Consider the Following Two Investment Situations

question 12

Essay

Consider the following two investment situations:
• In 1970, when WalMart Stores, Inc. went public, an investment of 100 shares cost $1,650. That investment
would have been worth $10,854,400 after 40 years (2010). The WalMart investors' rate of return would be
around 24.58%.
• In 1980, if you bought 100 shares of Fidelity Mutual Funds, it would have cost $5,245. That investment
would have been worth $80,810 after 15 years.
Which of the following statements is correct?
(a) If you bought only 50 shares of the WalMart stocks in 1970 and kept it for 40 years, your rate of return
would be 0.5 times 24.58%.
(b) The investors in Fidelity Mutual Funds would have made profit at the annual rate of 30% on the funds
remaining invested during the first 15 years.
(c) If you bought 100 shares of WalMart in 1970 but sold them after 10 years. (Assume that the WalMart stocks
grew at the annual rate of 35% for the first 10 years.) Then immediately, you put all the proceeds into Fidelity
Mutual Funds. After 15 years, the total worth of your investment would be around $511,140.
(d) None of the above

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Definitions:

Authorization

The formal or official approval, often required before an action or transaction can occur.

Job Cost Sheet

A document that records the costs related to a specific job or project, tracking materials, labor, and overhead.

Manufacturing Overhead

All indirect costs associated with the production process, including utilities, rent for manufacturing facilities, and salaries of supervisory staff.

Unit Costs

The cost incurred by a company to produce, store, and sell one unit of a particular product or service.