Common stock value—Variable growth Lawrence Industries' most recent annual dividend was $1.05 per share (Do = $1.05), and the firm's required return is 16%. Find the market value of Lawrence's shares when dividends are expected to grow at 15% annually for 3 years, followed by a 5% constant annual growth rate in years 4 to infinity. The market value of Lawrence's shares is $

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Answer 1

The solution to find the market value of Lawrence's shares when dividends are expected to grow at 15% annually for 3 years, followed by a 5% constant annual growth rate in years 4 to infinity, with the most recent annual dividend was $1.05 per share (Do = $1.05), and the firm's required return is 16% is given as follows:

We can use the formula to determine the price of the stock using constant growth rate.D1 = D0 × (1 + g)D2 = D1 × (1 + g)D3 = D2 × (1 + g)P3 = D3 ÷ (r − g)P0 = D1 ÷ (1 + r) + D2 ÷ (1 + r)2 + D3 ÷ (1 + r)3 + P3 ÷ (1 + r)3Where, D0 = $1.05 (Most recent annual dividend)g1 = 15% (Dividend growth rate in the first 3 years)r = 16% (Required return)g2 = 5% (Constant annual growth rate in years 4 to infinity)By plugging the values, we can get;D1 = $1.21D2 = $1.39D3 = $1.60P3 = $56.00P0 = $1.21 ÷ (1 + 0.16) + $1.39 ÷ (1 + 0.16)2 + $1.60 ÷ (1 + 0.16)3 + $56.00 ÷ (1 + 0.16)3P0 = $26.29

Therefore, the market value of Lawrence's shares is $26.29.

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Related Questions

Which of the following is not a management activity, as defined by Peter Drucker?
a. Measuring performance
b. Setting goals
c. Planning
d. Controlling

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Measuring performance is not a management activity, as defined by Peter Drucker.

According to Peter Drucker, the management activities include measuring performance, setting goals, planning, and controlling. However, the option that is not considered a management activity by Drucker is "a. Measuring performance." Measuring performance is a crucial aspect of management as it allows for the evaluation and assessment of progress towards achieving goals. It provides valuable insights into the effectiveness of various strategies and initiatives.

Therefore, the conclusion in one line would be that measuring performance is not a management activity, as defined by Peter Drucker.

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Forecast methods for development forecasts are an important tool in industrial goods marketing. Which statement about the mentioned forecasting methods is CORRECT?
A) The MAD (Mean Absolute Deviation) is a measure of the experience of those who use forecasts.
B )In large companies, only experienced employees with a high MAD value are allowed to make forecasts.
C) The weighted moving average method gives more weight to recent data.
With the "moving averages" method, more recent data is ignored in order to better reflect long-term developments.
D)The "arithmetic mean" method does not use real data, only index values.

Answers

In the weighted moving average method, recent data points are assigned higher weights or importance compared to older data points. This is done to capture and reflect any recent trends or changes in the underlying pattern of the data.

By assigning higher weights to recent data, the weighted moving average method provides a more responsive and up-to-date forecast. This approach acknowledges the notion that recent data may have a more significant impact on future developments compared to older data. The other statements mentioned are not correct. The MAD (Mean Absolute Deviation) is a measure of forecast accuracy, not the experience of forecast users (option A). There is no indication that experienced employees with a high MAD value are given exclusive forecasting responsibilities (option B). Additionally.

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Do you think Ruby should change the payment method she uses for her employees? Justify your answer.

Give me the real answers or you will not be able to get brainlist ​

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Answer:

Yes ✌️✌️✌️✌️✌️

#1 You are driving down the highway when one of your tires suddenly blows out. You should

Pump your brakes rapidly, and steer your vehicle to control any skids.

Avoid using your brakes. Slow down gradually and concentrate on steering.

Press hard on your brake pedal and stop as quickly as you can.

Answers

Avoid using your brakes. Slow down gradually and concentrate on steering

What is the main source of capital for sole proprietorship?

Answers

Answer:

Sole proprietorships are not companies – you cannot sell shares to investors to raise capital. _ Most times, you'll be relying on your own resources, such as savings and retained profits, as well as bank loans and credit cards to raise the money you need.

Explanation:

Answer:

Sole traders and partnerships have a range of options to get finance: personal savings, retained profits, working capital, sale of assets, and bank loans. Put simply, personal savings is the the amount of money a person has at his disposal.

Petty cash balance $595 Courier receipt $88.78 Postage receipt $38 Office Supplies receipt $110.20 Business meal receipt $68.77 Cash on hand at the end of the month $314.27 What is the amount that needs to be recorded for cash over and short

Answers

The amount that needs to be recorded for cash over and short is $289.25.

Given petty cash transactions and the cash on hand at the end of the month, the question asks for the amount that needs to be recorded for cash over and short.

To determine the amount that needs to be recorded for cash over and short, we need to compare the initial petty cash balance with the sum of all the expenses and the cash on hand at the end of the month. The initial petty cash balance was $595, and the total of the expenses (courier receipt, postage receipt, office supplies receipt, and business meal receipt) amounts to $305.75 ($88.78 + $38 + $110.20 + $68.77).

To find the cash over and short, we subtract the total expenses from the initial petty cash balance:

$595 (initial petty cash balance) - $305.75 (total expenses) = $289.25.

This represents the difference between the expected petty cash balance based on the recorded expenses and the actual cash on hand at the end of the month.

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2. Minor Case Study: Winter sports in New England: The New England list of sports excludes a range of activities found in other parts of the world including A) ice fishing, B) dogsledding and C) heli-skiing. Explain how you would create an artificial environment for EACH activity.

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Artificial Environment for each winter sport in New England are: For ice fishing: To create an artificial environment for ice fishing, the first thing that you would have to do is to have an artificial lake, which can be created by digging out a large area and filling it with water.

Once you have an artificial lake, you will have to lower the temperature of the water, so that it freezes over. To do this, you can install a refrigeration system that keeps the water at a constant low temperature or you can build a large freezer that can hold the water.

For dogsledding: To create an artificial environment for dogsledding, you would have to create a trail that mimics the natural terrain found in the region. This could be done by using a bulldozer to create hills, turns, and straightaways, which will give the dogs a chance to run and play.

For heli-skiing: To create an artificial environment for heli-skiing, you would have to have a large indoor space that can simulate the mountain conditions found in the region. This would include having a large mountain, complete with snow, that can be used for skiing and snowboarding.

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what are the likely reason(s) that the market for dress shirts is not perfectly competitive? select all that apply. instructions: you must make a selection for each option. click once to place a check mark for correct answers and click twice to empty the box for wrong answers.

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Product differentiation, brand loyalty, economies of scale, and barriers to entry all contribute to the dress shirt market not being perfectly competitive.

The reason of The market for dress shirts is not perfectly competitive

The market for dress shirts is not perfectly competitive due to several reasons:

1. Product differentiation: Dress shirt manufacturers often design and produce unique styles, fabrics, and features to appeal to specific customer preferences. This creates product differentiation, which prevents perfect competition, where all products are identical.

2. Brand loyalty: Consumers often develop brand loyalty to specific dress shirt manufacturers, influenced by factors like advertising, customer service, and perceived quality. This loyalty results in imperfect competition, as consumers may be unwilling to switch to a cheaper or more readily available product.

3. Economies of scale: Large dress shirt manufacturers can take advantage of economies of scale, leading to lower production costs per unit. Smaller firms may struggle to compete with these lower prices, leading to a more oligopolistic market structure.

4. Barriers to entry: High initial investment costs, brand recognition, and the need for specialized expertise can create barriers to entry for new firms in the dress shirt market. This limits the number of competitors, resulting in an imperfectly competitive market.

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Intangible assets Are rights, privileges, and competitive advantages to the owner, used in operations, having no physical substance and can be amortized All of these

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Intangible assets encompass various forms of intangible rights, privileges, or competitive advantages that contribute to a company's value and can be utilized in its operations

The key characteristics of intangible assets are:

Rights: Intangible assets represent legal or contractual rights that provide benefits or advantages to the owner. These rights can include patents, trademarks, copyrights, trade secrets, or licenses. Privileges: Intangible assets can also encompass privileges granted to the owner, such as permits, franchises, or government licenses. Competitive Advantages: Intangible assets often provide a competitive edge or advantage to the owner over their competitors. Lack of Physical Substance: Unlike tangible assets such as buildings or equipment, intangible assets do not have a physical presence. Amortization: Intangible assets can be amortized, which refers to the systematic allocation of their cost or value over their useful life.

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according to research on competitive dynamics, which strategic profile contains firms that have the highest likelihood of being a "responder" to an action taken by a competitor?

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According to research on competitive dynamics, firms that exhibit a "follower" strategic profile are more likely to be responders to actions taken by competitors.

The follower profile is characterized by a company that is reactive and tends to imitate or follow the actions of other firms within the industry. This profile is often associated with companies that lack innovation and creativity in their business strategy and are typically more risk-averse.

Research has shown that follower firms tend to be more reactive to competitive actions, such as price changes, product launches, or marketing campaigns, than proactive in initiating such actions themselves.

They are more likely to copy the actions of their competitors rather than innovate themselves. In conclusion, firms that exhibit a follower strategic profile are more likely to be responders to actions taken by competitors.

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Name two types of domestic sewing machine​

Answers

Answer:

Manual. Manual sewing machines are run by pedaling and therefore, no electricity or battery is required to run them. ...

Electronic. These machines have a single motor that runs on electricity

Explanation:

mechanical sewing machine, embroidery machine

What is an appropriate response when an interviewer asks what salary you are looking for
during your initial interview? Would the response change if you'd been given an offer?

Answers

Thank you I will gladly take the offer

in september, dk company sells merchandise to lions company on credit. in october, lions company pays the balance in full. the entry to record the collection of cash by dk company in october will include a (debit/credit) to accounts receivable.

Answers

The entry to record the collection of cash by DK company in October will include a credit to accounts receivable.

a credit score is the agree with which allows one party to offer money or resources to some other birthday party in which the second birthday party does now not reimburse the primary birthday celebration at once, however, promises either to pay off or go back the one's sources at a later date.

A credit score bureau continues a month-on-month record of your payments in the direction of your bills and loan repayment equated month-to-month installments (EMIs) for the past few years. typically by way of collating preceding years' fee records information, the credit score bureau calculates your credit score rating. credit score is the ability to borrow money or get the right of entry to items or offerings with the know-how that you will pay later.

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The entry to record the collection of cash by DK company in October will include a credit to accounts receivable.

The collection of cash entries on account magazine access is needed when a business has obtained cash from a customer and the quantity is not allocated to a selected client invoice or the purchaser has no longer been invoiced. for instance, suppose a business gives design offerings and has obtained coins of 4,000 from a patron.

Accounts receivable are quantities owed to an enterprise by means of customers for credit score income invoiced to them on the account. whilst a client will pay a bill, an account receivable collection magazine entry is needed to clear the quantity on their account.

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What does the business cycle shown on this graph suggest about the condition of the economy at point A?

A. the economy is getting worse and will continue to climb in for another quarter

B. the economy has struggled for some time but is preparing to recover

C. the economy has been well for a while and is at its highest point of the cycle

D. The economy is in a period of growth that will continue for some time ​

What does the business cycle shown on this graph suggest about the condition of the economy at point

Answers

Answer:

C the Ecenomy has been well for while and is

at its highest piont of the cycle

Explanation:

hope it helps

Answer:

The economy is in a period of growth that will continue for some time

Explanation:

Income tax is a type of _____ tax.


A.progressive

B.regressive

C.digressive

D.permissive

Answers

Income tax is a type of progressive tax .

What does "progressive tax" mean?

Progressive taxation is a type of taxation where the taxing body imposes higher rates of taxation as the taxpayer's income rises. Taxes are collected in varying amounts depending on the taxpayer's income, with larger taxes being collected from those making more money than those making less. The tax system used by the government is progressive.

What do regressive and progressive taxes mean?

A regressive tax is one in which the relative burden increases less than proportionately to the increase in income, whereas a progressive tax increases more than proportionally to the growth in income.

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What is the main idea of this text?

Mari Copeny takes action to save her city

Readwork
For more information ask

Answers

Answer:

Mari's activism helped people around the country to learn more about the problems in her town.

Benjamin's credit card has an APR of 19%, calculated on the previous monthly balance, and a minimum payment of 2%, starting the month after the first purchase. His credit card record for the last 7 months is shown in the table below. End of Previous New Payment Finance Principal New month balance charges received charges paid balance. What is the total amount that Benjamin has made in payments over the 7 months?

O A. $59.38
O B. $47.01
O c. $225.64
O D. $285.02​

Answers

To solve this question, we need to calculate Benjamin's monthly payments of credit card by taking 2% of his previous month's balance and add any new charges he made during that month.

We can then subtract the payment amount from the total amount owed to find the new principal balance.
Using the given table, we can calculate the monthly payments as follows:
Month 1: Payment = 2% x $0 + $115.00 = $115.00. New principal balance = $115.00 + $115.00 x 0.19 / 12 = $116.75.
Month 2: Payment = 2% x $116.75 + $89.43 = $92.14. New principal balance = $116.75 + $89.43 - $92.14 = $114.04.
Month 3: Payment = 2% x $114.04 + $78.51 = $80.19. New principal balance = $114.04 + $78.51 - $80.19 = $112.36.
Month 4: Payment = 2% x $112.36 + $72.02 = $74.86. New principal balance = $112.36 + $72.02 - $74.86 = $109.52.
Month 5: Payment = 2% x $109.52 + $67.23 = $70.95. New principal balance = $109.52 + $67.23 - $70.95 = $105.80.
Month 6: Payment = 2% x $105.80 + $60.68 = $63.10. New principal balance = $105.80 + $60.68 - $63.10 = $103.38.
Month 7: Payment = 2% x $103.38 + $54.35 = $56.67. New principal balance = $103.38 + $54.35 - $56.67 = $101.06.
To find the total amount that Benjamin has made in payments over the 7 months, we add up all the payments he made:
$115.00 + $92.14 + $80.19 + $74.86 + $70.95 + $63.10 + $56.67 = $552.91.
Therefore, the answer is not one of the options provided.

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What is the main difference between a market and a command economy?

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Answer:

Market economies utilize private ownership as the means of production and voluntary exchanges/contracts. In a command economy, governments own the factors of production such as land, capital, and resources. Most nations operate largely as a command or market economy but all include aspects of the other.

Which of the following will probably happen to a product when demand is low?
A. The price will go up.
B. The price will go down.
C. The price will stay the same.
D. The price will change based on inflation.

Answers

Answer:

Answer = B

Explanation:

If nit many people want a product the seller would lower the price to make it seem like a bargain or make it more affordable

Why might a manager for a non-profit organization seem as concerned with his or her organization's financial well-being as a for-profit manager?

a. Non-profit managers are evaluated on financial performance only.

b. Non-profit managers try to give the illusion that they care about the "bottom line."

c. Not-for-profit organizations need to make money to continue operating.

d. Non-profit organizations have an obligation to turn a profit.

Answers

Answer:

c. Not-for-profit organizations need to make money to continue operating.

Explanation:

Non-profit organisations mainly focus on meeting their set objectives for example ensuring education is provided to poor children, health services reach the less privileged in society, and so on.

On the other hand for profit organisations mainly focus on turning a profit for the benefit of the business owners.

The manager for a non-profit organization will be as concerned with his or her organization's financial well-being as the for profit manager.

This is because non- profit organisations tend to have a tight budget and they will need to effectively manage resources available to them to ensure they keep functioning.

Question 3 of 10
What type of information system would be used by upper level management
using both internal and external information?
O A. Decision support system
O B. Executive information system
O C. Transaction processing system
о D. Management information system

Answers

Top-level executives can plan and manage their workflow and make business choices with an organizational support system. Thus, option B is correct.

What is the Executive information system?

A decision support system (D.S.S.) called an executive information system (E.I.S.) is used to help senior executives make decisions.

It accomplishes this by offering simple access to crucial information required for an organization to realize its strategic objectives. A user-friendly interface and graphical displays are typical features of an E.I.S.

Many businesses can use organizational information systems to track business performance and spot possibilities and issues.

The primary goal of E.I.S. (Executive Information Systems) is to give high-level management timely, accurate information to assist strategic tasks, including goal-setting, planning, forecasting, and performance monitoring.

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Gateway Corp. has an inventory turnover ratio of 7.2. What is its day's sales in inventory? Round your final answer to nearest day. a. 63 days b. 59 days c. 64 days d. 51 days

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Gateway Corp. has an inventory turnover ratio of 7.2. The day's sales in inventory is d. 51 days.

The inventory turnover ratio is a financial metric used to measure how efficiently a company manages its inventory. It shows how many times a company sells and replaces its inventory within a given period.

To find the day's sales in inventory, you can use the formula:
Day's sales in inventory = 365 days / inventory turnover ratio


Plugging in the given inventory turnover ratio of 7.2, we get:
Day's sales in inventory = 365 days / 7.2
Day's sales in inventory = 50.69 days

Rounding to the nearest day, the day's sales in inventory is 51 days. Therefore, the correct answer is option d. 51 days.

A high inventory turnover ratio is generally a good sign, as it indicates that a company is selling its inventory quickly and efficiently. However, the optimal inventory turnover ratio can vary by industry and company size. It's essential to compare the ratio with industry benchmarks and historical data to determine if the company is performing well in managing its inventory.

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Which of the following influences the consumer when he or she is deciding wether to buy a product?
A. The stock market
B. Opinion factors
C. External factors
D. Multiple factors

Answers

Answer:

D.

Explanation:

The factors that infuence a consumer's decision of buying product are multiple. It can be internal, external, economic, cultural, etc.

These factors include psychological factor, social factor, cultural factor, situational factor, etc.

Many times it's psychological factors such as moods. If a person is in bad or good mood, it will affect his behavior to buy a product. Culture or social life also influences consumer's buying habit. Some buy under peer pressure or to have status in society.

Therefore, option D is correct.

Answer: External factors

Explanation:

what type of promotion is a sign on the side of a bus that tells about season tickets for a professional baseball team? a. advertising b. personal selling c. public relations d. sales

Answers

The type of promotion that a sign on the side of a bus that tells about season tickets for a professional baseball team would typically fall under the category of advertising. The correct option is A.

Advertising is a form of promotional activity that involves using various media channels, such as print, digital, outdoor, broadcast, or social media, to communicate messages about products, services, or ideas to a target audience.

In this case, the sign on the side of the bus is a visual display that promotes season tickets for a professional baseball team, likely using graphics, text, and other visual elements to convey the message.

Personal selling (option B) involves direct one-on-one communication between a salesperson and a potential customer, while public relations (option C) involves managing and maintaining relationships between an organization and its various publics, such as customers, investors, employees, and the general public.

Sales (option D) typically refers to the process of selling products or services to customers through direct interaction or negotiation.

In the given scenario, the sign on the side of the bus is likely a form of advertising, as it is a visual display intended to reach a broader audience and promote the season tickets for the baseball team.

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the legal department of a large corporation would be considered

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A department in an organization is composed of the various qualified employees found therein. The legal department of a large corporation would be considered;

Staff Personnel

Staff personnel refers to the group of people whose work indirectly impacts the organization.

They may not be involved in the daily operations of the business, but their work is equally valuable because the organization can get into trouble without them.

The services of lawyers are required occasionally when there are legal issues.

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1. As a manger is it more important to build relationships with employees or be more authoritative?
2. Which is more influential feedback or feedforward?

Answers

1) As a manager, it is more important to maintain a balance between building relationships and displaying authority, depending on the needs of the organization and the individuals being managed, 2) Both feedback and feedforward are important in influencing behavior and improving performance, but their impact may vary depending on the context and timing.

1. The importance of building relationships with employees versus being authoritative depends on the management style and the specific context. Both aspects have their merits and can be effective in different situations. Building relationships with employees fosters trust, collaboration, and employee engagement, which can lead to higher productivity and job satisfaction.

On the other hand, being authoritative may be necessary in certain circumstances that require clear direction, quick decision-making, or maintaining discipline. Ultimately, a balance between building relationships and displaying authority may be necessary, depending on the needs of the organization and the individuals being managed.

2. Feedback refers to providing information about past performance, highlighting strengths and areas for improvement. It helps individuals reflect on their actions and make adjustments accordingly. Feedforward, on the other hand, focuses on providing guidance, suggestions, and ideas for future performance improvement. It helps individuals anticipate and plan for future actions. While feedback is often used to analyze past performance and provide corrective measures, feedforward emphasizes proactive approaches to enhance future performance.

Both feedback and feedforward are valuable tools for development and growth, and their effectiveness can be influenced by factors such as the quality of information, timeliness, and the receptiveness of the recipient.

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why must a broker ensure the competency of a sales agent in the services he provides to a party in a real estate transaction?

Answers

Because the broker is accountable for the acts of the sales agent, the broker must ensure the competence of a sales agent in the services he offers to a party in a real estate transaction.

What precisely is a broker's purview?

Brokers oversee a range of commercial transactions in the banking and financial industries, such as investments, real estate, and insurance. In addition to managing sales, brokers also create and maintain relationships, serve as a point of contact for parties, and perform administrative tasks.

What obligations has the broker toward the client?

A broker is obligated to carefully carry out a client's request and look for the best possible price. The broker is also supposed to be honest and not to make any representations on potential investments or trades. A brokerage firm has a duty to oversee the brokers it employs.

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Bart graduated college with $40,000 in student loan and credit card
debt and is extremely worried about how he'll pay it back. His best friend
Miguel has the same exact debt and isn't worried at all. What could explain
why these two people have different levels of concern about the same
situation?

Answers

There are many reasons why people have different reactions to debt. First being they don’t have a good job or they don’t know how to save and handle money.

These two people have different levels of concern about the same situation depending on the situation that they are in and the date of the repayment.


What is debt?

Debt may be defined as the sum that the borrower owes the lender. A debt is an amount of money that has been borrowed for a dedicated amount of span and must be repaid, plus interest.

Bart may have some kind of debt that he may need to fulfill and there will be some changes that will come with it as the date of the repayment and the money in hand can also be the major causes.

Miguel may have a job on his hand and was confident that he may pay for the amount that is incurred. Also, he may have some kind of savings that will help him.

Depending on their current circumstances and the payback date, these two persons are concerned about the same scenario to different degrees.

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Morganton Company makes one product and it provided the following information to help prepare the master budget: The budgeted selling price per unit is $70. Budgeted unit sales for June, July, August, and September are 8,200, 13,000, 15,000, and 16,000 units, respectively. All sales are on credit. Thirty percent of credit sales are collected in the month of the sale and 70% in the following month. The ending finished goods inventory equals 20% of the following month’s unit sales. The ending raw materials inventory equals 10% of the following month’s raw materials production needs. Each unit of finished goods requires 5 pounds of raw materials. The raw materials cost $2.50 per pound. Thirty percent of raw materials purchases are paid for in the month of purchase and 70% in the following month. The direct labor wage rate is $14 per hour. Each unit of finished goods requires two direct labor-hours. The variable selling and administrative expense per unit sold is $1.40. The fixed selling and administrative expense per month is $63,000. 5. If 76,000 pounds of raw materials are needed to meet production in August, how many pounds of raw materials should be purchased in July?

Answers

July:

Raw materials needed for July production = 8,200 units x 5 lbs/unit = 41,000 lbs

Ending raw materials inventory = 10% of August production needs = 10% x 76,000 lbs = 7,600 lbs

Total raw materials needed in July = 41,000 + 7,600 = 48,600 lbs

Purchases in July = 48,600 - 41,000 (raw materials needed for July production) = 7,600 lbs

Matthew, Inc., owns 30 percent of the outstanding stock of Lindman Company and has the ability to significantly influence the investee's operations and decision making. On January 1, 2021, the balance in the Investment in Lindman account is $422,000. Amortization associated with this acquisition is $15,000 per year. In 2021, Lindman earns an income of $138,000 and declares cash dividends of $46,000. Previously, in 2020, Lindman had sold inventory costing $35,000 to Matthew for $50,000. Matthew consumed all but 25 percent of this merchandise during 2020 and used the rest during 2021. Lindman sold additional inventory costing $42,900 to Matthew for $65,000 in 2021. Matthew did not consume 40 percent of these 2021 purchases from Lindman until 2022.

a. What amount of equity method income would Matthew recognize in 2021 from its ownership interest in Lindman?
b. What is the equity method balance in the Investment in Lindman account at the end of 2021?

Answers

(a)  Matthew, Inc. would recognize equity method income of $26,400 in 2021. (b) The equity method balance in the Investment in Lindman account at the end of 2021 is $478,020.

a. To calculate the equity method income for 2021, we first need to determine the share of Lindman's net income attributable to Matthew, Inc. Since Matthew owns 30% of Lindman, its share of net income is calculated as:

Matthew's share of net income = 30% x $138,000 = $41,400

In addition to the share of net income, Matthew also needs to adjust for the amortization associated with the acquisition, which is $15,000 per year. Therefore, the equity method income for 2021 is:

Equity method income = Matthew's share of net income - amortization expense

= $41,400 - $15,000

= $26,400

Therefore, Matthew, Inc. would recognize equity method income of $26,400 in 2021.

b. The equity method balance in the Investment in Lindman account at the end of 2021 is calculated as follows:

Beginning balance in Investment in Lindman account = $422,000

Add: Equity method income for 2021 = $26,400

Less: Dividends received in 2021 = $46,000

Add: Share of Lindman's net income not recognized in 2021 = 70% x ($138,000 - $41,400) = $67,760

Add: Additional inventory purchases made in 2021 and not consumed until 2022 = 60% x ($65,000 - $42,900) = $7,860

The total equity method balance in the Investment in Lindman account at the end of 2021 is:

Investment in Lindman balance = $422,000 + $26,400 - $46,000 + $67,760 + $7,860

= $478,020

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