Answer:
The correct answer is $192,000.
Explanation:
According to the scenario, computation of the given data are as follows:
Returned average cost = $160
Printers sold = 40,000
Return percentage = 3%
So, we can calculate the company's warranty expense by using following formula:
Warranty expense = Returned average cost × Printers sold × Return percentage
= $160 × 40,000 × 3%
= 6,400,000 × 3%
= $192,000
Matthew owns a warehouse that is used in business while Pamela owns land. Matthew exchanges the warehouse for the land, which will be held for investment. The FMV of the warehouse is $200,000 (basis $120,000) and the warehouse is subjected to a mortgage of $40,000, which is assumed by Pamela. Matthew receives $10,000 cash and the land, which has a FMV of $150,000 (basis of $130,000 to Pamela). What is the amount of Pamela's recognized gain or loss?
Answer:
Paloma gains $80,000
Explanation:
From the question,
Property received :
Land = 150,000
Cash = 10,000
Debt assumed by Pamela = 40,000
Total = 200,000
From the Warehouse she give out
= 120,000
Therefore 200,000 - 120, 000 = 80,000.
Hence $80,000 is the gain she realised.
Owners of the restaurant in A. anticipate that in one year their demand will double as long as they can provide good service to their customers. How much will they have to increase their service capacity to stay out of the critical zone?
To avoid the critical zone when demand doubles due to elastic demand for restaurant meals, the restaurant in question should aim to double its service capacity.
Explanation:The question revolves around a restaurant's service capacity and how it should be adjusted to meet an anticipated doubling of demand. To stay out of the critical zone when demand for restaurant meals is elastic, the restaurant should increase its capacity to match the demand increase. This means if demand doubles, the restaurant should aim to double its service capacity. This could involve various strategies, such as increasing the number of seats, hiring more staff, expanding business hours, or optimizing service workflows to handle more customers without decreasing service quality.
In practical terms, as the demand for restaurant meals is more price-sensitive and elasticity of demand is higher compared to inelastic goods like housing, a significant change in the quantity demanded can occur with price changes. Therefore, a restaurant anticipating such changes in demand should prepare by scaling their service capacity to ensure customer satisfaction and efficient service provision.
Delaware Corp. prepared a master budget that included $18,225 for direct materials, $28,800 for direct labor, $15,400 for variable overhead, and $39,300 for fixed overhead. Delaware Corp. planned to sell 4,050 units during the period, but actually sold 4,320 units. What would Delaware’s direct materials cost be if it used a flexible budget for the period based on actual sales? (Do not round your intermediate calculations.)
Answer:
$19,440
Explanation:
The computation of the direct material cost is shown below:
But before that first we have to determine the per unit which is given below
= Total direct material cost ÷ planned selling units
= $18,225 ÷ 4,050 units
= $4.5
And, the actually selling units is 4,320 units
So, the direct material cost is
= Per unit cost × actually selling units
= $4.5 × 4,320 units
= $19,440
We simply multiplied the per unit with the actually selling units so that the direct material cost could come
Rundle Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,200 containers follows: Unit-level materials $ 6,000 Unit-level labor 6,400 Unit-level overhead 3,300 Product-level costs* 8,100 Allocated facility-level costs 27,500 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Rundle for $2.60 each. Required Calculate the total relevant cost. Should Rundle continue to make the containers? Rundle could lease the space it currently uses in the manufacturing process. If leasing would produce $12,300 per month, calculate the total avoidable costs. Should Rundle continue to make the containers?
Final answer:
To calculate the total relevant cost, you need to add up the unit-level materials, labor, and overhead, as well as the product-level costs and the allocated facility-level costs. To determine if Rundle should continue making the containers, compare the total relevant cost to the cost of purchasing the containers from Russo Container Company. To calculate the total avoidable costs if Rundle leased the space, subtract the monthly lease amount from the total relevant cost. Compare the total avoidable costs to the cost of purchasing the containers to determine if Rundle should continue making them.
Explanation:
To calculate the total relevant cost, we need to add up the unit-level materials, labor, and overhead, as well as the product-level costs and the allocated facility-level costs. The total relevant cost is as follows:
Add all these costs together to get the total relevant cost.
To determine if Rundle should continue making the containers, we need to compare the total relevant cost to the cost of purchasing the containers from Russo Container Company. If the total relevant cost is less than the cost of purchasing the containers, it would be more cost-effective for Rundle to continue making the containers. If the total relevant cost is greater than the cost of purchasing the containers, it would be more cost-effective for Rundle to buy the containers from Russo Container Company.
To calculate the total avoidable costs if Rundle were to lease the space it currently uses in the manufacturing process, we need to subtract the monthly lease amount of $12,300 from the total relevant cost. The total avoidable costs would be the difference between the total relevant cost and the lease amount.
To determine if Rundle should continue making the containers after leasing the space, we would compare the total avoidable costs to the cost of purchasing the containers. If the total avoidable costs plus the cost of leasing the space is less than the cost of purchasing the containers, it would be more cost-effective for Rundle to continue making the containers. If the total avoidable costs plus the cost of leasing the space is greater than the cost of purchasing the containers, it would be more cost-effective for Rundle to buy the containers from Russo Container Company.
It is cheaper for Rundle to continue producing the containers at $21,100 than to buy them for $23,920. However, considering additional avoidable costs, Rundle should stop producing and lease the space, as the total avoidable cost is $58,200.
Russo Container Company offers to sell the containers for $2.60 each. The total cost of buying the containers would be 9,200 × $2.60 = $23,920.
To find the total relevant cost of producing the containers, we consider the avoidable costs:
Unit-level materials: $6,000Unit-level labor: $6,400Unit-level overhead: $3,300Two-thirds of Product-level costs (which are not avoidable): $8,100 × (2/3) = $5,400The total relevant cost of producing is $6,000 + $6,400 + $3,300 + $5,400 = $21,100.
Comparing the total relevant cost of producing ($21,100) to the cost of buying ($23,920), it is cheaper to continue producing the containers.
Given the new lease opportunity at $12,300 per month, the avoidable costs including product-level costs (one-third) and allocated facility-level costs are factored in:
Unit-level costs: $6,000 + $6,400 + $3,300 = $15,700One-third of Product-level costs: $8,100 × (1/3) = $2,700Allocated facility-level costs: $27,500The total avoidable costs are $15,700 + $2,700 + $27,500 = $45,900.
Including the lease opportunity, the total cost avoided by not producing is $45,900 + $12,300 = $58,200.
Thus, Rundle should stop producing and lease the space since the avoidable cost ($58,200) is significantly higher than the cost of buying the containers ($23,920).
A lottery claims its grand prize is $15 million, payable over 5 years at $3000000 per year. If the first payment is made immediately, what is the grand prize really worth? Use an interest rate of 8%.
Answer:
$ 11, 978,133.75
Explanation:
The grand prize of 15,000,000 is worth the present value of the prize at an 8% interest. The prize is paid every year, meaning its an annuity case.
The present value of an annuity is calculated using the formula
PV = P × 1 − (1+r)−n
r
Where
P $3,000,000
r is 8% 0r 0.08
n is 5
PV = $3,000,000 x 1-(1+0.08) - 5
0.08
PV =$3,000,000 x 1 - 0. 6805831
0.08
PV = $ 3,000, 000 x 3.99271
PV = 11, 978,133.75
The grand prize of $15 million, payable over 5 years at $3,000,000 per year with the first payment made immediately, is calculated by determining the present value of each payment using an interest rate of 8%, and summing them together.
To determine what the grand prize of $15 million, payable over 5 years at $3,000,000 per year, is really worth when the first payment is made immediately, we need to calculate the present value of the annuity. Since the first payment is immediate, it retains its full value of $3,000,000. The remaining four payments need to be discounted back to their present value using the interest rate of 8%.
Using the formula for present value of an ordinary annuity, where PV is the present value, PM is the periodic payment, r is the interest rate per period, n is the number of periods, and considering that the first payment has no discount, the calculation is:
PV = PM + PM/(1+r) + PM/(1+r)² + PM/(1+r)³ + PM/(1+r)⁴
We substitute the known values:
PV = $3,000,000 + $3,000,000/1.08 + $3,000,000/1.08² + $3,000,000/1.08³ + $3,000,000/1.08⁴
The grand prize is the sum of these present values. After calculating each term and summing them up, we'd find out the actual worth of the $15 million prize.
Grady Precision Measurement Tools has forecasted the following sales and costs for a new GPS system: annual sales of 40,000 units at $19 a unit, production costs at 40% of sales price, annual fixed costs for production at $150,000 and straight-line depreciation expense of $250,000per year. The company tax rate is 40%. What is the annual operating cash flow of the new GPS system
Answer:
$283,600
Explanation:
Sales revenue = 40,000 * $19 = $760,000
Production cost = $760,000 * 40% = $304,000
Total cost = Production cost + Annual fixed production cost = $304,000 + $150,000 = $454,000
Annual depreciation expense = $250,000
Income before tax = $760,000 - $454,000 - $250,000 = $56,000
Tax = $56,000 * 40% = $22,400
Operating cash flow = Income before tax + Depreciation - Tax = $56,000 + $250,000 - $22,400 = $283,600
Therefore, the annual operating cash flow of the new GPS system is $283,600.
To compute the annual operating cash flow, calculate the company's earnings before interest and taxes, subtract the tax from this amount, and add back the depreciation expense. The operating cash flow for Grady Precision Measurement Tools would be $313,600 per year.
Explanation:To calculate the annual operating cash flow (OCF), we first need to compute the company's earnings before interest and taxes (EBIT). Start with the annual sales revenue, which is 40,000 units x $19 per unit = $760,000. Subtract the production costs, which are 40% of the sales amount, and the fixed production costs, and the depreciation expense.
Then, compute EBIT: $760,000 - (0.40 x $760,000) - $150,000 - $250,000 = $106,000. Finally, calculate OCF by subtracting the tax expense from EBIT and adding back depreciation (taxes = 40% of EBIT), therefore OCF = (1 - 0.40) x $106,000 + $250,000 = $63,600 + $250,000 = $313,600.
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The actual cost of direct materials is $10.50 per pound. The standard cost per pound is $11.75. During the current period, 10,000 pounds were used in production and 11,500 pounds were purchased. The standard quantity for actual units produced is 9,900 pounds. How much is the direct materials price variance, assuming it is recorded at purchase point
Answer:
$14,375 F
Explanation:
The standard cost per pound $11.75
Less actual cost of direct materials $10.50 per pound
Balance $1.25
Hence;
Purchased pound 11,500 × $1.25
= $14,375 F
Therefore the direct materials price variance, assuming it is recorded at purchase point will be $14,375 F
Russ Belmont is a staff accountant at a bank in the downtown Phoenix area. Belmont commutes to the bank each day from his suburban home in Mesa - a distance of 19 miles each way. Belmont's working hours are 8:00 AM to 5:00 PM and he commutes from 7:15 AM until he reaches the bank's parking garage between 7:45 and 8:00 (depending upon the traffic). If Russ is in an accident while on the freeway at 7:30 AM: a. the bank will be liable for any injuries to third parties. b. the bank will not be liable for any injuries to third parties. c. Belmont is an independent contractor and the bank will have no liability for injuries or damages in the accident. d. none of the above
Answer:
Answer b
Explanation:
One of the main principles of employer's liabilities for any damages to third party by employee is often referred to as Respondent Superior rule. Under this rule employer is liable for any damages employee did while performing his/her job according to the instructions given by the employer. Since Russ was involved in an accident while still not at work or not performing his duties, bank shouldn't be liable for injuries to third parties.
Final answer:
Based on the 'going and coming rule', the bank is likely not liable for accidents occurring during an employee's commute, hence the bank would not be liable for third-party injuries in Russ Belmont's freeway accident.
Explanation:
In the scenario provided, the answer to whether the bank would be liable for any injuries to third parties if Russ Belmont is in an accident on his way to work depends on multiple factors. Generally, an employer might not be held liable for accidents that occur during an employee's commute to and from work.
This is based on the going and coming rule which typically exempts employer liability for torts committed by employees while on their way to or from the workplace, as this is considered outside of their employment duties. However, there can be exceptions to this rule, such as when the employee is running an errand for the employer or if the travel is a significant part of the employee's service to the employer. Without additional information indicating such exceptions, the most likely legal interpretation is that in this case, the bank would not be liable for any injuries to third parties (Option B).
Erosion costs. Fat Tire Bicycle Company currently sells 39 comma 000 bicycles per year. The current bike is a standard balloon-tire bike selling for $120, with a production and shipping cost of $35. The company is thinking of introducing an off-road bike with a projected selling price of $375 and a production and shipping cost of $250. The projected annual sales for the off-road bike are 17 comma 000. The company will lose sales in fat-tire bikes of 9 comma 000 units per year if it introduces the new bike, however. What is the erosion cost from the new bike? Should Fat Tire start producing the off-road bike? What is the erosion cost from the new bike?
Answer:
Erosion cost from the new bike is equal to the profit lost from existing bike
= 9,000 x (120 - 35)
= $765,000
Benefit from new bike = 17,000 x (375 - 250)
= $2,125,000
Net Benefit = $2,125,000 - $765,000
= $1,360,000
Since there is net benefit from new bike, Fat Tire should start producing the off-road bike
Kellogg Company is the world's leading producer of ready-to-eat cereal and a leading producer of grain-based convenience foods such as frozen waffles and cereal bars. Suppose the following items were taken from its 2014 income statement and balance sheet. (All dollars are in millions.)
Type of Account Account Name Dollar Amount
Stockholders' Equity Retained earnings $5,481
Expense Cost of goods sold 7,184
Expense Selling and administrative expenses 3,390
Asset Cash 334
Liability Notes payable 44
Expense Interest expense 295
Liability Bonds payable 4,835
Asset Inventory 910
Revenue Sales revenue 12,575
Liability Accounts payable 1,077
Stockholders' Equity Common stock 105
Expense Income tax expense 512
Prepare an income statement for Kellogg Company for the year ended December 31, 2014.
Answer:
Please see answer in the explanation column.
Explanation:
Given,
Type of Account----- Account Name --- Amount in dollars
Stockholders' Equity--- Retained earnings ----$5,481
Expense----- Cost of goods sold ----$7,184
Expense---- Selling and administrative expenses ----$3,390
Asset ---Cash -----$334
Liability -----Notes payable---- $44
Expense---- Interest expense----$ 295
Liability---- Bonds payable----$ 4,835
Asset---- Inventory---- $910
Revenue---- Sales revenue----$12,575
Liability ----Accounts payable---- $1,077
Stockholders' Equity--- Common stock---- $105
Expense---- Income tax expense -----$512
Journal for income statement for Kellogg Company for the year ended December 31, 2014.
Revenue----
Sales revenue----$12,575
Expenses
Cost of goods sold ----$7,184
Selling and administrative expenses $3,390
Interest expense---- $295
Income tax expense -----$512
Total Expense---$11,381
Net Income = Total Revenue – Total Expense= $1,194
The Net income of the Kellogg Company for the year ended Dec. 31, 2014, is $23, 956. The preparation of the Income statement is attached below in the form of an MSWord Document.
An income statement, often known as a profit and loss account, is one of a company's financial statements that shows the company's or firm's revenues and expenses for a specific time period. It explains how revenues are converted into net profit or net income.
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What is brand awareness
Answer:
the extent to which consumers are familiar with the distinctive qualities or image of a particular brand of goods or services.
Explanation:
Answer:
C. how well a brand is recognized by potential customers
Explanation:
on edmentum
When interest is accrued on an interest-bearing note receivable, the Interest Revenue account is Select one: a. Increased; the Interest Receivable account is increased b. None of the above c. Decreased; the Interest Receivable account is increased d. Increased; the Notes Receivable account is decreased e. Increased; the Notes Receivable account is increased
Answer:
The correct answer is Option A.
Explanation:
Note is a promissory note with a written promise made by the borrower to the lender (payee) to pay a certain, definite sum at a specified date.
Interest revenue on the note is calculated as: Principal x Interest Rate x Time
So, when the interest is accrued, the required journals would be:
Debit Interest receivable XXX
Credit Interest revenue XXX
(Interest accrual on notes receivable)
The debit and credit to the corresponding accounts mean an increase.
The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $970,000, and it would cost another $19,500 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and it would be sold after 3 years for $617,000. The machine would require an increase in net working capital (inventory) of $15,000. The sprayer would not change revenues, but it is expected to save the firm $473,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 35%. Cash outflows, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar. What is the Year-0 net cash flow
Answer:
-1,004,500
Explanation:
Cash used by an transaction is known as the cash outflow and cash provided by the transaction is known as cash inflow. Expenses and payments uses the cash and Revenue or receipts provide the cash.
All of the following cash flows are incurred in year 0
Base price = $970,000
Installation cost = $19,500
Increase in Working capital = $15,000
Total Cash Flow = $970,000 + $19,500 + $15,000 = $1,004,500
Cash has been used by each above transaction so,There is a Cash out flow of $1,004,500.
Final answer:
The Year-0 net cash flow for the Campbell Company upon purchasing a robotic paint sprayer is the sum of its cost, installation, and increased inventory needs, amounting to -$1,004,500.
Explanation:
The Year-0 net cash flow for Campbell Company considering the purchase of a robotic paint sprayer is calculated by adding the initial cost of the sprayer, installation costs, and the change in net working capital. We do not include depreciation here as it not a cash flow, and it will be considered when calculating tax savings in the later years. Therefore, the initial cash outflow (net cash flow at Year-0) for the sprayer is:
Cost of the sprayer: $970,000
Installation costs: $19,500
Increase in net working capital: $15,000
Adding these together, the total Year-0 net cash flow is:
-$970,000 (cost of the sprayer) - $19,500 (installation costs) - $15,000 (net working capital) = -$1,004,500
A ________________ is a technological term used in security policy to describe a future state in which specific goals and objectives have been achieved and which processes, resources, and tools are needed to achieve those goals and objectives.
Answer: Target state
Explanation: A business' security policy is a continuously updated document that stipulates how a firm intends to protect both its physical and technological assets from competition and threats. The target state is simply a measurement of all efforts that addresses the question of where an organization would want to be. Thus it describes this future state with objectives and goals met, and the processes, resources and policies etc. that are needed to get to this future state.
The target state architecture is a tool used in IT and business solutions and works on the basis of IT capabilities.
The fill form of the target state is the enterprise transformation and change. The target state involves the values, position, strategies and objectives plus strategies. The target options include the idealized architecture, state, stretchered architecture state and a realistic and achievable state.Hence the target state.
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"Individuals who participate in coaching programs that provide information on interviews and tips on successful interviewing tend to have higher interview scores than those who do not"
The effects of coaching on interviews evaluations
Explanation:
This is a true statement, but it does contain some caveats, because for an interview to be successful, it must consider a number of factors, such as the candidate's compatibility with the vacancy, the psychological profile must be compatible, but it will complement academic training and experiences required for the vacancy available.
However, it is a fact that
individuals who participate in training programs that provide information about interviews and tips on successful interviews, may perform better than those who did not, as they will learn the best self-confidence and public speaking techniques that they can achieve with higher scores.
Answer:
The statement is: True.
Explanation:
Interview coaching programs are useful for people who want to learn techniques to pass job interviews with optimal performances. How to prepare a resume, keep control in front of stress interviews or direct interviews, and techniques on how to pass multiple-skill tests are some of the topics reviewed in such training.
Under those circumstances, individuals increase their chances of being accepted for those jobs compared to applicants who do not prepare at the same level.
merican Products is concerned about managing cash efficiently. On the average, inventories have an age of 9090 days, and accounts receivable are collected in 6060 days. Accounts payable are paid approximately 3030 days after they arise.
The firm’s operating-cycle investments are $30 million per year.Cost of goods sold are $20 million, and purchases are $15 million.
a. Calculate the firm’s operating cycle.
b. Calculate the firm’s cash conversion cycle.
c. Calculate the amount of resources needed to support the firm’s cash conversion cycle.
d. Discuss how management might be able to reduce the cash conversion cycle.
Answer:
a. operating cycle = 150 days
b. cash conversion cycle = 120 days
c. $9 863 013.70
d. decrease the period that stock stays on hand. Decrease the time debtors pay back debt. Increase time firm takes to pay off debts.
Explanation:
a. Operating cycle = inventory period + accounts receivable period
= 90 days + 60 days
= 150 days
it takes almost 5 months.
b. cash conversion cycle = number of days of inventory + number of days of receivables – number of days of payables
= 90 days + 60 days – 30 days
= 120 days
This cycle is 3 months long.
c. Amount needed to support the cash conversion cycle
= (annual sales / 365) * cash conversion cycle
= ($30 million / 365 ) * 120 days
= $82191.78082* 120 days
= $9 863 013.70
d. there are at least 3ways that a business can decrease its cash conversion cycle.
1. collect receivables faster by offering discounts to debtors who repay early
2. decrease number of days inventory on hand by having sales and discounts on stock
3. extend the payables period by having a good relationship with suppliers
Wright Company's cash account shows a $29,300 debit balance and its bank statement shows $27,600 on deposit at the close of business on May 31. a.The May 31 bank statement lists $190 in bank service charges; the company has not yet recorded the cost of these services. b.Outstanding checks as of May 31 total $6,500. c.May 31 cash receipts of $7,100 were placed in the bank’s night depository after banking hours and were not recorded on the May 31 bank statement. d.In reviewing the bank statement, a $490 check written by Smith Company was mistakenly drawn against Wright’s account. e.The bank statement shows a $420 NSF check from a customer; the company has not yet recorded this NSF check. Prepare its bank reconciliation using the above information.Prepare a bank reconciliation for the company using the above information
Answer:
Bank Reconciliation Statement:
Calculation of Adjusted cash Balance on 31 May:
Cash Balance: $ 29,300
less: Bank Charges $ (190)
less: NSF Check $ (420)
Adjusted cash Book Balance $ 28,690
Add: Outstanding Checks $ 6,500
Less: Uncleared Checks $ 7,100
Revised Cash Book Balance (A) $ 28,090
Bank Statement Balance $ 27,600
Add: Error by Bank $ 490
Adjusted Bank Balance (B) $ 28,090
Explanation:
Bank reconciliation is a company document prepared in order to reconcile difference between balance as per cash book and balance as per bank statement.
The difference arise because of two reasons:
Timing differences (Outstanding checks and Uncleared checksError and Omissions. (Bank charges -NSF)Final answer:
The bank and book balances now reconcile to $27,710 and $28,690, respectively, after accounting for the bank error correction, which would increase the cash account by $490 to $29,180.
Explanation:
Preparing a bank reconciliation involves adjusting the balance shown on the bank statement and the balance in the company's cash account to reflect all relevant transactions. Using the information provided, here is how you would prepare Wright Company's bank reconciliation:
Start with the bank statement balance of $27,600.Add the May 31 cash receipts of $7,100, which were not included in the bank statement (Deposits in Transit).Subtract the outstanding checks total of $6,500.Subtract the bank error of $490 mistakenly deducted from Wright's account (Bank Error).The adjusted bank statement balance would be $27,600 + $7,100 - $6,500 - $490 = $27,710.
Now, adjust the company's cash account:
Start with the company's book balance of $29,300.Subtract the bank service charges of $190 not previously recorded (Bank Service Charges).Subtract the $420 NSF (non-sufficient funds) check from a customer (NSF Check).The adjusted cash account balance would be $29,300 - $190 - $420 = $28,690.
Jones Company found the following information about delivery to customers. Late deliveries were made for 8 % of the orders. Early arrivals, which are unacceptable to customers, occurred 2 % of the orders. The company also experienced a 1.5% damage rate during delivery. It also had incorrect information on 3% of the invoices billed to customers. Based on this information, what was the approximate perfect order performance at Jones Company
Expert systems are used when: predictions for the future are required. patterns of consumer behavior need to be investigated. Big data needs to be analyzed. expertise is in short supply and needs to be captured. senior managers need reports on overall business performance.
Answer:
predictions for the future are required.
Explanation:
Expert system is defined as a computer system that mimics the decision making ability of a human being. It does this by using bodies of knowledge to solve complex problems.
Expert systems is made up of the knowledge base and the inference system. Facts are analysed and inferences about future outcomes are presented.
This is a useful tool for making accurate forecasts.
The Horizon Company will invest $65,000 in a temporary project that will generate the following cash inflows for the next three years. Year Cash Flow 1 $ 24,000 2 37,000 3 34,000 The firm will also be required to spend $17,000 to close down the project at the end of the three years. a. Compute the net present value if the cost of capital is 12 percent.
Answer:
NPV = $-1,974.99
Explanation:
Net present value is the present value of after tax cash flows from an investment less the amount invested.
Net present value can be calculated using a financial calculator
Cash flow in year 0 = $-65,000
Cash flow in year 1 = $ 24,000
Cash flow in year 2 = $37,000
Cash flow in year 3 = $34,000 - $17,000 = $17,000
I = 12%
NPV = $-1,974.99
To find the NPV using a financial calacutor:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
I hope my answer helps you
What does it mean when a manager takes a systems view? A. To ensure a firm has no carbon footprint B. To focus on common resources such as sunshine, air, and airspace C. To maximize the triple bottom line D. To look at a product's life from design to disposal, including all the resources required
Answer: D. To look at a product's life from design to disposal, including all the resources required
Explanation: To take a systems view is to look at a product's life from design to disposal, including all the resources required. It means that the manager is taking a step back to examine the entire scope of the project in order to understand all the operations involved the project including function. In simpler terms, it means taking a holistic view of the project and how it relates to the larger organization. Taking a systems view can lead to better assessments of the product, the resources that are required in making the product, the entire design process among others thereby providing a way of examining the potential consequences of actions, minimize risks, recognize the impact of time delays and feedback.
Charisma, Inc., has debt outstanding with a face value of $6.2 million. The value of the firm if it were entirely financed by equity would be $29.9 million. The company also has 425,000 shares of stock outstanding that sell at a price of $58 per share. The corporate tax rate is 22 percent. What is the decrease in the value of the company due to expected bankruptcy costs
Answer:
Decrease in value of company due to expected bankruptcy cost = $414,000
Explanation:
As per the data given in the question,
According to M & M proportional I with taxes,
Levered firm value is = Equity + Debt
= $29,900,000 + 0.22 × $6,200,000
= $31,264,000
Market value of the firm = market value of debt + market value of equity
= $6,200,000 + 425,000 × $58
= $30,850,000
Decrease in value of company due to expected bankruptcy cost = $31,264,000 - $30,850,000
= $414,000
The Crash, Inc. has an ROE of 12%, a payout ratio of 60%, earnings next year of $8 per share, a required return of 18%, and a current price of $36.36 Find the Present Value of Growth Opportunities for Crash.
Final answer:
The Present Value of Growth Opportunities (PVGO) for Crash, Inc. is $29.25 per share, calculated by subtracting the no-growth stock price from the current stock price, with the no-growth price derived from next year's earnings, payout ratio, and required return.
Explanation:
To find the Present Value of Growth Opportunities (PVGO) for Crash, Inc., we must understand that PVGO represents the portion of the company's stock price that is attributable to future growth. The formula to calculate stock value in this case is:
Stock Price = EPS x (1 - Payout Ratio) ÷ (Required Return - Growth Rate) + PVGO
Crash, Inc. has provided the following information:
Earnings per share (EPS) for next year: $8
Payout ratio: 60%
Required return: 18%
Return on Equity (ROE): 12%
Current stock price: $36.36
First, we need to calculate the Growth Rate using the retention rate and ROE, which is given by:
Growth Rate = ROE x (1 - Payout Ratio)
Substituting the known values:
Growth Rate = 0.12 x (1 - 0.60) = 0.048 or 4.8%
The company's stock price without growth (No-Growth Price) can be found by:
No-Growth Price = EPS x (1 - Payout Ratio) ÷ Required Return
Substituting the known values:
No-Growth Price = $8 x (1 - 0.60) ÷ 0.18 = $7.11
Now we can determine PVGO by rearranging the stock price formula and subtracting the No-Growth Price from the current stock price:
PVGO = Current stock price - No-Growth Price
PVGO = $36.36 - $7.11 = $29.25
Therefore, the Present Value of Growth Opportunities for Crash, Inc. is $29.25 per share.
Madsen Motor's bonds have 23 years remaining to maturity. Interest is paid annually, they have $1,000 par value, the coupon interest is 9%, and the yield to maturity is 11%. What is the bond's current market price
Answer:
The bond's current market price is $834.67
Explanation:
Market Value of the bond is the present value of all cash flows of the bond. These cash flows include the coupon payment and the maturity payment of the bond. Price of the bond is calculated by following formula:
According to given data
Assuming the Face value of the bond is $1,000
Coupon payment = C = $1,000 x 9% = $90 annually
Number of periods = n = 23 years =
Current Yield = r = 11% / 2 = 5.5% semiannually
Market Value of the Bond = C x [ ( 1 - ( 1 + r )^-n ) / r ] + [ $1,000 / ( 1 + r )^n ]
Market Value of the Bond = $90 x [ ( 1 - ( 1 + 11% )^-23 ) / 11% ] + [ $1,000 / ( 1 + 11% )^23 ]
Market Value of the Bond = $743.98 + $90.69 = $834.67
The current market price of Madsen Motor's bond can be calculated by determining the present value of the bond's annual payments and the present value of its face value when it matures, which adds up to $1045.75.
Explanation:In order to calculate the current market price of a bond, we need to calculate its present value using the coupon payment, the yield to maturity, and the face value. The bond's coupon payment can be calculated as it's face value multiplied by the coupon interest rate. Therefore, for the Madsen Motor's bond, the coupon payment is $1,000 X 0.09 = $90 annually. The present value of these annual payments for the remaining term of the bond can be calculated using the formula for the present value of an annuity: PVA = PMT X ((1 - (1 + r)^-n ) / r), where PMT is the annual payment, r is the yield to maturity divided by the number of periods, and n is the number of periods. In the case of this bond, this gives us the present value of annuity as $90 X ((1 - (1 + 0.11)^-23) / 0.11) = $807.57. The present value of the face value of the bond when it matures, also known as the present value of a lump sum, is computed as: PVLS = FV / (1+r)^n, where FV is the face value of the bond. For the Madsen Motor's bond, this is $1,000 / (1 + 0.11)^23 = $238.18. The current market price of the bond is the sum of these two present values, which comes to $807.57 + $238.18 = $1045.75.
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The income statement for the Clothing Division of Tom Ron Surf Company is as follows: Sales $445,000 Operating expenses 270,000 Net operating income 175,000 Interest expense 35,000 Earnings before taxes 140,000 Income tax expense (30%) 42,000 Net income $ 98,000 How much is net operating profit after taxes
Answer:
78000
Explanation:
To find the net operating profit after taxes, subtract the income tax expense from the net operating income, resulting in $133,000.
The net operating profit after taxes can be calculated by subtracting the income tax expense from the net operating income. In this case, it would be:
Net Operating Profit After Taxes = Net Operating Income - Income Tax Expense
Net Operating Profit After Taxes = $175,000 - $42,000
Net Operating Profit After Taxes = $133,000
Stocks and bonds Use letters in alphabetical order to select options A are examples of stores of value, but not units of account nor medium of exchange. B are examples of stores of value and units of account, but do not function as medium of exchange. C are forms of money, according to economists. D have all the same functions as money, but are not considered money by economists.
Answer:
B are examples of stores of value, but not units of account nor medium of exchange.
Explanation:
(Stocks and bonds are store of value as they store the wealth of an individual but they are not units of account or medium of exchange and goods are not valued in terms of stock or bond and thus stock or bond can be used to purchase something.)
Acme Manufacturing is producing $4,000,000 worth of goods this year and expects to sell its entire production. It also is planning to purchase $1,500,000 in new equipment during the year. At the beginning of the year, the company has $500,000 in inventory in its warehouse. Find actual investment and planned investment if:a) Acme actually sells $3,850,000worth of goods. b) Acme actually sells $4,000,000worth of goods. b) Acme actually sells $4,200,000worth of goods. Assuming that Acme's situation is similar to that of other firms, in which of these three cases is output equal to short run equilibrium output?
Answer:
a.$1,650,000 $1,500,000
b. $1,500,000 $1,500,000
c.$1,300,000 $1,500,000
Assuming that Acme’s situation is similar to that of other firms, output will equal to short-run equilibrium output in CASE B
Explanation:
Actual Investment, Planned investment
a.$1,650,000 $1,500,000
b. $1,500,000 $1,500,000
c.$1,300,000 $1,500,000
Assuming that Acme’s situation is similar to that of other firms, output will equal to short-run equilibrium output in CASE B
Acme’s planned investment in every case is $1,500,000.
Therefore the key to this problem is to find the amount of unplanned inventory investment Acme makes then add this to their planned investment to find Acme’s actual investment
a. If Acme sells $3,850,000 worth of goods, it has unplanned inventory investment of $150,000 and total actual investment of $1,650,000.
$4,000,000-$3,850,000=$150,000
$1,500,000+$150,000=$1,650,000
b. If Acme sells $4,000,000 worth of goods as it planned, its actual investment of $1,500,000 isequal to its planned investment
$4,000,000-$4,000,000= $0
$0+$1,500,000=$1,500,000
c. If Acme sells $4,200,000 worth of goods, it must draw down $200,000 worth of goods from itsexisting inventory, implying that inventory investment is –$200,000.
$4,000,000-$4,200,000= -$200,000
Acme’s actual investment in this case is $1,500,000 – $200,000 = $1,300,000.
Output equals short-run equilibrium output in CASE B , so planned spending and actual spendingare equal.
The planned investment of Acme is $2,000,000 in all cases, while their actual investment differs based on the actual sales. When Acme sells $3,850,000 worth of goods, the actual investment is $2,150,000. If Acme sells exactly $4,000,000 worth of goods, the planned and actual investment are equal at $2,000,000, showing a short run equilibrium output. When Acme sells $4,200,000 worth of goods, the actual investment decreases to $1,800,000.
Explanation:To calculate the actual and planned investments, we first need to clarify what they are. Planned investment includes a company's planned capital expenditures like new equipment (in Acme's case $1,500,000) and changes in inventory. Actual investment comprises these factors as well, but takes into account deviations between expected and actual sales.
For scenario a) where Acme sells $3,850,000 worth of goods, they must retain $150,000 ($4,000,000 - $3,850,000) of the goods as unsold inventory. Hence, their planned investment of $2,000,000 ($1,500,000 for equipment and $500,000 for inventory expansion) will be different from their actual investment which would be $2,150,000 (adding the unexpected increase in inventory of $150,000).
For scenario b) where Acme sells all $4,000,000 worth of goods, the planned and actual investments are equal at $2,000,000. There is no unexpected change in inventory.
For the second scenario b) where Acme sells $4,200,000 of goods, they actually managed to reduce their inventory by $200,000. Thus, their actual investment falls to $1,800,000 ($1,500,000 for equipment and $300,000 reduction in inventory). Their planned investment remained at $2,000,000.
Short run equilibrium output occurs where planned investment equals actual investment. Therefore, this is the case where Acme sells exactly $4,000,000 worth of goods, matching their production.
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Kimble Electronics issued its 6%, 20-year bonds payable at a price of $855,000 (face value is $900,000). The company uses the straight-line amortization method for the bond discount or premium. Interest expense for the first year is:
Interest expense for the first year is: $56,250
Solution:
Kimble Electronics issued = 6%, 20-year bonds payable
The corporation follows the straight-line amortization approach for the discount or premium on debt.
$900,000 - $855,000= $45,000
$45,000/20 years= $2,250 per year
$900,000 * 0.06 = $54,000
$2,250 + $54,000 = $56,250 interest expense.
Final answer:
The annual interest expense for Kimble Electronics's 6%, 20-year bonds payable, sold at a discount, is calculated by adding the straight-line amortization of the discount to the annual interest payment, resulting in $56,250 for the first year.
Explanation:
Kimble Electronics issued 6%, 20-year bonds payable with a face value of $900,000 but sold them at a discount for $855,000. To calculate the interest expense for the first year using the straight-line amortization method, we first determine the total discount on the bonds by subtracting the issue price from the face value:
$900,000 - $855,000 = $45,000.
This $45,000 is the bond discount that needs to be amortized over the 20-year life span of the bond. To get the annual amortization amount:
$45,000 ÷ 20 years = $2,250 per year.
Next, we calculate the annual interest payment based on the face value:
$900,000 × 6% = $54,000 per year.
The interest expense for the first year combines the annual bond payment with the annual amortization of the discount:
$54,000 + $2,250 = $56,250.
Therefore, the interest expense for the first year is $56,250.
Your company rents computers to local businesses and schools. You have 3,000 computers with a book value of $177,500. As a result of changing technology, your computers are more difficult to rent so you must drastically reduce your rental price, which causes a decrease in estimated future cash flows. The fair value of the computers is estimated to be $116,500 because of their outdated technology. Your company should report an asset impairment loss of:
Answer:
The answer is $61,000
Explanation:
An impairment loss is recognized when the carrying amount of an asset is less than its fair value(prevailing market price).
The difference between the carrying value and fair value is written off. Carrying amount is the cost of acquiring an asset minus any subsequent depreciation and impairment charges.
Impairment Loss = Book Value – Market Value
Impairment Loss = $177,500 - $116,500
Impairment loss is $61,000
If a competitive firm is currently producing a level of output at which profit is not maximized, then it must be true that a. marginal revenue exceeds marginal cost. b. marginal cost exceeds marginal revenue. c. total cost exceeds total revenue. d. None of the above is correct.
Answer:
a. Marginal revenue exceeds marginal cost.
Explanation:
Note: The words "profit is not maximized" have been interpreted as, "the firm at current level of output earns profits, but not maximum profits it can earn." The answer provided herein is based upon this assumption.
Marginal revenue (MR) refers to the addition to total revenue when an additional unit of output is sold.
Similarly, marginal cost (MC) refers to the addition to total cost of production, when an additional unit is produced.
For an optimal level of production, and as a condition for profit maximization under perfect competition,
MR = MC and the marginal cost should increase post the level of output at which MR = MC.
If a competitive firm operates at a level wherein profits are not maximized, but the firm does earn profits, it indicates the stage of production wherein the marginal revenue exceeds the marginal cost.
Thus, as firm produces more and more units of output, it would reach a stage wherein marginal revenue would equal marginal costs and profits shall be maximized.