Question

twin bay resort, currently has common stock of $275,000, additional paid-in capital of $900,000, and retained earnings of $90,000. on february 12 of certain year, it issues 20,000 shares of $10 par common stock at $7.50 per share. based on this information, the journal entry for the common stock issuance of february 12 would be: group of answer choices additional paid-in capital in excess of par $50,000 common stock $150,000 cash $200,000 common stock $200,000 cash $200,000 cash $150,000 additional paid-in capital in excess of par $50,000 common stock 200000 additional paid-in capital in excess of par $150,000 common stock $50,000 cash $200,000 cash $150,000 common stock $200,000 additional paid-in capital in excess of par $300,000 common stock $150,000 cash $150,000

Answer 1

An investor will pay for a share of Babble, Inc. based on the present value of the expected dividends. By discounting the future profits to their present value using a specified discount rate and dividing by the number of shares, one can calculate the share price. However, without a given discount rate or further details, an exact share price cannot be computed.

Step-by-step explanation:

To determine what an investor will pay for a share of stock in Babble, Inc., we need to calculate the present value of the dividends, as these are the profits that will be distributed to shareholders. Given that Babble will be disbanded in two years, we can calculate the present value of the expected profits using a discount rate that reflects the opportunity cost of capital for the investors. Since the profits of $15 million, $20 million, and $25 million are expected at present, in one year, and two years respectively, we will discount them back to their present value.

Assuming an appropriate discount rate (let's use 10% for example purposes), we perform the present value calculation for each year's profits and then sum these up. Once we have the total present value of the profits, we divide it by the number of shares (200 in this case) to find out the price per share. It's important to note that these calculations must use accurate discount rates and reflect the timing of the profits accurately. Given that this is a hypothetical example without specific discount rates provided, we won't produce an exact number here.

The formula for present value (PV) of a single payment to be received in the future is:

PV = Future Value / (1 + r)^n

where 'r' is the discount rate and 'n' is the number of years in the future the payment will be received. However, without a given discount rate or more specific investment details, we can't compute an exact share price for Babble, Inc. in this example.