Intrinsic value is the estimated value, which is calculated by present value of future cash flows that company expects to generate. If we base our understanding of shareholder value on intrinsic value, then the shareholder value would be value of expected future cash flows adjusted for time and risk.

DOL = ($20 - $8) * 1,000 / [($20 - $8) * 1,000 -$4,000] = 1,5

sustainable growth rate=return on equity*(1-dividend payout ratio)

where return on equity=net income/average shareholder equity

and

dividend payout ratio=dividends/net income.

Thus an increase in return on equity, an increase in net income, a decrease in average shareholder equity or a decrease in dividend payout ratio causes to an increase in sustainable growth rate. However an increase in dividends results in a decrease in susainable growth rate.

$468,000= $136,000 (1.08)^n

3.44= 1.08^n

n=log3.44/log 1.08

n=16

Corporations are founded for a reason, which is called as “main objective” in business academic jargon. Owners’ (shareholders’) main motive for taking all risks and starting up a business is assumed to beincreasing their wealth as much as possible, in technical words, maximizing wealth.

Contribution Margin Ratio of Parrot=(0.60*0.60)+(0.30*0.25)=0.435
Overall Break-even Sales=$43,500/0.435=$100,000

There are two major types of leverage - financial and operating. Financial leverage refers to the use of
debt to acquire additional assets. Operating leverage measures a company’s fixed costs as a percentage of its total costs. In the cases of both financial and operating leverage, the crucial question is how much leverageis appropriate.

FV= $16,000 *((1,14)^12 -1) / 0,14

=$436,332

With compound interest, one can earn interest on interest earned in the previous periods (You can earn interest on interest). Thus, money invested in compound interest rate earns more interest than money invested in simple interest rate.

Current liabilities include obligations which are settled within the next year or operating cycle, resulting in an outflow from the entity either in cash or in kind.

Earnings Quality: The extent which the reported income reflects the true financial condition and performance of the company.

In finance, risk refers to the likelihood that we will receive a return on an investment that is different from the return we expect to make. Thus, risk includes not only the bad outcomes (returns that are lower than expected “downside risk”), but also good outcomes (returns that are higher than expected “upside risk”). We consider both when measuring risk.

Degree of Total Leverage(DTL) = DOL * DFL

The cvp analysis is based on variable costing

Main stakeholders are owners, employees, suppliers, lenders, customers, the community, competitors and the government. Illegal entities, CEO, General managers, Borrowers are not related to the question, so C is the correct answer.

FV=100*(1+0.15)=373.75

ROE = (net income / sales) * (sales / average shareholders’ equity)
The first component of the equation is net profit margin and the second is the equity turnover ratio.
This equation can further be written as:
• ROE = (net income / sales) * (sales / average total assets) * (average total assets / shareholders’ equity)
In this case the equation for ROE breaks it into three components, net profit margin, asset turnover
ratio and equity multiplier:
• ROE = (net profit margin) * (asset turnover) * (equity multiplier)

Break-even point: $150,000/($10-$5) = 30,000

Break even sales: 30,000*$7 = $210,000

Financial Leverage: The extent which the company uses debt in financing its assets. As long as the cost of debt financing is lower than equity financing financial leverage is beneficial for the company.

100,000*(1.12)^5 = 176,234