elastic if a small change in price has an equal and proportionate effect on quantity demanded.
Income elasticity of demand measures the responsiveness of quantity demanded to changes in income.
In one ancient civilization, hunters shared fresh meat with other individuals in a group without an explicit timeframe or agreement about who would do what in return. However, the favor would surely be returned by those in the tribe who could cook, take care of children, and provide
shelter. What type of economy does this MOST closely describe?
A. Socialist economy
B. gift economy
С. market economy
D. planned economy
Answer:
B. Gift economy
Explanation:
Correct Answer: gift economy
Gabuat Corporation, which has only one product, has provided the following data concerning its most recent month of operations:
Selling price $147
Units in beginning inventory 0
Units produced 2,200
Units sold 1,910
Units in ending inventory 290
Variable costs per unit:
Direct materials $47
Direct labor $34
Variable manufacturing overhead $5
Variable selling and administrative expense $6
Fixed costs:
Fixed manufacturing overhead $39,600
Fixed selling and administrative expense $15,280
The total gross margin for the month under the absorption costing approach is:________
Answer:
Gross Margin $82,130
Explanation:
The computation of the gross margin under the absorption costing approach is as follows:
Sales ($147 × 1,910 units) $280,770
Less:
Direct Material ($47 × 1,910 units) $89,770
Direct Material ($34 x 1,910 units) $64,940
Variable Manufacturing Overhead ($5 × 1,910 units) $9,550
Fixed Manufacturing Overhead ($39,600 ÷ 2,200 units) × $1,910 units $34,380
Gross Margin $82,130
Florida Palms Country Club adjusts its accounts monthly. Club members pay their annual dues in advance by January 4. The entire amount is initially credited to Unearned Membership Dues. At the end of each month, an appropriate portion of this amount is credited to Membership Dues Earned. Guests of the club normally pay green fees before being allowed on the course. The amounts collected are credited to Green Fee Revenue at the time of receipt. Certain guests, however, are billed for green fees at the end of the month.
The following information is available as a source for preparing adjusting entries at December 31.
1. Salaries earned by golf course employees that have not yet been recorded or paid amount to $9,600.
2. The Tampa University golf team used Florida Palms for a tournament played on December 30 of the current year. At December 31, the $1,800 owed by the team for green fees had not yet been recorded or billed.
3. Membership dues earned in December, for collections received in January, amount to $106,000.
4. Depreciation of the country club's golf carts is based on an estimated life of 15 years. The carts had originally been purchased for $180,000. The straight-line method is used. Note: The clubhouse building was constructed in 1925 and is fully depreciated.)
5. A 12-month bank loan in the amount of $45,000 had been obtained by the country club on November 1. Interest is computed at an annual rate of 8 percent. The entire $45,000, plus all of the interest accrued over the 12-month life of the loan, is due in full on October 31 of the upcoming year. The necessary adjusting entry was made on November 30 to record the first month of accrued interest expense. However, no adjustment has been made to record interest expense accrued in December.
6. A one-year property insurance policy had been purchased on March 1. The entire premium of $7,800 was initially recorded as Unexpired Insurance.
7. In December, Florida Palms Country Club entered into an agreement to host the annual tournament of the Florida Seniors Golf Association. The country club expects to generate green fees of $4,500 from this event.
8. Unrecorded Income Taxes Expense accrued in December amounts to $19,000. This amount will not be paid until January 15.
Required:
a. For each of the above numbered paragraphs, prepare the necessary adjusting entry (including an explanation). If no adjusting entry is required, explain why.
b. Four types of adjusting entries are described at the beginning of the chapter. Using these descriptions, identify the type of each adjusting entry prepared in part a above.
c. Although Florida Palms's clubhouse building is fully depreciated, it is in excellent physical condition. Explain how this can be.
Answer:
Florida Palms Country Club
a. Adjusting Journal Entries:
1. Debit Salaries Expense $9,600
Credit Salaries Expense Payable $9,600
To record the unpaid salaries.
2. Debit Accounts Receivable (Tampa University Golf Team) $1,800
Credit Green Fee Revenue $1,800
To record earned revenue not yet billed and recorded.
3. Debit Unearned Membership Dues $106,000
Credit Membership Dues Earned $106,000
To record membership dues earned.
4. Debit Depreciation Expense on Golf Carts $12,000
Credit Accumulated Depreciation $12,000
To record depreciation expense for the year.
5. Debit Interest Expense $300
Credit Interest Expense Payable $300
To accrue interest expense for the month of December.
6. Debit Insurance Expense $6,500
Credit Insurance Prepaid (Unexpired Insurance) $6,500
To record insurance premium for 10 months.
7. No entry is required because the period in which the tournament will be hosted is not disclosed. Revenue is only recorded when performance obligations have been fulfilled.
8. Debit Income Taxes Expense $19,000
Credit Income Taxes Expense Payable $19,000
To record accrued expenses for the year.
b. The types of adjusting entries prepared in part a above are:
Accrued Expenses
Accrued Revenue
Deferred Revenue
Depreciation estimate
c. That Florida Palm's clubhouse is fully depreciated but remains in excellent physical condition results from the fact that depreciation is a systematic allocation of the cost of the clubhouse costs over its estimated useful life. This implies that depreciation is merely an accounting estimate that spreads the cost of the clubhouse over its useful life and not an attempt to put a value on the clubhouse.
Explanation:
a) Data and Calculations:
1. Depreciation Expense on the golf carts = $180,000/15 years = $12,000 per annum based on the straight-line method of depreciation.
2. Interest expense on the bank loan = $45,000 * 8% * 1/12 = $300
3. Insurance Premium Expense = $7,800 * 10/12 = $6,500
The overall unemployment rate in Lebanon stands at 24 percent, and youth unemployment exceeds 35 percent. In the face of job crisis, Lebanon should introduce reforms in the education system to adapt to future labor market needs. At the same time, it is crucial to develop a viable information and communications technology sector and to speed up the process of finalizing the oil and gas exploration and production projects. Also essential to job creation are small- and medium-size enterprises.
Source: The Daily Star, December 24, 2014
a. On the basis of the news clip, what is the main type of unemployment that Lebanon should use
policies to control? Explain.
b. How might these policies impact Lebanon’s natural unemployment rate? Explain.
Answer:
a. Lebanon should address the structural unemployment issue in the economy to support the current labor force with the new methods and technologies of production. Policies would be aimed at boosting the productivity of labor and hence the demand for labor force. From the given scenario it is comprehensible that the major issue prevailing is lack of competency due to structural and technological changes.
b. Policies aimed at fighting structural unemployment would cause the natural rate of unemployment rate to fall. Natural rate of unemployment would change when there arises changes in factors such as technology, productivity etc.
describe the cycle that dictates the economic ups and down of the hotel industry
The terms of business cycle which includes expansion, growth, peak, recession describes the Ups and down of the hotel industry
Business cycle refers to the cyclical upswings and downswings of a business in its output, employment, income, sales etc
The 4 stages of business cycle includes:
expansionpeakcontractiontrough/recession.In conclusion, the terms of business cycle which includes expansion, growth, peak, recession describes the Ups and down of the hotel industry
Read more about business cycle
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If the future value of an ordinary, 7-year annuity is $10.000 and interest rates are 4 percent, what is the future value of the same annuity due?
Answer:
The future value of the same annuity due is $10,400.
Explanation:
Step 1: Calculation of the annuity payment
This can be calculated using the formula for calculating the Future Value (FV) of an Ordinary Annuity as follows:
FV = P * (((1 + r)^n - 1) / r) ................................. (1)
Where,
FV = Future value of the amount after 7 years = $10.000
P = Annuity payment = ?
r = interest rate = 4%, or 0.04
n = number of years = 7
Substituting the values into equation (1) and solve for P, we have:
10,000 = P * (((1 + 0.04)^7 - 1) / 0.04)
10,000 = P * 7.89829448089601
P = 10,000 / 7.89829448089601
P = $1,266.09612039504
Step 2: Calculation of the future value of the same annuity due
This can be calculated using the formula for calculating the Future Value (FV) of an Annuity Due as follows:
FV = P * (((1 + r)^n - 1) / r) * (1 + r) ................................. (2)
Where,
FV = Future value the same annuity due = ?
P = Annuity payment as obtained in Step 1 above = $1,266.09612039504
r = interest rate = 4%, or 0.04
n = number of years = 7
Substituting the values into equation (2), we have:
FV = $1,266.09612039504 * (((1 + 0.04)^7 - 1) / 0.04) * (1 + 0.04)
FV = $1,266.09612039504 * 7.89829448089601 * 1.04
FV = $10,400
Therefore, the future value of the same annuity due is $10,400.
what Is quality Control
Answer:
a system of maintaining standards in manufactured products
Which of the following explains why tariffs and quotas raise the cost of protected products, such as sugar, to consumers?
-High demand forces domestic businesses to lower prices to match foreign competitors' prices
-High demand causes the government to raise revenues to protect domestic farmers
-High demand encourages world prices to increase at regular intervals
-High demand encourages domestic quantities to increase, raising domestic prices higher than world prices
Answer: High demand encourages domestic quantities to increase, raising domestic prices higher than world prices
Explanation:
Due to tariffs and quotas, the amount of the protected goods coming into the country from countries where it is cheaper will reduce.
This will push people towards the domestic manufacturers of the goods. This increase in demand for local goods will lead to the producers having to charge more as well as produce more. As they are charging more based on the situation in their own country, the prices will be more than world prices.
what are some common tasks performed by Municipal Clerks? Check all that apply.
recording and editing the minutes (notes) of meetings
performing inspections to make sure restaurants meet standards
planning the maintenance of documents
issuing public notifications of meetings
drafting and proposing legislation
traveling to attend conferences in other states
participating in administration of elections
Answer:
record minutes of council meetings; answer official correspondence; keep fiscal records and accounts; and prepare reports on civic needs.
Answer:
1, 3, 4, 7
Explanation:
Hi, I'm sorry I'm late but maybe it will help others. ;D
Shirts makes business dress shirts. The shirts could have defects in various ways including in the weave or color of the fabric, loose buttons, wrong dimensions, and uneven stitches. 8 shirts are randomly examined, with the following results. What is the LCL for a three-sigma control chart?
Shirts Defects
1 4
2 6
3 3
4 1
5 5
6 6
7 4
8 6
a. 2.00
b. 0.00
c. -1.90
d. 1.90
Answer:
our correct option is b = 0.00 for 3 sigma (σ)
Explanation:
Solution:
Let's tabulate the data given:
Shirts Defects
1 4
2 6
3 3
4 1
5 5
6 6
7 4
8 6
Now, as we can see from the above data,
Number of samples taken = Shirts randomly examined = 8
Now, we have to calculate (C bar), for this we have to divide the sum of defects and total number of samples.
Note: We denoting (C bar) as B. So,
B = Sum of defects/ Number of samples
Sum of defects = 4 + 6 + 3 + 1 + 5 + 6 + 4 + 6
Sum of defects = 35
(C bar) = B = 35/8
B = 4.37
Formula to find out LCL for 3 sigma (σ):
LCL = B - [tex]z\sqrt{B}[/tex]
where z value for 3 sigma = 3
LCL = 4.37 -(3[tex]\sqrt{4.37}[/tex])
LCL = 4.37 - (3 x (2.092)
LCL = 4.37 - (6.276)
LCL = -1.901
So, now, when the LCL = negative, it is taken as 0.0
Hence, our correct option is b = 0.00 for 3 sigma (σ)
Longshore Group bought a piece of equipment for use in its operations under the following terms: 5 annual payments of $64,000 for the equipment, including interest. Although the list price of the equipment was $315,000, Longshore Group could have bought it for $300,000 cash. Salvage value is $20,000. Which amount should Longshore Group use to record the purchase of the machine on its books
Answer:
$300,000
Explanation:
Calculation for Which amount should Longshore Group use to record the purchase of the machine on its books
Amount to record machine purchased=($64,000*5 annual payment)-$20,000
Amount to record machine purchased=$320,000-$20,000
Amount to record machine purchased=$300,000
Therefore the amount that Longshore Group should use to record the purchase of the machine on its books is $300,000
The nominal interest rate is 7% and the expected inflation rate is 2%. Based on the Fisher effect, the real rate of interest is Group of answer choices 5.0% 5.1% 4.9% 6.86%
Assume the CPI increases from 100 to 110 and a person's nominal income increases from $50,000 to $55,000 over the same period. This person's real income has
Answer and Explanation:
The computation of the real income percentage is as follows:
The Increase in CPI would be
= (110 - 100) ÷ 100 × 100
= 10%
And, the increase in nominal income is
= ($55,000 - $50,000) ÷ ($50,000) × 100
= 10%
As the CPI and increase in nominal income percentage is same
SO the real income would also remains the same
Do you think that business practices in an Islamic country are likely to differ from business practices in a Christian country
Explanation:
Yes, since an organization is a reflection of the values of the society in which it operates, it is correct to say that business practices in an Islamic country may be different from business practices in a Christian country.
Some differences can be mentioned, such as in Islamic organizations, there is the incorporation of rules and laws arising from Islam, such as in the period of Ramadan, where there is a 6-hour working day, fasts and other religious practices. It is also possible to quote the dress code in the workplace, the treatment given to women among several other practices that differentiate an Islamic organization from a Christian one.
How a society's culture affects the values found in the workplace is considerably important to an international business with operations in different countries? Management processes and practices may need to vary according to culturally determined work-related values.
Explanation:
Technological development has enabled social, economic and cultural interactions between countries, generating the phenomenon known as globalization. Therefore, companies saw new opportunities for profitability in different countries, but also new challenges, such as the cultural adaptation of their processes, policies and employees.
It is necessary for organizations to adapt to the multicultural environment in which they operate, aligning their values and organizational ethics to the place in which they operate, since each country has its own set of behaviors, customs and characteristics in the work environment, which therefore they must be included in a company's internal and external processes in a globalized environment so that there is acceptance by the local public of the products and services offered by a company, in addition to protecting and respecting the dignity, culture and values of a people.
ook at these two sentences about Undeposited Funds: By posting to Undeposited Funds, you can create a single bank deposit for multiple payments, making it easy ___________. When receiving a payment, make sure _________________.
Answer:
1. To match your bank register with your bank statement; 2. the Deposit to account is Undeposited Funds
Explanation:
In order to reconcile with the company book accounts to the bank statement. If the posting is to be done in non-deposited funds so it would be develop the bank deposit for multiple payments that could easy for matching also at the time of payment received make sure that the deposit should be undeposited funds
So the same is relevant
Participative leadership is enhanced when:______
Answer:
employees partake in the decision making in an organization.
Explanation:
Participative leadership is enhanced when employees are involved in the decision making of an organization, hence creating a collaborative approach towards running and managing the organization.
In participative leadership approach, all the members within a team collaborate in terms of identifying essential goals and finding a means to achieving those goals. The importance of participative leadership is that it boost the morale of employees by giving them sense of belonging.
Two major variables in choosing the structure and design of an organization are the opportunities and need for ________.
Answer:
globalization and localization.
Explanation:
Globalization can be defined as the strategic process which involves the integration of various markets across the world to form a large global marketplace. Basically, globalization makes it possible for various organizations to produce goods and services that is used by consumers across the world.
Comparative advantage in economics is the ability of an individual or country to produce a specific good or service at a lower opportunity cost better than another individual or country.
The comparative advantage gives a country a stronger sales margin than their competitors as they are able to sell their specific products or render their peculiar services at a lower opportunity cost.
Also, localization (local responsiveness) refers to the degree of requirements and conditions to which a manufacturing firm should significantly adjust their products and methods of production in a particular country to. Thus, a firm that is facing both strong cost pressures and strong pressures for localization should ensure that it adopts a global standardization strategy.
Hence, two major variables in choosing the structure and design of an organization are the opportunities and need for globalization and localization because the opportunities that abound in the market would determine the level of revenues (cash-inflows) that the organization can generate.
2019 balance sheet showed net fixed assets of $5.2 million, and the 2020 balance sheet showed net fixed assets of $5.8 million. The company’s 2020 income statement showed a depreciation expense of $335,000. What was the company's net capital spending for 2020?
Answer: $935,000
Explanation:
Net capital spending refers to the amount spent on acquiring new fixed assets.
= 2020 net fixed assets + 2020 depreciation - 2019 net fixed assets
= 5,800,000 + 335,000 - 5,200,000
= $935,000
1.2. What are five foundations of economics?Eleanor works at a department store and is paid by the hour. She can work as many hours as she wants each week. When not at work, Eleanor likes to spend her time reading. The store recently increased her hourly wage.Fill in the blanks to complete the passage describing Eleanor’s situation.
Answer:
There is a connection between work and the incentive to work.
The more incentive we have to work, the more work we get done. One of the incentives that we have to work is wages or money.
With the increase in the hourly wage, Eleanor will now weigh how much she would gain or lose in wages every time she chooses to work or not. In order words, the opportunity cost of reading at home. The more time she spends reading rather than working, the more money she loses.
Cheers
Lisa is trying to earn some extra money for a cruise she's taking in a few months, so she's made sure to book her days so that she has back to back clients. Today she's scheduled some clients to come in for simple washes and cuts between applying and finishing color treatments for other clients. Lisa plans to clean up at the end of her day to save time. What is the ergonomic issue with this situation? Select the best option. This will make her customers annoyed. She won't have enough time to perform each service. It's against licensing policy to schedule services like this. She will have long periods of holding the same posture.
Explanation:
would it be the overexaustion? I'm not even sure if its a word
Lisa is trying to earn some extra money for a cruise she's taking in a few months, so she's made sure to book her days so that she has back-to-back clients. Today she's scheduled some clients to come in for simple washes and cuts between applying and finishing color treatments for other clients. Lisa plans to clean up at the end of her day to save time. She will have long periods of holding the same posture. The correct option is D.
Why is ergonomics an issue?Muscle fatigue, muscle imbalances, and strain are all consequences of poor ergonomics. Performing the same motion repeatedly can lead to numerous muscle strains. These develop into repetitive stress injuries, some of the most frequent workplace accidents.
Working in uncomfortable positions or holding one position for a long time. assuming positions that strain the body, such as bending over to use a knife with the wrists bent or twisting the torso while lifting, or repeatedly reaching above shoulder height.
Thus, the ideal selection is option D.
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With SMART goals, what does the “T” stand for?
a
Training
b
Time bound
c
Task
d
Teaching
Answer:
time bond
Explanation:
time frame given to achieve that goal
Which of the following statements is LEAST accurate?
a. Color can be used for headings. WRONG
b. Color helps readers focus on essential information.
c. Use very bright colors to draw attention to text.
d. Bold or shading can be used instead of color.
The Jones Corporation uses a process system. During the current period, 2,500 units were started and 1,100 units were completed and transferred out. Ending units were 60% complete for materials and 45% complete for conversion costs. Direct materials costs added were $35,405 and conversion costs added were $32,870. There was no beginning WIP Inventory and conversion costs are added evenly throughout the process. At the end of the period, the cost per equivalent unit for conversion costs would be closest to
Answer:
The Jones Corporation
At the end of the period, the cost per equivalent unit for conversion costs would be closest to:
$19
Explanation:
a) Data and Calculations:
Units started during the current period = 2,500
Units completed and transferred out = 1,100
Ending inventory of units = 1,400
Degree of completion for ending inventory:
Materials = 60%
Conversion = 45%
Equivalent production:
Direct materials Conversion
Started and completed 1,100 1,100 (100%)
Ending inventory 840 (1,400 * 60%) 630 (1,400 *45%)
Total equivalent unit 1,940 1,730
Cost per equivalent unit:
Direct materials Conversion
Cost incurred $35,405 $32,870
Total equivalent unit 1,940 1,730
Cost per equivalent unit $18.25 $19
State two goals you hope to achieve through applying your coursework this term to your workplace experience.
Explanation:
1. Improve communication skills
2. Apply customer relationship marketing
The current business scenario is globalized and highly competitive, the social dynamics resulting from globalization and new technologies have changed the demands and relations between company / consumer, this new parameter requires companies to be promoters of society's well-being, acting with socio-environmental responsibility in the market, which means that this includes the relationship with all its stakeholders.
Therefore, it is essential that interpersonal communication skills are improved in a management-oriented course and applied to the work environment, as organizations have more and more responsibilities when dealing with people, and negotiation and communication skills with people are increasingly valued. different nationalities and culture, with ethics in communication being an essential factor.
Relationship marketing is also another essential factor that must be applied in the workplace, especially if you work directly with the customer or work using the internet, since companies are closer to customers, and must generate value and engagement that creates market identification and positioning.
A goal is termed as the idea of the future result that is committed to achieving. It can be a plan or envision that is to be accomplished by a group of persons. The deadline is set for the accomplishment of the goals by the group of people.
The two goals to achieve in the workplace are:
1. Improve communication skills
2. Apply customer relationship marketing
The current business scenario is globalized and highly competitive, the social dynamics resulting from globalization and new technologies have changed the demands and relations between company and the consumer. Relationship marketing is also another essential factor that must be applied in the workplace.
Therefore, it is essential that interpersonal communication skills are improved in a management-oriented course and applied to the work environment, as organizations have more and more responsibilities when dealing with people, and negotiation and communication skills with people are increasingly valued.
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A proposed new investment has projected sales of $850,000. Variable costs are 60 percent of sales, and fixed costs are $174,000; depreciation is $75,000. Prepare a pro forma income statement assuming a tax rate of 30 percent. What is the projected net income
Answer:
63,700Explanation:
Sales: 850,000
Variable Cost: (850,000*60%) = 510,000
Contribution Margin = 850k-510k= 340,000
Fixed cost = 174,000
Depreciation = 75,000
Earnings Before Taxes = 91,000
Taxes (30%) = (27,300)
Net Income 63,700When we compute the mean of a frequency distribution, why do we refer to this as an estimated mean?
Answer:
We call it an estimated mean because it represents the average of the data collected, and we assume that this average (estimated mean) represents the data collected. But this is not necessarily true since the estimated mean is not the same as all the different data collected. Most of the times, when we are working with statistics we do not know or are not even given all the data, we are just given the relevant ratios or indicators.
Which 3 transactions in QuickBooks Online are reflected in the Accounts Payable Aging Detail report?
a. Bill
b. Statements
c. Vendor Credits
d. Bill Payments
e. Purchase Orders
Answer:
a. Bill
c. Vendor Credits
d. Bill Payments
Explanation:
QuickBooks Online is an accounting software that has millions of users most of whom are medium and small time businesses. It is very useful in ensuring that the needs of even novices in accounting are taken care of.
In the Accounts Payable Aging detail report, QuickBooks online includes Bills which gives a list of vendors purchased from. It includes Vendor credits which shows the vendors owed and the payment terms of the debt and Bill payments which show the history of payments both owed and already made to certain vendors.
Parcel Corporation expects to pay a dividend of $5 per share next year, and the dividend payout ratio is 50 percent. If dividends are expected to grow at a constant rate of 8 percent forever, and the required rate of return on the stock is 13 percent, calculate the present value of growth opportunities.
Answer:
The present value of growth opportunities is $23.08
Explanation:
First, we need to calculate the price with growth
Stock Price = Expected Dividend / ( Required rate of return - growth rate )
Where
Expected Dividend = $5
Required rate of return = 13%
Growth rate = 8%
Pacing values in the formula
Stock Price = $5 / ( 13% - 8% )
Stock Price = $100
Now determine the expected EPS
EPS = Dividend / Payout ratio
Where
Dividend = $5
Payout ratio = 50%
Placing values in the formula
EPS = $5 / 50%
EPS = $10
Now calculate the present value of growth opportunity
PV of Growth opportunity = Price with growth - ( EPS / Required rate of return )
Where
Price with growth = $100
EPS = $10
Required rate of return = 13%
Placing value in the formula
PV of Growth opportunity = $100 - ( $10 / 13% )
PV of Growth opportunity = $100 - $76.92
PV of Growth opportunity = $23.08