Final answer:
The student's question relates to the investment strategy called dollar-cost averaging (DCA), specifically to the scenario where the stock price has declined. It also involves understanding Present Value (PDV) calculations and the concept of spreading overhead concerning fixed costs and average fixed cost.
Step-by-step explanation:
The subject of the student's question is dollar-cost averaging (DCA), a strategy used in investing, which falls under the category of Business. The question pertains to the scenario where the average cost per share becomes less than the average price per share when there is a regular fixed dollar amount invested, specifically when the stock price has declined.
Present Value (PDV) Calculations
Understanding PDV calculations is crucial when it comes to investment strategies like DCA. For instance, suppose the PDV of total profits from a financial investment must be calculated, and then divided by the number of shares. If the total PDV is 51.3 million and the number of shares is 200, the calculation would be:
51.3 million / 200 = 0.2565 million or $256,500 per share.
Spreading the Overhead in Fixed Costs
When discussing fixed costs, commonly referred to as "overhead," and how they influence the average fixed cost, it's noted that as the quantity of output produced increases, the average fixed cost per unit decreases. So, if the fixed cost is $1,000, as the quantity of output goes up, the term "spreading the overhead" refers to the distribution of that fixed cost over a larger number of units, consequently lowering the average fixed cost.