On January 1, Total Assets and Liabilities Had a Fair

question 56

Essay

On January 1, total assets and liabilities had a fair market value of $21,000 and $8,000, respectively. On December 31, total assets and liabilities were $30,000 and $7,000, respectively. During the year, $9,000 of dividends were declared and paid and $3,000 of stock was issued. Calculate net income for the year.

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Definitions:

Intrinsic Value

The actual, fundamental value of an asset, based on underlying perceptions of its true value including all aspects of the business.

ROE

ROE, or Return on Equity, measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested.

Required Return

The minimum expected return an investor demands for an investment, considering its risk level.

Dividend Payout

The portion of a company's earnings that is distributed to shareholders, usually in the form of cash dividends.