Assume that the risk-free rate of interest is 5% and the expected rate of return on the market is 17%. A share of stock sells for $64 today. It will pay a dividend of $2 per share at the end of the year. Its beta is 1.0. What do investors expect the stock to sell for at the end of the year?

Answers

Answer 1

Answer:

New price (P1) = $72.88

Explanation:

Given:

Risk-free rate of interest (Rf) = 5%

Expected rate of market return (Rm) = 17%

Old price (P0) = $64

Dividend (D) = $2

Beta (β) = 1.0

New price (P1) = ?

Computation of expected rate on return:

Expected rate on return (r) = Rf + β(Rm - Rf)

Expected rate on return (r) = 5% + 1.0(17% - 5%)

Expected rate on return (r) = 5% + 1.0(12%)

Expected rate on return (r) = 5% + 12%

Expected rate on return (r) = 17%

Computation:

Expected rate on return (r) = (D + P1 - P0) / P0

17% = ($2 + P1 - $64) / $64

0.17 = (2 + P1 - $64) / $64

10.88 = P1 - $62

New price (P1) = $72.88


Related Questions

The table shows the terms of a fixed-rate mortgage.
Which formula should be used to correctly calculate the
monthly mortgage payment?
Component
Cost
[R(1 - R)"
(1 + R)?
(P) Principal
$200,000
[R(1 + R)"]
(R) Monthly interest rate
.4%
1 + R)
(n) Total number of
monthly payments (30-
year term)
360
[(1 + R"
M=pl
p[R(1 + R)"
(N + R)
(M) Monthly payment
$1059.85

Answers

Answer: attached picture.

Answer:

Its B :)

Explanation:

The chart gives prices and output information for the country of Utopia. Use this information to calculate real and nominal GDP for both years. Use 2017 as the base year. 2016 2017 Price Quantity Price Quantity Ice cream $7.00 600 $3.00 400 Blue jeans $70.00 20 $20.00 90 Laptops $300.00 5 $300.00 5

Answers

Answer: Nominal GDP 2016 = $7,100

REAL GDP 2016 = $3,700

Nominal GDP 2017 = $4,500

Real GDP 2017 = $4,500

Explanation:

To calculate the Nominal and Real GDPs we use the following formulas,

Nominal GDP = Sum of (Current Year Price x Current Year Quantity)

Real GDP = Sum of (Base Year Price x Current Year Quantity)

We make the assumption that 2017 is the base year so calculating would be,

Nominal GDP, 2016 = [(7 x 600) + (70 x 20) + (300 x 5)]

= $(4200 + 1400 + 1500)

= $7,100

Remember for this we will use 2017 as the base year so we will use 2017 prices

Real GDP, 2016 = [(3 x 600) + (20 x 20) + (300 x 5)]

= $(1800 + 400 + 1500)

= $3,700

Nominal GDP, 2017 = [(3 x 400) + (20 x 90) + (300 x 5)]

= $(1200 + 1800 + 1500)

= $4,500

Now seeing as 2017 is the base year, it's nominal and real GDPs will be the same.

Real GDP, 2017 = $[(3 x 400) + (20 x 90) + (300 x 5)]

= $(1200 + 1800 + 1500)

= $4,500

I included the details part of question so it is clearer.

If you have need any clarification do react or comment.

Assume the following for a piece of equipment assuming​ straight-line depreciation: Purchase price​ $20,000; installation costs of​ $2,500; 4-Yr useful life with an estimated salvage value of​ $4,500; tax rate​ 40%; What would be the cash flow from salvage if the asset sold after 2 years for​ (a) $15,500 and​ (b) $7,000?

Answers

Answer:

a. $14,700

b. $9,600

Explanation:

Total cost of the equipment = Purchase price + installation costs = $20,000 + $2,500 = $22,500

Salvage value = $4,500

Amount to be depreciated = $22,500 - $4,500 = $18,000

Depreciation rate = 1 ÷ 4 = 0.25, or 25%

Annual depreciation = $18,000 × 25% = $4,500

Equipment book value after 2 years = $22,500 - ($4,500 × 2) = $13,500

(a) What would be the cash flow from salvage if the asset sold after 2 years for​ $15,500

Gross profit on equipment disposal =  Sales amount - Equipment book value = $15,500 - $13,500 = $2,000

Tax = $2,000 × 40% = $800

Net profit on equipment disposal = $2,000 - $800 = $1,200

Cash flow = Equipment book value + Net profit on equipment disposal = $13,500 + $1,200 = $14,700

(b) What would be the cash flow from salvage if the asset sold after 2 years for​ $7,000

Loss on equipment disposal =  Sales amount - Equipment book value = $7,000 - $13,500 = $6,500

Tax shield difference = $6,500 × 40% = $2,600

Cash flow = $7,000 + $2,600 = $9,600

Jack is a crook with an honest face. People easily trust him. Jack works a scam in which he convinces the elderly to invest their life savings in a false company based on false annual reports of highly lucrative returns. He insists that the investment must be in cash to facilitate timely return on investment. Jack is guilty of a crime involving what

Answers

Answer:

False Pretenses

Explanation:

From the question given, jack is involved in the crime called false pretenses. He receives money by which he mentions things that are not true.

He brings out a false annual reports of profitable returns for a a non existing company or organisation. This representation is false with actual facts.

Identify how planned investment will change in each scenario. Airwings, a commercial airline manufacturer, becomes optimistic about economic conditions after seeing reports of strong growth in consumer spending. Due to Airwings, planned investment The Federal Reserve announces an end to accommodative monetary policy, and is now implementing policy tools that will increase the real interest rate. Due to the Fed, planned investment In an effort to reduce constant budget deficits, Congress announces plans to increase the corporate income tax rate. Due to the Congress, planned investment A major recession has reduced consumption spending, which has hurt profit levels for Aston-Benz, a high-end car manufacturer. Due to the recession, planned investment

Answers

Answer:

See explaination for the details of the answer.

Explanation:

1) Increase

As business is optimistic about its future, such business will start capacity expansion to cater for consumer demand.

2) Decrease

Higher real interest rate simply means borrowing cost is higher for the firms and so that they will reduce the investment in respose to that.

3) Decrease

A lower tax means higher profits and firms can pass these benefits to consumers with lower prices, to employees with higher wages and to the government with tax on profit. However, if the rate of tax itself has been increased then in that case corporates will see higher tax as a dampener in sentiments and they might curtail investment plans.

4) Decrease

A recession means there will be lesser economic activity overall and demand will be lower so as the consumption. In such case, planned investment will be reduced.

ccording to your authors, entrepreneurial innovation is similar to "arbitrage" because both activities ultimately involve Select one: a. obtaining inputs at relatively high prices and selling the output at lower prices. b. obtaining inputs at relatively low prices and selling the output at higher prices. c. the absence of uncertainty. d. greed.

Answers

Answer:

B. obtaining inputs at lower prices and selling the output at higher prices.

Explanation:

Arbitrage refers to the activity of trying to earn a gain, by exploiting the inefficiencies between two markets. The rule of arbitrage is to buy at a low price from one market and sell at a higher price in another market.

When interest rate parity theory exists and fair pricing prevails, arbitrage opportunities are wiped out.  

Entrepreneurial innovation refers to innovation with respect to products and their attributes.  It may also refer to entrepreneur attaining new skill sets and creativity which help in better operations.

Such innovation is also characterized by buying inputs at a lower price and selling the output at a higher price thereby maximizing profits. Buying inputs at a low price indicates innovation in the form of optimal utilization of resources.

Thus, both arbitrage and entrepreneurial innovation are driven by the common factor of buying low and selling high, to maximize gains.

Suppose that a bank has $30 million in asset X, $10 million in asset Y, and $20 million in asset Z. Each asset has a different risk weight. The risk weight for asset X is 30%, the risk weight for asset Y is 60%, and the risk weight for asset Z is 10%. The amount of risk-weighted assets for this bank is ____________ million. Assuming that the bank has to hold capital equal to 8% of its risk-weighted assets, the bank must hold _____________ million in capital.

Answers

Answer:

The amount of risk-weighted assets for this bank is $17 million. Assuming that the bank has to hold capital equal to 8% of its risk-weighted assets, the bank must hold $1.36 million in capital.

Explanation:

asset X, $30 million x 30% risk = $9 million weighted risk

asset Y, $10 million x 60% risk = $6 million weighted risk

asset Z, $20 million x 10% risk = $2 million weighted risk

total risk weighted assets = $9 million + $6 million + $2 million = $17 million

since the bank has to 8% capital to risk weighted assets = $17 million x 8% = $1.36 million

An employee earns $6,350 per month working for an employer. The FICA tax rate for Social Security is 6.2% of the first $118,500 of earnings each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay. The employee has $216 in federal income taxes withheld. The employee has voluntary deductions for health insurance of $184 and contributes $92 to a retirement plan each month. What is the amount the employer should record as payroll taxes expense for the employee for the month of January

Answers

Final answer:

The employer should record a payroll taxes expense of $866.78 for the month of January, derived from calculating and summing up Social Security tax, Medicare tax, FUTA and SUTA taxes for the employee's earnings.

Explanation:

To determine the amount the employer should record as payroll taxes expense for the month of January, one must consider Social Security tax, Medicare tax, federal (FUTA) and state (SUTA) unemployment taxes. The employee's gross earnings for the month of January are $6,350.

The Social Security tax is 6.2% of gross earnings ($6,350 * 0.062 = $393.70) and Medicare tax is 1.45% of all earnings ($6,350 * 0.01450 = $92.08).

The FUTA and SUTA rates are applied to the first $7,000 of employee's pay. Therefore, if this is January and the employee has not yet hit that threshold, calculate FUTA tax (0.6%) as $6,350 * 0.006 = $38.10, and SUTA at 5.4% as $6,350 * 0.054=$342.90.

Now, add all of these totals together to get: $393.70 + $92.08 + $38.10 + $342.90 = $866.78.

So the amount the employer should record as payroll taxes expense for the month is $866.78.

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RecRoom Equipment Company received an $8,000, six-month, 6 percent note to settle an $8,000 unpaid balance owed by a customer. a. The note is accepted by RecRoom on November 1, causing the company to increase its Notes Receivable and decrease its Accounts Receivable. b.RecRoom adjusts its records for interest its earned to its December 31 year-end. c.RecRoom receives the interest on the note's maturity date. d.RecRoom receives the principal on the note's maturity date.

Answers

Answer:

(a) The required journals are:

Debit Note receivable $8,000

Credit Accounts receivable $8,000

(To record note receivable)

(b) Adjustment for interest its earned to its December 31 year-end:

Debit Interest receivable $80

Credit Interest revenue $80

(To record interest receivable on notes as at 31 Dec)

(c) Receipt of interest on the note at maturity

Debit Cash $240

Credit Interest receivable $240

(Being receipt of interest on note at maturity)

(d) Receipt of principal on the note at maturity

Debit Cash $8,000

Credit Note receivable $8,000

(Being receipt of note principal at maturity)

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

The total interest revenue is $8,000 x 6%/12 x 6 months = $240.

Monthly interest revenue is therefore $240 / 6 months = $40.

Total interest as at December 31 (Nov 1 - Dec 31): $40 x 2 months = $80.

The types of decision making a consumer uses for a product does not necessarily remain constant. Why ?

Answers

Answer:

The answer is:

1. When the consumer's preferred product is sold out or not in the market again.

2. When a consumer is deriving a disutility from a product and the producer of the product fails to address the situation

Explanation:

Consumers are believed to be rational when it comes to taking consumption decisions. Consumers' consumption is not always constant or the same sometimes there are deviations from the norms and the following reason could be some of the reasons.

1. When the consumer's preferred product is sold out or not in the market again. Consumers in this category will need to go for alternative or substitute goods after evaluating his choices.

2. When a consumer is deriving a disutility from a product and the producer of the product fails to address the situation. The rational consumer will have to abadon this product and go for the alternative.

These two reasons can make consumers to change their preference.

The moving activity of Alpha Inc. has an expected cost of $200,000. Expected direct labor hours are 50,000, and the expected number of moves is 90,000. What is the best activity rate for moving? (Note: Round answer to two decimal places.)

Answers

Answer:

$2.22 per moves

Explanation:

Activity rate for moving =expected cost/Expected no of moves =$200000/90000 =$2.22 per mover

Pottery Ranch Inc. has been manufacturing its own finials for its curtain rods. The company is currently operating at 100% of capacity, and variable manufacturing overhead is charged to production at the rate of 63% of direct labor cost. The direct materials and direct labor cost per unit to make a pair of finials are $3.51 and $4.73, respectively. Normal production is 28,300 curtain rods per year.

A supplier offers to make a pair of finials at a price of $13.20 per unit. If Pottery Ranch accepts the supplier’s offer, all variable manufacturing costs will be eliminated, but the $48,200 of fixed manufacturing overhead currently being charged to the finials will have to be absorbed by other products.

(a)

Prepare an incremental analysis to decide if Pottery Ranch should buy the finials. (Round answers to 0 decimal places, e.g. 1250. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Make Buy Net Income
Increase (Decrease)
Direct materials $Pottery Ranch Inc. has been manufacturing its own $Pottery Ranch Inc. has been manufacturing its own $Pottery Ranch Inc. has been manufacturing its own
Direct labor Pottery Ranch Inc. has been manufacturing its own Pottery Ranch Inc. has been manufacturing its own Pottery Ranch Inc. has been manufacturing its own
Variable overhead costs Pottery Ranch Inc. has been manufacturing its own Pottery Ranch Inc. has been manufacturing its own Pottery Ranch Inc. has been manufacturing its own
Fixed manufacturing costs Pottery Ranch Inc. has been manufacturing its own Pottery Ranch Inc. has been manufacturing its own Pottery Ranch Inc. has been manufacturing its own
Purchase price Pottery Ranch Inc. has been manufacturing its own Pottery Ranch Inc. has been manufacturing its own Pottery Ranch Inc. has been manufacturing its own
Total annual cost $Pottery Ranch Inc. has been manufacturing its own $Pottery Ranch Inc. has been manufacturing its own $Pottery Ranch Inc. has been manufacturing its own

(b)

Should Pottery Ranch buy the finials?

Pottery Ranch Inc. has been manufacturing its own NoYes, Pottery Ranch should Pottery Ranch Inc. has been manufacturing its own not buybuy the finials.

(c)

Would your answer be different in (b) if the productive capacity released by not making the finials could be used to produce income of $61,137?

Pottery Ranch Inc. has been manufacturing its own NoYes, income would Pottery Ranch Inc. has been manufacturing its own increasedecrease by $Pottery Ranch Inc. has been manufacturing its own

Answers

Answer:

See attached file

Explanation:

Testbank Multiple Choice Question 47 Deferred taxes should be presented on the balance sheet as a current amount. as reductions of the related asset or liability accounts. as a noncurrent amount. as either noncurrent or current.

Answers

Final answer:

Deferred taxes should be presented as noncurrent amounts and as reductions of the related asset or liability accounts on the balance sheet.

Explanation:

Deferred taxes should be presented on the balance sheet as a noncurrent amount. This is because deferred taxes represent the future tax impacts of temporary differences between the book value and tax value of assets and liabilities. Therefore, the correct answer to the question is that deferred taxes should be presented on the balance sheet as noncurrent amounts and as reductions of the related asset or liability accounts.

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Final answer:

Deferred taxes should be represented on the balance sheet as a non-current amount. They arise due to the difference in accounting rules used by the tax department and those used by a company for its financial reporting. On a T-account sheet, deferred tax can be found on either side depending on whether it's a deferred tax asset or liability.

Explanation:

Deferred taxes in a financial context are future tax liabilities or assets that result from timing differences between the recognition of revenue or expense in the financial statements and their recognition in a tax return. They arise due to the difference in accounting rules used by the tax department and those used by a company for its financial reporting.

Given their nature, deferred taxes should be represented on the balance sheet as a non-current amount, meaning they are not expected to be settled within the next 12 months. They should not be shown as reductions of the related asset or liability accounts. On a T-account sheet, which is used to depict the general ledger, deferred tax can be found on either side depending on whether it's a deferred tax asset or liability.

In sum, deferred taxes can be represented as either current or non-current on the balance sheet, but it is more typical and appropriate for them to be presented as non-current.

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Suppose the restaurant industry is perfectly competitive. All producers have identical cost curves and the industry is currently in long-run equilibrium, with each producer producing at its minimum long-run average total cost of $8.


a. If there is a sudden increase in demand for restaurant meals, what will happen to the price of a restaurant meal? How will individual firms respond to the change in price? Will there be entry or exit from the industry? Explain.


b. In the market as a whole, will the change in the equilibrium quantity be greater in the short-run or the long-run? Explain.


c. Will the change in output on the part of individual firms be greater in the short-run or the long- run? Explain and reconcile your answer to part (b).

Answers

Answer:

Explanation:

A. Supply stays the same, demand decreases since restaurants are normal goods. As a result, the equilibrium price and the equilibrium quantity will go down.

B. In the short run, the existing firms reduce their output causing Q* to fall. In the long run, as firms exit, Q* falls even further.

C. An individual firm may produce in the short run, but exit from the industry in the long run. As a result, the firm will decrease its quantity produced up to 0. Therefore, in the long run the output of an individual firm may change drastically comparing with the short run.

Plaintiffs purchased state lottery tickets and were winners along with 76 others. The state had advertised that $1,750,000 would be the prize, but it distributed only $744,471. Plaintiff sued the lottery director, alleging fraud in the conduct of the lottery. The state lottery law provides for administrative hearings upon complaints charging violations of the lottery law or of regulations thereunder. It also allows any party adversely affected by a final order of the administrative agency to seek judicial review. Must the plaintiffs exhaust their administrative remedies? Why or why not?

Answers

Answer:

yesBecause the state lottery provides for administrative hearings

Explanation:

The plaintiffs must exhaust their administrative remedies before a court of law  would grant them the opportunity to pursue a legal action against the lottery board because it might a breach in communication or administration from the lottery board or the lottery director and the plaintiffs should  seek to resolve the issues without having to seek a legal action but through administrative remedies and procedures which more swift in resolving such issues

Final answer:

Yes, the plaintiffs must first exhaust their administrative remedies before going to court. This involves filing a complaint with the administrative agency, allowing them to investigate and potentially correct the issue. Only after this step can they seek judicial review.

Explanation:

Based on the provided information, it can be inferred that the plaintiffs would need to exhaust their administrative remedies before proceeding to legal litigation. This is because the state lottery law provides for administrative hearings for complaints alleging violations of the lottery law. Essentially, the plaintiffs must first file a complaint with the administrative agency responsible for the lottery and allow them to investigate and possibly remedy the situation. Only if the plaintiffs are unsatisfied with the final order of the administrative agency may they seek judicial review. This process is known as 'exhausting administrative remedies' and is generally a prerequisite before court proceedings. It helps to ensure that administrative agencies have the opportunity to correct their own errors and applies their expertise where appropriate.

The requirement to exhaust administrative remedies is also part of the rule of law that respects the separation of powers. In this context, the disputes would first have to be directed at the administrative level, which is the branch of government responsible for implementing and managing state programs such as lotteries. Turning to the administrative system allows for potential errors to be corrected without the immediate need for judicial intervention.

However, it's important to notate that exhaust administrative remedies rules vary by jurisdiction, and exceptions may exist depending on the specifics of the case.

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Your division is considering two investment projects, each of which requires an up-front expenditure of $25 million. You estimate that the cost of capital is 10% and that the investments will produce the following after-tax cash flows (in millions ofdollars):Year Project A Project B1 5202 10 103 15 84 20 6a. What is the regular payback period for each of the projects?b. What is the discounted payback period for each of the projects?c. If the two projects are independent and the cost of capital is 10%, which project or projects should the firm undertake?d. If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake?e. If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake?f. What is the crossover rate?g. If the cost of capital is 10%, what is the modified IRR (MIRR) of each project?

Answers

The answer is attached in form of text file below giving solution to each of the question parts in detail.

Answer:

a. What is the regular payback period for each of the projects?

project A: 2.67 yearsproject B: 1.5 years

b. What is the discounted payback period for each of the projects?

project A: 3.07 yearsproject B: 1.83 years

c. If the two projects are independent and the cost of capital is 10%, which project or projects should the firm undertake?

project A: NPV = $12.74 million project B: NPV = $11.55 million both projects have positive NPVs so they should both be chosen

d. If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake?

project A: NPV = $18.24 million (higher NPV, so this project should be selected)project B: NPV = $14.96 million

e. If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake?

project A: NPV = $8.21 million project B: NPV = $8.64 million (higher NPV, so this project should be selected)

f. What is the crossover rate?

13.53%

g. If the cost of capital is 10%, what is the modified IRR (MIRR) of each project?

MIRR project A = 21.93%MIRR project B = 20.96%

Explanation:

                                             Project A                      Project B

investment required       -$25,000,000              -$25,000,000

cash flow 1                          $5,000,000               $20,000,000

cash flow 2                        $10,000,000                $10,000,000

cash flow 3                        $15,000,000                 $8,000,000

cash flow 4                       $20,000,000                 $6,000,000

a. What is the regular payback period for each of the projects?

project A: 2 years ($15 million) + 10/15 = 2.67 years

project B: 1 year ($20 million) + 5/10 = 1.5 years

b. What is the discounted payback period for each of the projects?

interest rate = 10%

discounted cash flows      Project A                    Project B

                                        5/1.1 = 4.55                20/1.1 = 18.18

                                      10/1.1² = 8.26               10/1.1² = 8.26

                                      15/1.1³ = 11.27                8/1.1³ = 6.01

                                     20/1.1⁴ = 13.66                6/1.1⁴ = 4.1

project A: 3 years ($24.08 million) + 0.92/13.66 = 3.07 years

project B: 1 year ($18.18 million) + 6.82/8.26 = 1.83 years

c. If the two projects are independent and the cost of capital is 10%, which project or projects should the firm undertake? using excel spread sheet an NPV function:

project A: NPV = $12.74 million

project B: NPV = $11.55 million

both projects have positive NPVs so they should both be chosen

d. If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake?

project A: NPV = $18.24 million (higher NPV, so this project should be selected)

project B: NPV = $14.96 million

e. If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake?

project A: NPV = $8.21 million

project B: NPV = $8.64 million (higher NPV, so this project should be selected)

f. What is the crossover rate?

investment project A - investment project B = 0

cash flow 1 project A - cash flow 1 project B = 5 - 20 = -15

cash flow 2 project A - cash flow 2 project B = 10 - 10 = 0

cash flow 3 project A - cash flow 3 project B = 15 - 8 = 7

cash flow 4 project A - cash flow 4 project B = 20 - 6 = 14

now using excel spreadsheet we determine IRR: 13.53%

g. If the cost of capital is 10%, what is the modified IRR (MIRR) of each project?

MIRR = {ⁿ√ [FV(positive cash flows x cost of capital)] / [PV(initial outlays)]} - 1

future value of positive cash flows project A = (5 x 1.1³) + (10 x 1.1²) + (15 x 1.1) + 20 = 6.655 + 12.1 + 16.5 + 20 = 55.255

future value of positive cash flows project A = (20 x 1.1³) + (10 x 1.1²) + (8 x 1.1) + 6 = 26.62 + 12.1 + 8.8 + 6 = 53.52

PV initial outlays for both projects = -$25,000

n = 4

MIRR project A = {⁴√ [55.255 / -25]} - 1 = 1.2193 - 1 = 0.2193 or 21.93%

MIRR project B = {⁴√ [53.52 / -25]} - 1 = 1.2096 - 1 = 0.2096 or 20.96%

The Department of Service Financing in the city of Belmont, New York, has been experimenting with having city units provide services in-house versus having private contractors provide the same services. In the city's ground department, half of the landscaping work is performed by city crews, whereas the other half is performed by a private landscaping firm. The city manager has collected random samples of weekly expense report data for both providers. She asks you to conduct a difference of means test. What can the city manager conclude about the difference between in-house and private-service provision

Answers

Answer:

Using paired sample t test for means in attached file

Explanation:

Which of the following is not a capital expenditure? Multiple Choice Advertising expenditures to introduce a new product line Sales tax paid in conjunction with the purchase of new machinery Installation of elevators to replace escalators An amount paid to acquire a patent with a remaining life of only three years

Answers

Final answer:

In the given options, advertising expenditures to introduce a new product line is not considered a capital expenditure because it doesn't involve purchasing or upgrading productive assets. Instead, it's an operational expense.

Explanation:

A capital expenditure is an amount spent to acquire or upgrade productive assets, like buildings, machinery, and technology, to increase the capacity or efficiency of a company for more than one accounting period. Advertising expenditures to introduce a new product line is not a capital expenditure, but an operational expense. Other options in the multiple choice such as Sales tax paid in conjunction with the purchase of new machinery, installation of elevators to replace escalators, and an amount paid to acquire a patent (even with a remaining life of 3 years), are all examples of capital expenditures because they are investments improving the company’s performance in the long run.

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Final answer:

Among the options, 'Advertising expenditures to introduce a new product line' is not a capital expenditure. While this is spending by the firm, it does not contribute to future profits in the way that capital expenditures (like machinery purchases or patent acquisitions) do.

Explanation:

The question here is to identify which among the given options is not a capital expenditure. Capital expenditures are funds used by a company to acquire, upgrade, and maintain physical assets such as property, buildings, an industrial plant, technology, or equipment. This caters to investments that affect the company’s future operating capacity and income. In the provided options, the 'Advertising expenditures to introduce a new product line' is not a capital expenditure. Advertising is considered as a revenue expenditure that is used for promoting a firm's goods and services, and its effect is short-term.

However, other options like paying sales tax for new machinery, installing elevators to replace escalators, and paying to acquire a patent (even if its life is only three years remaining), are examples of capital expenditures, as they contribute to future profits and are thus capitalized and depreciated over time.

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Price supports (such as those placed on agricultural goods) Select one: a. are designed to benefit suppliers. b. hurt demanders because they face artificially higher prices. c. create surpluses that have to be purchased by government agencies. d. impose a higher tax burden on society in order to finance government purchases. e. generate all of the above consequences.

Answers

Answer:

The correct answer is letter "E": generate all of the above consequences.

Explanation:

Price supports, mostly known as price floors, are set by the government to protect producers of certain goods and services. By doing so, the product prices will have a minimum that cannot be trespassed. This is to make sure producers can continue with their operations at least earning a minimum profit margin.

The counterpart, the demanders, are affected because their purchasing power is decreased by setting the price at a certain level without the option of going down from there. Besides, the higher the price, the more taxes consumers will be paying. The disadvantage of price floors is surplusses in production that are the result of demanders not being able to pay the price set by the government. Eventually, government agencies purchase the surplus quantity in an attempt to keep the equilibrium in the market.

Final answer:

Price supports on agricultural goods provide benefits to suppliers but lead to higher prices for consumers, surpluses that the government must purchase, and a higher tax burden for society. Therefore, the correct answer is e. generate all of the above consequences.

Explanation:

Price supports, such as those placed on agricultural goods, have multiple consequences. These government enforcements are designed to maintain a minimum price by directly purchasing the goods or providing subsidies, which can lead to various effects.

The answer to the student's question would be e. generate all of the above consequences. Price supports benefit suppliers by ensuring they receive a certain minimum price for their goods, thus increasing producer surplus. However, they hurt demanders since they face artificially higher prices than what the market might have offered without such controls.

Also, they create surpluses because when the price is held above the equilibrium, quantity supplied exceeds quantity demanded, and these surpluses are usually purchased by the government. This action, in turn, imposes a higher tax burden on society to finance the government purchases of the surplus, and can lead to a deadweight loss (DWL), reflecting the loss of economic efficiency.

While such interventions aim to stabilize markets and ensure sufficient income for producers, they can lead to distortions in market functioning and carry a cost for society as a whole. Thus, they are a subject of debate since the goal is to balance the benefits of subsidies with the need to minimize negative externalities.

Suppose that a​ firm's only variable input is​ labor, and the constant hourly wage rate is ​$20 per hour. The last unit​ (hour) of labor hired enabled the firm to increase its hourly production from 250 units to 251 units. What was the marginal cost of the 251st unit of​ output?

Answers

Answer:

20

Explanation:

The marginal cost refers to the cost a company has when an additional unit is manufactured and it is calculated using the formula:

Marginal Cost= change in costs / change in quantity

Change in cost in this case is 20 as the last unit of labor hired costs an additional 20 per hour.

Change is quantity is 1 as the hourly production increases from 250 to 251 units.

Marginal Cost=20/1

Marginal Cost= 20

The marginal cost of the 251st unit of​ output was 20.

Incremental analysis is most useful 1. in evaluating the master budget. 2. as a replacement technique for variance analysis. 3. in developing relevant information for management decisions. 4. in choosing between capital budgeting methods.

Answers

Answer:

The correct answer is number (3): in developing relevant information for management decisions.

Explanation:

Incremental analysis is a study firm makes to allocate resources efficiently. It can be used at the moment of comparing the costs of different products to be manufactured to select the lowest that provides more benefits. Incremental analysis can also be implemented at the moment of identifying how a scarce resource should be used ensuring it brings the highest returns possible.

Incremental analysis, also known as differential or marginal analysis, helps managers to make more informed decisions, then.

Final answer:

Incremental analysis is most useful in developing relevant information for management decisions and in choosing between capital budgeting methods.

Explanation:

Incremental analysis is most useful in developing relevant information for management decisions. It involves analyzing the costs and benefits of different alternatives and making decisions based on the incremental effects of those alternatives. For example, when deciding whether to introduce a new product, a company can use incremental analysis to compare the additional revenue and costs associated with the new product to determine if it is financially feasible.

Incremental analysis can also be useful in choosing between capital budgeting methods. When considering different investment opportunities, a company can use incremental analysis to assess the incremental cash flows and benefits of each option. By comparing the incremental benefits and costs, the company can make an informed decision on which capital budgeting method to pursue.

Overall, incremental analysis is an effective tool in helping businesses make informed decisions, whether it's evaluating management decisions or choosing between capital budgeting methods.

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Heavy sales of umbrellas during a rain storm is an example of which of the following? Group of answer choices A trend A causal relationship A fad A coincidence None of the above

Answers

Answer:

im pretty sure a Fad

Explanation:

Final answer:

Heavy sales of umbrellas during a rain storm is an example of a trend.

Explanation:

Heavy sales of umbrellas during a rain storm is an example of a trend. A trend refers to a general direction or pattern of behavior that can be observed over a period of time. In this case, the increase in umbrella sales during a rainstorm is a consistent and predictable phenomenon, indicating a trend. Other examples of trends could be the popularity of certain fashion styles or the increase in sales of ice cream during the summer months.

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A regression analysis of 117 homes for sale produced the following regression equation, where price is in thousands of dollars and size is in square feet. regimage04 (a) What does the slope of the line say about housing prices and size? For every $1,000 increase in price of a house, the size is predicted to increase by 0.061 square foot. For every additional square foot of area of a house, the price is predicted to increase by $61. For every additional square foot of area of a house, the price is predicted to increase by $0.061. For every $1 increase in price of a house, the size is predicted to increase by 61 square feet. (b) A realtor shows a potential buyer a 1600 square-foot house, saying that the asking price is $4100 less than what one would expect to pay for a house of this size. What is the asking price of this house and what is the residual? The asking price is $145410 and the residual is a positive $4100 . The asking price is $145410 and the residual is a negative $4100 . The asking price is $141310 and the residual is a positive $4100 . The asking price is $141310 and the residual is a negative $4100 .

Answers

Answer:

(a). For every additional square foot of area of a house, the price is predicted to increase by $61

(b) The asking price is $145410 and the residual is a negative $4100

Explanation:

As per the data given in the question,

a) From regression equation Slope = 0.061

So slope = (0.061 × 1,000) ÷ 1 sq. ft.

= $61 per sq. ft.

For every additional square foot area price is increased by $61

b) If size of the house is = 1600 square foot then

Price = 47.81 + 1600*0.061

=$145,410

The asked price is $4,100 less than estimated price and residual is not positive

Hence,

Asking price = $145,410

Residual price = a negative $4,100

Equivalent Units of Materials Cost The Rolling Department of Kraus Steel Company had 3,400 tons in beginning work in process inventory (80% complete) on October 1. During October, 55,900 tons were completed. The ending work in process inventory on October 31 was 2,800 tons (50% complete). What are the total equivalent units for direct materials for October if materials are added at the beginning of the process?

Answers

Answer:

Explanation:

The process adopted by Kraus steel is process cost. A process cost is used to assign cost when there is a mass production of identical goods with continuous and various stages of production

                                           Input      Conversion%       Output

Opening inventory           3,400             80                 2720

October process               55,900         100                55900

                                            59,300                                58620

Closing Inventory                   2800          50                  1400

Total units                               62100                               60020

The total equivalent units for direct materials for October in the Rolling Department of Kraus Steel Company are 58,700 equivalent units. Since materials are added at the beginning of the process, both completed units and ending work in process inventory are considered 100% for materials cost.

To calculate the total equivalent units for direct materials for October in the Rolling Department of Kraus Steel Company, we consider that materials are added at the beginning of the process, and therefore any tons of steel in process or completed will have 100% of the materials costs applied to them. To find the total equivalent units, we add the following: the tons completed and the ending work in process inventory (considering the completion percentage is irrelevant as the materials are added at the beginning).

The calculation is as follows:

Beginning work in process inventory: not applicable since materials are added at the beginning, so all the materials would have already been accounted for in the previous month's calculation.Units completed: 55,900 tons (since they are completed, they have 100% of the materials).Ending work in process inventory: 2,800 tons (again, since materials are added at the beginning, these are also considered 100% for materials cost).

Therefore, the total equivalent units of materials cost for October are:

55,900 (completed) + 2,800 (ending WIP) = 58,700 equivalent units

National Drilling Company ships its only pump to American Hydraulics Corporation, the manufacturer, for repair. National pays Overland Transport, Inc., $400 to haul the pump to American Hydraulics and to return it to National five days later when the repair is complete. National is forced to suspend operations without a pump, but National does NOT tell Overland. To avoid losing profits of $1,000 per day while the pump is out for repairs, National rents a replacement pump at a cost of $100 per day. The repairs are completed on time, but Overland does not return the pump on the day specified in the contract, and delays five more days before returning the pump. National files a suit against Overland, asking for compensatory, consequential, and punitive damages. National will most likely be awarded

Answers

Answer:

National will prevail with regards in recovering the damages, but not for all the damages that it looks for. Overland's inability to perform quickly is a break of agreement for which National can recover damages. Although, the late delivery of pump by the Overland's, National is qualified for recover the cost of renting the pump for the five days that Overland delayed. Costs that are caused legitimately by a breach of agreement.

Twifty Sports Inc. manufactures basketballs for the Women’s National Basketball Association (WNBA). For the first 6 months of 2017, the company reported the following operating results while operating at 80% of plant capacity and producing 118,800 units. Amount Sales $4,514,400 Cost of goods sold 3,633,000 Selling and administrative expenses 517,540 Net income $363,860 Fixed costs for the period were the cost of goods sold $960,000, and selling and administrative expenses $274,000. In July, normally a slack manufacturing month, Swifty Sports receives a special order for 10,000 basketballs at $29 each from the Greek Basketball Association (GBA). Acceptance of the order would increase variable selling and administrative expenses $0.77 per unit because of shipping costs but would not increase fixed costs and expenses.
Prepare an incremental analysis for the special order.

Answers

Answer:

Incremental Analysis for special order

units                                                                   10,000

offer price                                                          $290,000

Variable cost:

Cost of goods sold($22.5 *10,000)     225,000

Selling and Administrative expenses

($2.05*10,000)                                       20,500

shipping cost (0.77*10,000)                  7,700       (253,200)

Additional contribution                                            36,800

Explanation:

variable cost goods sold per unit  =  ( 3,633,000 - 960,000)/118800 = $22.5

Variable selling and admin expense per unit = ( 517,540 - 274,000)/118800                  

                                                                         = $ 2.05

The Cash account in the ledger of Hensley, Inc. showed a balance of $3,100 at June 30. The bank statement, however, showed a balance of $3,900 at the same date. The only reconciling items consisted of a $700 deposit in transit, a bank service charge of $7, and a large number of outstanding checks. What is the "adjusted cash balance" at June 30?

Answers

Answer:

$3,093

Explanation:

Hensley, Inc.

Bank Reconciliation Statement

Month Ended June 30

Balance as Hensley, Inc. record $3,100

Less: Service Charges $7

Adjusted Cash Balance $3,093

Cash Balance as per Bank Statement $3,900

Add: Deposit in Transit $700

Less: Outstanding checks* $1,507

Adjusted Cash Balance $3,093

*Outstanding Checks = Balance as per Bank Statement + Deposit in Transit - Adjusted Cash Balance

Outstanding Checks = $3,900 + $700 - $3,093

Outstanding Checks = $1,507

Final answer:

The adjusted cash balance at June 30 can be calculated by adding the deposit in transit, deducting the bank service charge, and deducting the outstanding checks.

Explanation:

The adjusted cash balance at June 30 can be calculated by adjusting the Cash account balance in the ledger to reconcile it with the bank statement balance.

A $700 deposit in transit should be added to the Cash account balance, as it represents a deposit made by Hensley, Inc. that has not been recorded by the bank yet.The $7 bank service charge should be deducted from the Cash account balance, as it represents a fee charged by the bank.Outstanding checks should also be deducted from the Cash account balance, as they represent checks issued by Hensley, Inc. that have not yet been cleared by the bank.

By applying these adjustments, we can calculate the adjusted cash balance at June 30.

Suppose a competitive firm has​ cost, C​ = ​(0.002q3​) ​+ (22q)​ + 750, marginal​ cost, MC​ = 0.006q2​ + 22, and​ revenue, R​ = 80q. If the firm produces 150 units of​ output, A. R​ < C. B. MR​ < MC. C. marginal profit​ > 0. D. MR​ > MC. At this output level​ (150 units),

A. profit is negative.
B. marginal profit is negative.
C. profit is positive.
D. None of the above.

Answers

Answer:

 Options B and C are correct.

Marginal profit is negative. Profit is positive.

Explanation:

At q = 150

R = 80q = 80(150) = 12,000

C = 0.002(150)3 + 22(150) + 750 = 6750 + 3300 + 750 = 10,800

R > C so first is incorrect.

MR = 80

MC = 0.006(150 x 150) + 22 = 135 + 22 = 157

MC > MR so B is correct.

Profit = TR - TC = 80(150) - 0.002(150)3 - 22(150) - 750 = 12000 - 10800 = 1200

Profit is positive.

Marginal profit = MR - MC = 80 - 157 = - 77

MR is Negative

In the case when the firm should be produce 150 units of output so here  Options B and C are correct.

Calculation of the impact on the profit:

Since At q = 150

R = 80q = 80(150) = 12,000

So,

C = 0.002(150)3 + 22(150) + 750

= 6750 + 3300 + 750

= 10,800

Here Revenue > Cost  so first is incorrect.

Now

MR = 80

MC = 0.006(150 x 150) + 22 = 135 + 22 = 157

MC > MR so B is correct.

Now

Profit = TR - TC

= 80(150) - 0.002(150)3 - 22(150) - 750

= 12000 - 10800

= 1200

Profit is positive.

And,

Marginal profit

= MR - MC

= 80 - 157

= - 77

So, MR is Negative.

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On June 1, 2020, Smith sold equipment to Landing Inc. in exchange for a zero-interest bearing note with a face value of $110,000, with payment due in 12 months. The fair value of the equipment on the date of sale was $100,000.
(a) The amount of revenue to be recognized on this transaction in 2020 is ___________.

Answers

Answer:

$100,000 sales revenue and $5,833 interest revenue

Explanation:

The computation is shown below:

For interest revenue

= (Face value - fair value of the equipment) × number of months ÷ total number of months in a year

= ($110,000 - $100,000) × 7 months ÷ 12 months

= $5,833

The seven months is calculated from June 1 to December 31

And, the fair value of the equipment on the sale date i.e $100,000 is also recognized

BHS Inc. determines that sales will rise from $300,000 to $500,000 next year. Assets are 70% of sales and liabilities are 30% of sales. BHS has a 10% profit margin and a 40% dividend payout ratio. What is the level of required new funds?

Answers

Final answer:

The level of required new funds for BHS Inc. is calculated by finding the differences between the increases in assets, increases in liabilities, and the dividends paid out from profits. For BHS Inc., this results in required new funds of $60,000.

Explanation:

The student is seeking to understand the level of required new funds for BHS Inc., given its projected increase in sales, asset and liability structure, profit margin, and dividend payout ratio. To calculate this, we must follow several steps.

Calculate the projected increase in assets and liabilities based on the new sales figure.

Determine the profits based on the new sales and profit margin.

Calculate the dividends to be paid out based on the profit and dividend payout ratio.

Finally, deduce the required new funds by subtracting both the increase in liabilities and dividends from the increase in assets. The remaining balance reflects the new funds required.

Let's break this down:

Projected increase in assets: $500,000 x 0.70 = $350,000 (new asset level) - $300,000 x 0.70 = $210,000 (current asset level) = $140,000 increase.

Projected increase in liabilities: $500,000 x 0.30 = $150,000 (new liability level) - $300,000 x 0.30 = $90,000 (current liability level) = $60,000 increase.

Projected profits: $500,000 x 0.10 = $50,000.

Dividends paid: $50,000 x 0.40 = $20,000.

Required new funds: $140,000 (increase in assets) - $60,000 (increase in liabilities) - $20,000 (dividends paid) = $60,000.

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