Answer:
a) $8
b) $4
c) Decrease
Explanation:
Background.
A call option as you probably know, is an agreement to buy an asset on or before a particular day at a price already determined in the agreement.
a) the Intrinsic value of the option is the market price minus the strike price.
Intrinsic Value = Market Price - Strike price
= $43 - $35
= $8 per share.
It is worthy of note that for an option, of the intrinsic value dips into negative figures it is just said to be 0.
b) To calculate the time value, we subtract the intrinsic value from the call premium
= Call Premium - Intrinsic value
= $12 - $8
= $4
c) The call option has 6 months to maturity and the dividends are to come in 3 months. Share prices usually drop after a dividend has been paid so because the call option matures in 6 months, the price of the call option will DECREASE owing to the Expected drop in stock price.
A business cycle is the period of time in which: a. a business is established and ceases operations. b. there are four phases: peak, recession, trough and expansion. c. the price level varies with real GDP. d. expansion and contraction of economic activity are equal. e. none of the above are true.
Answer:
The correct answer is letter "B": there are four phases: peak, recession, trough and expansion.
Explanation:
The business cycle refers to the fluctuations that an economy faces throughout the economic activity. It consists of economic expansions or periods of growth and contractions or periods of economic decline. When the expansion reaches its peak there is usually a downturn followed by a contraction in the economy. The point where the economy starts to recover is called trough after which expansion takes place repeating the cycle.
After the amount due on a sale of $22,600, terms 1/10, n/eom, is received from a customer within the discount period, the seller consents to the return of the entire shipment for a cash refund. The cost of the merchandise returned is $13,560. a. What is the amount of the refund owed to the customer?
Answer: $22,374
Explanation:
With terms of of 1/10 n (unclear), it means that the customer paid their dues within 10 days and were liable for a sales discount of 1%.
The amount of refund that the customer should get is therefore what they paid which is 1% less than the full amount.
Calculating for that then will be,
= Amount due *(1-discount rate)
= 22,600 * (1 - 0.01)
= $22,374
$22,374 is the amount due for refund.
1. Working with Numbers and Graphs Q1 The marginal utility for the fourth unit of X is 38 utils, and the marginal utility for the fifth unit of X is 19 utils. Assume that, in this case, utility can only take on whole number, integer, values measured in utils. If the law of diminishing marginal utility holds, the minimum total utility of consuming five units of X is utils.
Answer:
177 utils
Explanation:
Given that,
Marginal utility for the fourth unit of X = 38 utils
Marginal utility for the fifth unit of X = 19 utils
Law of diminishing marginal utility states that as a consumer is consuming more and more units of a commodity, the utility obtained from the additional unit goes on diminishing.
It states that,
Marginal utility of 4th unit is less than the marginal utility of 3rd unit.
Therefore, the minimum marginal utility of 3rd unit will be at least 39 utils,
the minimum marginal utility of 2nd unit will be at least 40 utils,
the minimum marginal utility of 1st unit will be at least 41 utils,
Total utility is the sum of all the marginal utilities.
Minimum total utility of consuming five units of X:
= 1st unit + 2nd unit + 3rd unit + 4th unit + 5th unit
= 41 + 40 + 39 + 38 + 19
= 177 utils
The law of diminishing marginal utility states that satisfaction decreases as more of a good or service is consumed. In this scenario, the minimum total utility of consuming 5 units of X, given the marginal utilities for the fourth and fifth units of 38 and 19 utils respectively, would be 57 utils.
Explanation:The law of diminishing marginal utility signifies that as the consumption of a particular good or service increases, the additional satisfaction received from the next unit decreases. In terms of utils, it means that the difference between total utilities before and after the consumption of new unit lessens. As for your question, if the marginal utility for the fourth unit of X is 38 utils and for the fifth unit is 19 utils, the total utility for the consumption of five units of X would be at least 38 + 19 which equals 57 utils. However, this is a minimum value, the actual total utility of consuming five units of X will be higher because you have not included the utility derived from the first three units of X in your calculations.
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The stockholders’ equity of TVX Company at the beginning of the day on February 5 follows. Common stock—$20 par value, 150,000 shares authorized, 64,000 shares issued and outstanding $ 1,280,000 Paid-in capital in excess of par value, common stock 424,000 Retained earnings 548,000 Total stockholders’ equity $ 2,252,000 On February 5, the directors declare a 2% stock dividend distributable on February 28 to the February 15 stockholders of record. The stock’s market value is $36 per share on February 5 before the stock dividend. 1. Prepare entries to record both the dividend declaration and its distribution.
Answer:
Feb 05
Dr Retained earnings $46,080
Cr Common stock dividend distributable $25,600
Cr Paid-in capital in excess of par value, Common stock $20,480
Journal entries Feb 28
Dr Common stock dividend
distributable$25,600
Cr Common stock, $20 par value $25,600
Explanation:
TVX Company
Journal entries
Feb 05
Dr Retained earnings $46,080
Cr Common stock dividend distributable $25,600
Cr Paid-in capital in excess of par value, Common stock $20,480
Journal entries Feb 28
Dr Common stock dividend
distributable$25,600
Cr Common stock, $20 par value $25,600
Feb. 5
Shares to be issued: 64,000 shares × 2% = 1,280 shares
Retained earnings: (1,280 shares × $36) = $46,080
Common stock dividend distributable: 1,280 shares × $20 per share = $25,600
On March 15, American Eagle declares a quarterly cash dividend of $0.060 per share payable on April 13 to all stockholders of record on March 30. Required: Record American Eagle's declaration and payment of cash dividends for its 223 million shares. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answer in dollars, not in millions (i.e. 5.5 should be entered as 5,500,000).)
Answer:
American Eagle Journal entries
March 15 (Declaration date)
Dr Dividends $13,380,000
Cr Dividends Payable $13,380,000
March 30 (Date of Record)No Entry
April 13 (Payment Date)
Dr Dividends Payable $13,380,000
Cr Cash $13,380,000
Explanation:
March 15 (Declaration date)
Dr Dividends (223 million shares x $0.060)
$13,380,000
Cr Dividends Payable $13,380,000
March 30 (Date of Record)No Entry
April 13 (Payment Date)
Dr Dividends Payable (223 million shares x $0.060) $13,380,000
Cr Cash $13,380,000
For an organization to be successful, its leaders must be fully aware of their environment. What are the primary internal and external organizational considerations for the development of a global strategic plan?In your opinion, which 3 considerations have the most impact and why?
Answer:
“Internal organisation considerations for the development of a strategic plan include workforce strengths and weaknesses, financial considerations and organisational culture”.
The structure and culture are significant in light of the fact that they furnish the organization with the capacity change and prevail through the changing states of the organization. Regardless of whether the arrangement fits into the organization's way of life and whether the authoritative structure can alter or adjust to the change may influence the chance of following a particular vital course spread out by the organization. To deal with workforce gives the organization must think about the qualities and shortcomings of the workforce when they are making the vital arrangement. A workforce with various abilities will respond distinctive to the adjustments in the key arrangement. Workers that are imaginative and enhanced will adjust and assume responsibility for the new vital arrangement while untalented representatives will react to the new arrangement in an altogether different way. During the upper hand phase of arranging, the organization must recognize key chances. This can appear as innovation, licenses, elite agreements, the area of the organization, and in any event, having the associations the organization similarly as with others. At last, is the money related circumstance of the organization, which should be considered before beginning the key getting ready for the organization. Right now, you should consider how much cash the organization needs to acquire the objectives of the key arrangement. At that point the objectives ought to be set that are viewed as reachable by the organization.
As I would like to think, the budgetary thought would be the most significant stage. After all there would be no compelling reason to get ready for an adjustment in the activity of the organization if there was no money related sponsorship to help such a change.
The essential outside hierarchical contemplation in building up a vital arrangement are the chances, dangers, and patterns. These segments are a piece of the SWOTT Analysis. Long haul arranging, observing and looking into industry patterns, defining objectives, executing strategy, methods, and checking and exploring impacts of activities are for the most part approaches to achieve a key arrangement. The most significant thought relies upon the SWOTT Analysis. The market, contenders, and assets are continually evolving. Given the aftereffects of these changes, the thought might be modified. On the off chance that I needed to make a theory with regards to what the most significant thought would be in the present climate, I would state the economy! It is the thing that enables a business to succeed or fall flat.
A firm is offered trade credit terms of 2/8, net 45 days. The firm does not take the discount. It pays after 58 days. What is the effective annual cost (EFF%) of not taking this discount
Answer: 15.89%
Explanation:
Since no discounts were taken, this company made your job a whole lot easier because if we are for instance assuming a 365 day year then you simply take the base period of payments which is 58 days in this scenario and divide by 365.
So it would come out like,
= 58/365
= 15.89%
If you need any clarification just drop a comment. Cheers.
You place an order for 300 units of inventory at a unit price of $135. The supplier offers terms of 3/10, net 60. a-1. How long do you have to pay before the account is overdue? a-2. If you take the full period, how much should you remit?
Answer:
a1. 60 days
a2.Remittance = $40,500
b1- 1 % discount offered
b-2, 10days
b-3 =$40,095 ± 0.1
c-1 Implicit interest $405 ± 0.1%
c-2 Days' credit days=50 days
Explanation:
a1. 60 days
a2.0rder for 300 units of inventory at a unit price of $135
Remittance = 300($135)
Remittance = $40,500
b- 1 % discount offered
b-2, 10days
b-3 Remittance (1- 0.01) $40,500
(0.99)$40,500
Remittance =$40,095 ± 0.1%
c-1 Implicit interest $40,500- $40,095
Implicit interest $405 ± 0.1%
c-2
Days' credit days 60-10
Days' credit days=50 days
g On January 2, Yorkshire Company acquired 34% of the outstanding stock of Fain Company for $400,000. For the year ended December 31, Fain Company earned income of $104,000 and paid dividends of $32,000. Prepare the entries for Yorkshire Company for the purchase of the stock, the share of Fain income, and the dividends received from Fain Company.
Answer:
See the explanation below:
Explanation:
Share of profit of Fain Company = $104,000 * 34% = $35,350
Dividend received = $32,000 * 34% = $10,880
Date Details Dr ($) Cr ($)
Jan. 2 Investment in Fain Company 400,000
Cash 400,000
To record payment for investment in Fain Company
Dec. 31 Investment in Fain Company 35,350
Share of profit of Fain Co. 35,000
To record share of profit in Fain Company
Dec. 31 Cash 10,880
Investment in Fain Company 10,880
To record received from investment in Fain Company
XS Supply Company is developing its annual financial statements at December 31. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized:
Current Year Previous Year
Balance Sheet at December 31
Cash $ 35,370 $ 30,450
Accounts Receivable 36,600 28,800
Inventory 42,600 38,800
Equipment 133,000 108,000
Accumulated Depreciation—Equipment (31,600 ) (25,800 )
Total Assets $ 215,970 $ 180,250
Accounts Payable $ 37,600 $ 27,800
Salaries and Wages Payable 970 1,250
Note Payable (long-term) 45,200 52,000
Common Stock 93,400 73,400
Retained Earnings 38,800 25,800
Total Liabilities and Stockholders’ Equity $ 215,970 $ 180,250
Income Statement
Sales Revenue $ 128,000
Cost of Goods Sold 74,000
Other Expenses 41,000
Net Income $ 13,000
Additional Data:
a. Bought equipment for cash, $25,000. Paid $6,800 on the long-term note payable.
b. Issued new shares of stock for $20,000 cash.
c. No dividends were declared or paid.
Other expenses included depreciation, $5,800; salaries and wages, $20,800; taxes, $6,800; utilities, $7,600.
Accounts Payable includes only inventory purchases made on credit. Because there are no liability accounts relating to taxes or other expenses, assume that these expenses were fully paid in cash.
Required:
1. Prepare the statement of cash flows for the current year. Using the indirect method.
2. Evaluate the statement of the cash flows.
Answer:
B.) The net cashflow from operating activities stands at $16,720 while that from investing activities was ($25,000) for equipment purchase. The net cash from financing activities is $13,200 giving a total net cash increase of $4920 for the year. With the total cash balance at end totaling $35,370 including the beginning cash balance of $30,450
Explanation:
Kindly check attached picture for detailed statement of cash flow
1. The preparation of XS Supply Company's Statement of Cash Flows, using the indirect method is as follows:
XS Supply Company's
Statement of Cash Flows
For the Current Year Ended December 31
Operating Activities:
Net Income $13,000
Non-Cash Expense:
Depreciation 5,800
Cash from operations $18,800
Changes in working capital:
Accounts Receivable (7,800)
Inventory (3,800)
Accounts Payable 9,800
Salaries & Wages Payable (280)
Net Cash Flows from operations $16,720
Financing Activities:
Issuance of new stock $20,000
Long-term note payable payment (6,800)
Net Cash Flows from financing $13,200
Investing Activities:
Equipment Purchase ($25,000)
Net Cash Flows: investing ($25,000)
Net Cash Flows $4,920
Reconciliation of Cash:
Beginning Cash balance $ 30,450
Net Cash Flows $4,920
Ending Cash balance $ 35,370
2. The Statement of Cash Flows shows that the cash inflows increased positively from $30,450 to $35,370. This increase was boosted by the issuance of new stock for $20,000 and an appreciably increase in cash from operations of $18,800. The investment in new Equipment reduced these increases by $25,000.
Data and Calculations:
Current Year Previous Year Changes
Balance Sheet at December 31
Cash $ 35,370 $ 30,450 +$4,920
Accounts Receivable 36,600 28,800 +7,800
Inventory 42,600 38,800 +3,800
Equipment 133,000 108,000 +25,000
Accumulated Depreciation—Equipment (31,600 ) (25,800 ) +5,800
Total Assets $ 215,970 $ 180,250
Accounts Payable $ 37,600 $ 27,800 +$9,800
Salaries and Wages Payable 970 1,250 -280
Note Payable (long-term) 45,200 52,000 -6,800
Common Stock 93,400 73,400 +20,000
Retained Earnings 38,800 25,800 +13,000
Total Liabilities & Stockholders’ Equity $ 215,970 $ 180,250
Income Statement
Sales Revenue $ 128,000
Cost of Goods Sold 74,000
Other Expenses 41,000
Net Income $ 13,000
Additional Data:
a. Payments:
Equipment Purchase $25,000
Long-term note payable $6,800
b. Issuance of new shares of stock = $20,000
c. No dividends were declared or paid.
d. Other expenses:
Depreciation, $5,800
Salaries and wages, $20,800
Taxes, $6,800
Utilities, $7,600
Thus, overall, XS Supply Company performed creditably with regard to its cash flows in the current year.
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Ford Motor Company has been attacked by its own sustainability committee for failing to do enough to cut vehicular greenhouse gas emissions. According to the committee's 2005 report, "Ford has failed to define a goal for reducing global emissions from the company's products." The report called for the company to set clear targets to improve fuel economy and to cut factory emissions. This committee wants Ford to establish emission control ____.
Answer:
Standard
Explanation:
The committee wants Ford to establish emission control standard.
Emission standard is a legal requirement that governs all forms of air pollutants which are released by a company's product into the atmosphere. Quantitative limits are set on specific air pollutants that have permission to be released at specific time periods.
Sustainability means addressing the current demands without compromising the generations' ability to meet their own.
We require social and economic resources due to organic resources. Environmentalism isn't the only aspect of sustainability.
The correct word for the blank is Standard
An environmental regulation is a governmental requirement that covers all types of air pollutants discharged into the environment by a specific product. Quantitative limitations are established for specific air pollutants that are allowed to be discharged for specific timeframes.
It is necessary to control the air pollutants and adapt the environment-friendly methods for the production and manufacturing of the goods and services for the fullfillment of the customer in the market at the prevailing demand of the goods and services.
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Gavin invested $40,000 in the Jason and Kelly Partnership for ownership equity of $40,000. Prior to the investment, land was revalued to a market value of $363,000 from a book value of $174,000. Jason and Kelly share net income in a 1:2 ratio. a. Provide the journal entry for the revaluation of land. If an amount box does not require an entry, leave it blank.
Answer:
A.
Dr Land $189,000
Cr Jason, Capital $63,000
Cr Kelly, Capital $126,000
B.
Dr Cash $40,000
Cr Gavin, Capital $40,000
Explanation:
A.
Dr Land ($363,000-$174,000) $189,000
Jason, Capital (1/3×189,000) $63,000
Kelly, Capital(1/2×189,000) $126,000
B.
Dr Cash $40,000
Cr Gavin, Capital $40,000
To record the revaluation of land, debit the Land account by $189,000 and credit the Land Revaluation Surplus account by the same amount, which reflects the increase in the land's market value.
The journal entry to record the revaluation of land in the Jason and Kelly Partnership due to its increase in market value from $174,000 to $363,000 is:
Debit Land account: $189,000 (which is $363,000 - $174,000)Credit Land Revaluation Surplus account: $189,000This reflects an increase in the asset's value on the balance sheet and recognizes the unrealized gain in equity.
In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $247,000 of the fixed manufacturing expenses and $208,000 of the fixed selling and administrative expenses are avoidable if product L07E is discontinued. The financial advantage (disadvantage) for the company of eliminating this product for the upcoming year would be:
Answer:
($140,000)
Explanation:
The computation of financial advantage (disadvantage) for the company is shown below:-
If product LO7E is discontinued then $247,000 and $208,000 would contribute to savings and loss of contribution equals $595,000 ($990,000-$ 395,000)
Financial advantage/Disadvantage = Fixed manufacturing expenses + Fixed selling and administrative expenses - Contribution
= $247,000 + $208,000 - $595,000
= ($140,000)
Therefore for computing the financial advantage (disadvantage) for the company we simply applied the above formula.
Olive Corp. currently makes 20,000 subcomponents a year in one of its factories. The unit costs to produce are: Per unit Direct materials $ 12 Direct labor 8 Variable manufacturing overhead 12 Fixed manufacturing overhead8 Total unit cost #40 An outside supplier has offered to provide Olive Corp. with the 20,000 subcomponents at a $36 $36 per unit price. Fixed overhead is not avoidable. What is the maximum price Olive Corp. should pay the outside supplier?
a. $32
b. $36
c. $40
d. $44
Answer:
a. $ 32
Explanation:
Computation of purchase price
The company can make the components with a variable cost which is as follows:
Direct Materials per unit $ 12
Direct Labour per unit $ 8
Variable Manufacturing overhead per unit $ 12
Total Variable Cost per unit $ 32
Since the fixed manufacturing overhead shall not be reduced, the maximum price that can be paid is the internal variable costs.
So the maximum purchase price is $ 32
Olive Corp. should only take into account variable costs—direct materials, direct labor, and variable overhead—which come to $32—while deciding whether to create or buy. Unavoidable fixed overhead expenses are not taken into account. Therefore, Olive Corp. should not pay the outside provider more than $32. The correct option is a.
Explanation:Olive Corp. must decide whether to make a make or purchase decision. The subcomponent can be produced internally for a total cost of $40 per unit. The supplier is offering a price of $36. Olive Corp. will pay fixed manufacturing overhead even if it chooses to buy from the supplier because it is an unavoidable expense.
As a result, it need to be disregarded when figuring out the highest amount Olive Corp. should have to pay. The unit cost without fixed overhead as a result. The correct option is a.
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rapper Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would have 200,000 shares of stock outstanding. Under Plan II, there would be 150,000 shares of stock outstanding and $3 million in debt outstanding. The interest rate on the debt is 8 percent, and there are no taxes. a. If EBIT is $675,000, what is the EPS for each plan
Answer:
EPS formula = (net income - preferred stock dividends) / weighted average outstanding stocks
Earnings per share (EPS) for Plan I:
EPS = $675,000 / 200,000 = $3.375 or $3.38 per share
Earnings per share (EPS) for Plan II:
net income = EBIT - interests = $675,000 - $240,000 = $435,000
EPS = $435,000 / 150,000 = $2.90 per share
The marginal product of labor can be defined as the change in a. profit divided by the change in labor. b. output divided by the change in labor. c. labor divided by the change in output. d. labor divided by the change in total cost.
Answer:
The correct answer is b. output divided by the change in labor.
Explanation:
The marginal product means the additional units of production that are added to the total production when the labor is increased by 1 unit and is a measure of production efficiency.
You are the CFO of a US firm whose wholly owned subsidiary in Mexico manufactures component parts for your U.S. assembly operations. The subsidiary has been financed by bank borrowings in the United States. One of your analysts told you that the Mexican peso is expected to depreciate by 30 percent against the dollar on the foreign exchange markets over the next year. What actions, if any, should you take
Answer:
Explanation:
When the Peso depreciates by 30%, the firm can save money on the costs of production as the inputs would be less costly but the market for the firm in Mexico would be affected negatively as the depreciation of the peso would mean that now, the consumer can buy more goods with the same amount of money which will increase the demand. The loans that the subsidiary has taken would also be affected as it has to pay more for the collateral.
If the company reduces the inventory and stock the foreign receivables before the depreciation occurs to minimize the loss. Before the depreciation happens, the firm can convert the pesos denomination to the dollar so that its value doesn't fall.
Analyzing the situation where the Mexican peso is expected to depreciate against the dollar, several actions can be taken such as converting the US dollar loans into peso loans, hedging currency risk through forward contracts, and potential business expansion owing to cheaper foreign investments in Mexico.
Explanation:As the CFO of a firm with a subsidiary in Mexico that is anticipated to face a depreciation of the Mexican peso by 30 percent against the dollar, you might need to consider some strategic moves. Generally, expected depreciation in a currency can lead investors to divest themselves of that currency, leading to an increase in currency supply and a decrease in demand, thus reducing the currency's value.
In this specific case, the expected depreciation of the peso might increase your operational costs since your company would need more pesos to repay its US dollar-based loans. One potentially beneficial action can be, if possible, converting US dollar loans into peso loans before the depreciation occurs. This way, even if the peso depreciates, the subsidiary firm can pay back its loans in weaker pesos.
Another strategy could be to hedge your currency risk. For instance, using forward contracts to lock in today's exchange rate for future transactions, can be particularly helpful if the currency is indeed going to depreciate.
Moreover, as the peso depreciates, foreign investments in Mexico and exports from Mexico would become cheaper for foreign entities, presenting an opportunity to potentially expand your business further in Mexico.
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Blur Corp. has an expected net operating profit after taxes, EBIT(1 – T), of $7,600 million in the coming year. In addition, the firm is expected to have net capital expenditures of $1,140 million, and net operating working capital (NOWC) is expected to increase by $10 million. How much free cash flow (FCF) is Blur Corp. expected to generate over the next year?
Answer:
Free cash flow (FCF) for next year = $ 6,450 million
Explanation:
Free cash flow represents the amount that is left to all the providers of capital after the payment of all all operating expenses, working capital and investment in fixed asset expenditures.
It is computed as cash flow made from operation less capital expenditures
For Blur Communications
The Free cash flow
= EBIT (1-T) - increase in capital expenditure - increase in working capital
= 7600 - $1,140 - 10
= $ 6,450 million
Free cash flow (FCF) for next year = $ 6,450 million
Answer:
$6,450,000
Explanation:
Free cash flow (FCF) can be defined as the money or cash that remained after the company might have pay for its operating expenses as well as capital expenditures which is why companies, organisation, business owner or individual make use of FREE CASH FLOW to understand the profitability of their business.
Blur Corp
FCF = NOPAT – Net investment in operating capital
= $7,600M – (1,140+10)
= $7,600M - $1,150
=$6,450,000
Therefore Blur Corp is expected to generate free cash flow (FCF) of $6,450,000 over the next year.
For all parts of this question, assume the following: The CAPM holds. The riskless rate of return is 5%. The market portfolio has expected rate of return of 15% and standard deviation of 20%. 1. Burger Inc. stock has an expected rate of return of 4% per year and standard deviation of 30%. Linda Belcher says, "No rational person would hold a risky asset expected to return less than the riskless rate! It must be mispriced." Is Linda correct? Explain. 2. Consider the following data on two stocks whose returns have a correlation of 0.2 with each other: Expected Return Standard Deviation Walmart 5% 12% Tesla 20% 35% Bob Belcher owns $25,000 worth of Walmart stock, $10,000 worth of Tesla stock, and no other investments. a) Compute expected rate of return (% per year), and standard deviation of Bob’s portfolio. b) Mr. Belcher says he cannot tolerate any more standard deviation than her portfolio has now. Given this risk tolerance, is he maximizing her expected return? If he is, explain why? If he is not, explain how she should invest to maximize expected return (give a specific trading and investment strategy).
Answer 1:
The CAPM model shows that the points (return and stdv) which are below the capital market line are in infeasible reason. This means no investor, be it risk-taking or risk-neutral, won't invest in such portfolios.
If a risk free asset is giving a return of 5%, then no one would go for an asset with 30% stdv (risky asset) to get 4% return. Hence, Linda is right.
Answer 2:
Out of 35000 of available funds, 25000 (71.43%) are invested in Walmart and 28.57% are invested in tesla.
Expected return = W1*R1 +W2*R2 where W1 and W2 are the weights and R1 and R2 are the expected returns from each stocks.
hence, the expected return of the portfolio = 0.7143*5% + 0.2857*20%= 9.2858%
portfolio variance = (W1S1)^2 + (W2S2)^2 + 2*W1W2S1S2Cor, where S1 and S2 are stdv of portfolio and Cor is the correlation between these stocks
stdv of portfolio
=( (0.7128*0.12)^2 + (0.2857*0.35)^2 + 2*0.7128*0.2857*0.12*0.35*0.2)^0.5 = 14.4%
If he wants to retain the same stdv, we need to find corresponding expected return on Capital market line, which is 12% return.
12% >= W1'*5% + W2'*20%
W1'= 1- W2'
12% = 5% - 5%*W2' +W2'*20%
W2 =
0.466 = 16333
Hence, he should invest 16333 in Tesla and remaining in Walmart
Answer:
Explanation:
If a risk free asset is giving a return of 5%, then no one would go for an asset with 30% standard deviation (risky asset) to get 4% return. Hence, Linda is right.
2. Out of 35000 of available funds, 25000 (71.43%) are invested in Walmart and 28.57% are invested in tesla.
Expected return = W1*R1 +W2*R2 where W1 and W2 are the weights and R1 and R2 are the expected returns from each stocks.
hence, the expected return of the portfolio = 0.7143*5% + 0.2857*20%= 9.2858%
portfolio variance = (W1S1)^2 + (W2S2)^2 + 2*W1W2S1S2Cor, where S1 and S2 are standard deviation of portfolio and Cor is the correlation between these stocks
standard deviation of portfolio =( (0.7128*0.12)^2 + (0.2857*0.35)^2 + 2*0.7128*0.2857*0.12*0.35*0.2)^0.5 = 14.4%
12% >= W1'*5% + W2'*20%
W1'= 1- W2'
12% = 5% - 5%*W2' +W2'*20%
W2 = 0.466 = 16333
Hence, he should invest 16333 in Tesla and remaining in Walmart
kindly check the attached image below for the graphical presentation of the explanation to the question
Suppose when the price of a cookie is $2.50, the quantity demanded is 50, and when the price is $1, the quantity demanded is 200. Using the midpoint method, the price elasticity of demand is:
Answer:
The price elasticity of demand is -1.40
Explanation:
E = [Q2-Q1/(Q2+Q1/2)]/[P2-P1/(P2+P1/2)]
= [200-50/(200+50/2)] / [1-2.5/(1+2.5/2)]
= [150/125]/[1.5/1.75]
= 1.2/0.8571
= -1.4 0
the price elasticity of demand is -1.40
Indicate whether each of the following audit procedures is a test of controls, a substantive test, or dual-purpose test. Next, indicate the financial statement assertion most closely related to each audit procedure.a. Vouch recorded sales invoices to supporting shipping documents. b. Inspect recorded sales invoices for credit approval. c. Vouch recorded sales invoices prices to the approved price list. d. Send confirmations to all customers regarding accounts receivable. e. Recalculate the arithmetic accuracy of the recorded sales invoices. f. Compare the shipment date of record sales invoices with the invoice record date. g. Trace recorded sales invoices to posting in the general ledger control account and in the correct customer's account. h. Select a sample of shipping documents from the shipping shipping department file and trace shipments to recorded sales invoices. i. Scan recorded sales invoices and shipping documents for missing numbers in sequence. j. Vouch sales invoices and shipping documents. k. Evaluate the adequacy of the allowance for doubtful accounts.
Answer:
The audit procedures whether controls, a substantive test, or dual-purpose test and the Financial statement assertion of the following procedures are given in the explanation below:
Explanation:
1.Vouch recorded sales invoices to supporting shipping documents.----
-----Dual-purpose/occurence and existence
2)Inspect recorded sales invoices for credit approval-----Test of controls/valuation and occurence
3) Vouch recorded sales invoices prices to the approved price list.
--Test of Controls/accuracy
4. Send confirmations to all customers regarding accounts receivable.
----Substantive test/existence
5) Recalculate the arithmetic accuracy of the recorded sales invoices.-----dual-purpose/accuracy and valuation
6) Compare the shipment date of record sales invoices with the invoice record date.-----dual-purpose/cut-off and completeness
7.)Trace recorded sales invoices to posting in the general ledger control account and in the correct customer's account-----dual-purpose/completeness
8)Select a sample of shipping documents from the shipping shipping department file and trace shipments to recorded sales invoices-------------dual purpose/completeness
9)Scan recorded sales invoices and shipping documents for missing numbers in sequence-----test of controls/completeness
10)Vouch sales invoices and shipping documents.-----Dual-purpose/occurence and existence
11.) Evaluate the adequacy of the allowance for doubtful accounts.
----Substantive/Valuation
The procedures are tests that auditors perform to ensure that the financial statements of a company are presented fairly in all material respects. They fall into three categories: tests of controls, substantive tests, and dual-purpose tests, and relate to a specific financial statement assertion such as accuracy, existence, completeness, etc.
Explanation: a. Vouch recorded sales invoices to supporting shipping documents. This is a dual-purpose test, and it pertains to the financial statement assertions of accuracy and completeness.
b. Inspect recorded sales invoices for credit approval. This is a test of controls, relating to the financial statement assertion of rights and obligations.
c. Vouch recorded sales invoices prices to the approved price list. This is a substantive test, closely related to the financial statement assertion of accuracy.
d. Send confirmations to all customers regarding accounts receivable. This is a dual-purpose test, related primarily to the financial statement assertion of existence.
e. Recalculate the arithmetic accuracy of the recorded sales invoices. This is a substantive test, related mainly to the financial statement assertion of accuracy.
f. Compare the shipment date of record sales invoices with the invoice record date. This is a dual-purpose test related to the financial statement assertions of cutoff and completeness.
g. Trace recorded sales invoices to posting in the general ledger control account and in the correct customer's account. This is an example of a dual-purpose test relating to the financial assertion of completeness.
h. Select a sample of shipping documents from the shipping department file and trace shipments to recorded sales invoices. This is a dual-purpose test and pertains to the financial statement assertions of completeness and accuracy.
i. Scan recorded sales invoices and shipping documents for missing numbers in sequence. This is a dual-purpose test concerned with the financial statement assertion of completeness.
j. Vouch sales invoices and shipping documents. This is a dual-purpose test, related primarily to the financial statement assertion of existence and accuracy.
k. Evaluate the adequacy of the allowance for doubtful accounts. This is a substantive test related to the financial statement assertion of valuation.
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DL and MOH budget: The Production Department of Top of The World Corporation has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Units to be produced 10,700 9,700 11,700 12,700 Each unit requires 0.25 direct labor-hours and direct laborers are paid $14.00 per hour. In addition, the variable manufacturing overhead rate is $2.00 per direct labor-hour. The fixed manufacturing overhead is $67,000 per quarter. The only noncash element of manufacturing overhead is depreciation, which is $16,000 per quarter. a. Calculate the company’s total estimated direct labor cost for each quarter of the upcoming fiscal year and for the year as a whole. Assume that the direct labor workforce is adjusted each quarter to match the number of hours required to produce the estimated number of units produced. b. Calculate the company’s total estimated manufacturing overhead cost and the cash disbursements for manufacturing overhead for each quarter of the upcoming fiscal year and for the year as a whole.
Answer and Explanation:
a. The computation of the total estimated direct labor cost is shown below:
Particulars 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year
Units to be produced 10,700 9,700 11,700 12,700 44,800
Multiply Direct labor hour per unit 0.25 0.25 0.25 0.25 0.25
Total Direct labor hour required 2675 2425 2925 3175 11200
Multiply Direct labor rate per hour $14 $14 $14 $14 $14
Estimated Direct labor cost $37,450 $33,950 $40,950 $44,450 $156,800
b. The total estimated manufacturing cost and the cash disbursement is shown below:
Particulars 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year
Units to be produced 10,700 9,700 11,700 12,700 44,800
Direct labor hour per unit 0.25 0.25 0.25 0.25 0.25
Multiply Total Direct labor hour required 2675 2425 2925 3175 11200
Variable manufacturing overhead rate $2 $2 $2 $2 $2
Estimated Variable manufacturing overhead cost $5,350 $4,850 $5,850 $6,350 $22,400
Add: Fixed manufacturing overhead $67,000 $67,000 $67,000 $67,000 $268,000
Total estimated manufacturing overhead $72,350 $71,850 $72,850 $73,350 $290,400
Less: depreciation $16,000 $16,000 $16,000 $16,000 $64,000
Cash disbursement for manufacturing overhead $56,350 $55,850 $56,850 $57,350 $226,400
We simply applied the above format to find out the manufacturing overhead, cash disbursement, and the direct labor cost
U.S. Products operates two divisions with the following sales and expense information for the month of May: North Division: Sales $240,000; Operating income $72,000, Operating assets $600,000. South Division: Sales $160,000; Operating income $80,000, Operating assets $800,000. U.S. Products expects a minimum return of 10% should be earned from all investments. North Division’s return on investment for May is:
Answer:
12%
Explanation:
The income earned over on the investment made in the business is known as the return on Investment. it is calculated by dividing net income for the period with the total investment made in the business.
In this question we have operating income and operating asset to calculate the return on investment.
North division
Return on Investment = (Operating Income / Operating Assets) x 100
Return on Investment = ( $72,000 / $600,000 ) x 100 = 12%
The North Division's return on investment (ROI) for the month of May is 12%, calculated by dividing the operating income by the operating assets and then multiplying by 100.
The student has asked for the calculation of the return on investment (ROI) for the North Division of U.S. Products for the month of May. To calculate this, we use the formula: ROI = (Operating Income / Operating Assets) × 100. For the North Division, this calculation would be: ROI = ($72,000 / $600,000) × 100, which simplifies to ROI = 0.12 × 100 = 12%. Therefore, the North Division's return on investment for May is 12%.
A rain barrel is a container that captures and stores rainwater for landscape and garden use during dry periods. As a result, rain barrels benefit the community through water conservation. If homeowners do not consider this external benefit of rain barrels, then a. the socially optimal quantity of rain barrels will be larger than the equilibrium quantity of rain barrels. b. the socially optimal quantity of rain barrels will be smaller than the equilibrium quantity of rain barrels. c. the socially optimal price of rain barrels will be lower than the equilibrium price of rain barrels. d. the market for rain barrels would benefit from a tax on rain barrels.
Answer:
A. The socially optimal quantity of rain barrels will be larger than the equilibrium quantity of rain barrels.
Explanation:
Rain barrels capture water from a roof and hold it for later use such as on lawns, gardens or indoor plants. Collecting roof runoff in rain barrels reduces the amount of water that flows from your property. It's a great way to conserve water and it's free water for use in your landscape. The rain has it's own benefits which can be seen as follows;
1. Save Money. Reduce your water bill with a rain barrel's water catch. ...
2. Reduce Runoff Pollution & Erosion. Runoff from rains pick up soil, oil, pesticides, fertilizers and push them to other areas. ...
3. Promote Plant & Soil Health. ...
4. Conserve Water. ...
5.Wash Cars & Windows.
The socially optimal quantity of rain barrels is larger than the equilibrium quantity because homeowners often do not consider the external benefits like water conservation and reduced stormwater runoff. This leads to underinvestment in rain barrels. Therefore, the correct answer is option a.
A rain barrel is a system that captures and stores rainwater, offering benefits such as water conservation and reduced stormwater runoff. If homeowners do not account for these external benefits, the market fails to achieve the socially optimal quantity of rain barrels.
The correct answer to this question is: a. the socially optimal quantity of rain barrels will be larger than the equilibrium quantity of rain barrels. This is because the external benefits are not included in the decision-making of individual homeowners, leading to underinvestment in rain barrels from a societal perspective.Examples of these benefits are reduced reliance on municipal water systems and improved watershed habitats due to less stormwater runoff. Thus, without considering these benefits, fewer rain barrels are installed than what is socially optimal.On June 30, 2018, Adams Company’s total current assets were $504,500 and its total current liabilities were $278,000. On July 1, 2018, Adams issued a short-term note to a bank for $40,200 cash. Required Compute Adams’s working capital before and after issuing the note. Compute Adams’s current ratio before and after issuing the note. (Round your answers to 2 decimal places.)
Answer:
Old Current Ratio = 1.815
New Current Ratio = 1.712
Explanation:
Working Capital = Current Assets - Current Liabilities
Given : Current Assets = 504500 , Current Liabilities = 278000
Current Ratio = Current Assets / Current Liabilities
= 504500 / 278000 = 1.815
Issue of short term note (current liability) to bank for 40200 cash (current asset) leads to following change in working capital :-Current Assets = 504500 + 40200 = 544700
Current Liabilities = 278000 + 40200 = 318200
Current Ratio = Current Assets / Current Liabilities
= 544700 / 318200 = 1.712
Neakanie Industries sells specialized mountain bikes. Each specialized bike purchased includes free maintenance service for 12 months. The price of the specialized bike is $1,400. When sold separately, a maintenance contract is $600 and a comparable but non-specialized bike is $1,000. What amount of revenue will Neakanie recognize at the date of sale for each bike?
$875 is the amount of revenue that will be recognized.
Explanation:
Entire price for specialized bike will be appropriated in the ratio of individual prices of the non- specialized bikes and the maintenance contract.
The following calculation is made to calculate the revenue from the sale of a bike:
= 1400 multiply with (1000 divide by 1600)
After solving the above equation we get,
= $875 will be recognized by Neakanie at the date of sale.
Hence, the correct option will be with an amount of $875
Note: a maintenance contract is $600 and a comparable but non-specialized bike is $1,000 when added sums to $1600 amount.
Bee Company issued 5-year, 7% bonds with a par value of $95,000. The company received $92,947 for the bonds. Using the straight-line method to amortize the discount, the amount of interest expense for the first semiannual interest period is: $6,650.00. $7,060.60. $3,530.30. $3,119.70. $3,325.00.
On January 1, a company issues bonds dated January 1 with a par value of $200,000. The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The market rate is 6% and the bonds are sold for $208,531. The journal entry to record the issuance of the bond is:
Debit Cash $208,531; credit Discount on Bonds Payable $8,531; credit Bonds Payable $200,000.
Debit Bonds Payable $200,000; debit Bond Interest Expense $8,531; credit Cash $208,531.
Debit Cash $208,531; credit Bonds Payable $208,531.
Debit Cash $200,000; debit Premium on Bonds Payable $8,531; credit Bonds Payable $208,531.
Debit Cash $208,531; credit Premium on Bonds Payable $8,531; credit Bonds Payable $200,000.
On January 1, a company issues bonds dated January 1 with a par value of $270,000. The bonds mature in 5 years. The contract rate is 11%, and interest is paid semiannually on June 30 and December 31. The market rate is 10% and the bonds are sold for $280,420. The journal entry to record the first interest payment using straight-line amortization is:
Debit Bond Interest Expense $15,892.00; credit Premium on Bonds Payable $1,042.00; credit Cash $14,850.00.
Debit Interest Payable $14,850.00; credit Cash $14,850.00.
Debit Bond Interest Expense $15,892.00; credit Discount on Bonds Payable $1,042.00; credit Cash $14,850.00.
Debit Bond Interest Expense $13,808.00; debit Premium on Bonds Payable $1,042.00; credit Cash $14,850.00.
Debit Bond Interest Expense $13,808.00; debit Discount on Bonds Payable $1,042.00; credit Cash $14,850.00.
Answer:
A) $3,530.3
B)
Debit Cash $200,000; debit Premium on Bonds Payable $8,531; credit Bonds Payable $208,531.
C)
Debit Bond Interest Expense $13,808.00; debit Premium on Bonds Payable $1,042.00; credit Cash $14,850.00.
Explanation:
discount:
95,000 - 92,947 = 2,053
This amount is distribute equally among all interest paymeny:
2,053 / 10 payment = 205.3
cash outlay + amortization on discount = interest expense
95,000 x 7% x 1/2 + 205.3 = $3,530.3
B)
debit the cash received
we credit the bond payable for their face value
we adjust using premium when lower and premium when higher
C)
we calcualte the premium and divide oer total payment to get the amortization:
280,420 - 270,000 = 10,420 / 10 = 1,042
cash outlay - amortization on premium = interest expense
270,000 x 11% x 1/2 - 1,042 = 13,808
A company has employed two workers A and B whose productivities are 20units and 15units respectively. The wage for A is k12 whilst B's is k8. Are these two employees optimally employed?
Answer:
no
Explanation:
In order to achieve optimal employment level, the ratio of productivity between employees must be equal to the ratio between their wages, e.g. an employee who is 25% more productive, should earn 25% more.
In this case, the productive ratio is 15:20 or 3:4, while the wage ratio is 8:12 or 2:3. Since the wage ratio is lower than the productivity ratio (2:3 < 3:4), the two employees are not optimally employed.
Goodwin Ross Mid Cap Growth is a fund that lets its investors buy ownership in a market basket that contains different securities. The fund's market basket has a composition that is similar to the composition of the Dow Jones Industrial Average stock index. In this scenario, Goodwin Ross MidCap Growth is a(n) _____.
Answer:
exchange-traded fund
Explanation:
Goodwin Ross Mid Cap Growth is an investment company that offer their clients different set of portfolios to invest their clients’ money. According to the information the Goodwin Ross Mid Cap Growth is an exchange-traded fund company that invests in different portfolios such as stocks, commodities and bonds in the financial market similar to the composition of the Dow Jones.
Tyrell Co. entered into the following transactions involving short-term liabilities. Year 1 Apr. 20 Purchased $38,000 of merchandise on credit from Locust, terms n/30. May 19 Replaced the April 20 account payable to Locust with a 90-day, 8%, $35,000 note payable along with paying $3,000 in cash. July 8 Borrowed $60,000 cash from NBR Bank by signing a 120-day, 11%, $60,000 note payable. __
Solution:
1) Maturity date
locust NBR fargo
date of the note 19-May 8-Jul 28-Nov
term of note 90 120 60
maturity date 17-Aug 5-Nov 27-Jan
2) interest due at maturity
principal * Rate * time = interest
locust 35,000 * 8% * 90/360 = 700
NBR 63,000 * 11% * 120/360 = 2310
Fargo 33,000 * 7% * 60/360 = 385
3) Amount in adjusting entry
33,000*7%*33/360
= 211.75
principal * Rate * time = interest
interest to be acccrued 33,000 * 7% * 33/360 = 211.75
4) interest expense to be recorded in 2017
198
principal * Rate * time = interest
interest to recorded in 2018 33,000 * 7% * 27/360 = 173.25
Journal entries
Date Accounting titles & Explanations Debit Credit
2016
20-Apr inventory 38,000
Accounts payable 38,000
19-May Accounts payable 38,000
cash 3,000
notes payable 35,000
8-Jul Cash 63,000
notes payable 63,000
17-Aug notes payable 35,000
interest expense 700
cash 35,700
5-Nov notes payable 63,000
interest expense 2,310
cash 65,310
28-Nov Cash 33,000
notes payable 33,000
31-Dec interest expense 211.75
interest payable 211.75
2017
27-Jan notes payable 33,000
interest payable 211.75
interest expense 173.25
cash 33,385
Tyrell Co. makes purchasing and borrowing transactions that create short-term liabilities. These liabilities, like the loan from Singleton Bank to Hank's Auto Supply, need to be paid back with interest.
Explanation:The question pertains to the accounting process of Tyrell Co.'s short-term liabilities. In the first instance, Tyrell Co. buys $38,000 worth of merchandise from another company, Locust, creating a short-term liability, as it's on credit terms n/30, meaning the amount is due within 30 days.
Later, the company replaced the account payable with a 90-day, 8%, $35000 note payable and paid $3000 in cash. This means the liability has been transformed from an account payable to a note payable
In the subsequent transaction, the company borrows $60,000 cash from NBR Bank by signing a 120-day, 11%, $60,000 note payable. This is another short-term liability as the loan has a maturity of less than one year. The interest rate represents the cost of borrowing.
In this situation, these transactions are similar to the one where Singleton Bank lends $9 million to Hank's Auto Supply. The loans in both the scenarios need to be paid back with interest, thereby, creating short-term liabilities on the balance sheets of Tyrell Co. and Hank's Auto Supply.
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