Answer:
C. $25,000 overallocated.
Explanation:
[tex]\frac{Cost\: Of \:Manufacturing \:Overhead}{Cost \:Driver}= Overhead \:Rate[/tex]
160,000 / 12,000 = 13.33333333 = 13 + 1/3 (to avoid rounding issues)
Applied Overhead
[tex]rate \times actual \: labor \: hours = applied \: overhead[/tex]
(13 + 1/3) * 15,000 = 200,000
Actual Overhead (175,000)
Overapplied for 25,000
Remember that the overhead is done by distributing the estimated overhead cost over a cost driver, which usually is direct labor or machine hours
Final answer:
Johnson Manufacturing overallocated manufacturing overhead by approximately $25,000. This was determined by calculating the predetermined overhead rate, applying it to the actual labor hours, and then comparing to the actual overhead incurred. The correct answer is option (C).
Explanation:
Johnson Manufacturing initially estimated that the manufacturing overhead would be $160,000 for 12,000 direct labor hours, which gives us a predetermined overhead rate (POHR). To calculate the POHR, we divide the estimated manufacturing overhead by the estimated direct labor hours: $160,000 / 12,000 hours = $13.33 per labor hour. This rate is then applied to the actual labor hours to allocate manufacturing overhead.
Using the actual labor hours of 15,000, we multiply by the POHR: 15,000 hours x $13.33 per hour = $199,950. This is the amount of overhead that should have been applied based on actual hours worked. However, the actual manufacturing overhead incurred was $175,000.
Now, we compare the applied overhead ($199,950) to the actual overhead ($175,000). Since the applied overhead is greater than the actual overhead, manufacturing overhead was overallocated by the difference: $199,950 - $175,000 = $24,950. The closest answer is C. $25,000 overallocated.
A jewelry supply house incurred $300,000 in factory overhead cost, of which $50,000 was identified as the cost of sanders for polishing tool bits. It also incurred rent of $75,000 for the building in which the tool bits and other products were manufactured. 20% of the building space is used to manufacture tool bits. It paid $100,000 in sales commission for tool bits. Under activity-based costing, the jeweler will identify ________ as product cost for tool bits.
Answer:
The correct answer is $165,000
Explanation:
Firstly the activity based costing is one of the most popular method of costing that is mainly used by manufacturing companies because of its accuracy , as it produces true cost data and properly classify's the cost incurred by the corporation in its process of manufacturing goods. Here cost would be identified and assigned to the overhead activities of the company and then those costs would be assigned to those goods.
Here for calculating the product cost for the tool bits we will see which cost are directly related to the tool bits.
So product cost for tool bits = cost of sanders for polishing tool bits
+
sales commission paid for tool bits
+
building space used for manufacturing the
tool bits
= $50,000 + $100,000 + 20% of $75,000
= $150,000 + 20/100 x $75,000
= $150,000 + $15,000
= $165,000
Schager Company purchased a computer system on January 1, 2012, at a cost of $40,000. The estimated useful life is 10 years, and the estimated residual value is $5,000. Assuming the company will use the double-declining-balance method, what is the depreciation expense for the second year?
Answer:
The depreciation expense for the second year would be $6400
Explanation:
Double declining balance method is that method of depreciation where depreciation on the asset continues until the value of the asset comes down to its salvage value.
Firstly we will here find the depreciation rate here , where we can use the formula -
straight line declining depreciation rate x 2,
where straight line declining depreciation rate = 100% / estimated useful life
so, (100% / estimated useful life of asset) x 2
= (100% / 10) x 2
= 10% x 2
= 20% ( double declining depreciation rate )
DEPRECIATION EXPENSE FOR FIRST YEAR =
$40,000 X 20% = $8000
DEPRECIATION EXPENSE FOR SECOND YEAR =
$40,000 - $8000 X 20%
= $32,000 X 20%
= $6400
Job A3B was ordered by a customer on September 25. During the month of September, Jaycee Corporation requisitioned $3,500 of direct materials and used $5,000 of direct labor. The job was not finished by the end of the month, but needed an additional $4,000 of direct materials and additional direct labor of $8,500 to finish the job in October. The company applies overhead at the end of each month at a rate of 200% of the direct labor cost incurred. What is the balance in the Work in Process account at the end of September relative to Job A3B?
Answer:
18,500 WIP balance at September 30th
Explanation:
Job A3B
3,500 direct materials
5,000 direct labor
10,000 Overhead (200% of labor = 5000 x 200%)
18,500 WIP balance at September 30th
The cost added during October will be part of October calculation, on September we should work with September values.
At the end of September, the Work in Process account balance relative to Job A3B is $18,500, which includes direct materials of $3,500, direct labor of $5,000, and applied overhead of $10,000.
The balance in the Work in Process account at the end of September relative to Job A3B can be calculated by adding the direct materials, direct labor, and applied overhead for the job up to that point. The direct materials requisitioned in September were $3,500 and the direct labor used was $5,000. Overhead is applied at 200% of the direct labor cost, which would be 200% of $5,000 resulting in $10,000 of overhead. Therefore, the total cost recorded in the Work in Process account at the end of September would be the sum of these amounts.
Direct Materials: $3,500
Direct Labor: $5,000
Applied Overhead (200% of direct labor): $10,000
Total Work in Process at end of September: $18,500
On January 1, 2014, Howe Company's Accounts Receivable balance was $11,400 and the balance in the Allowance for Doubtful Accounts was $570. On January 5, 2014, a $340 uncollectible account was written-off as uncollectible. Assuming that no other transactions related to accounts receivable had occurred, the net realizable value of accounts receivable immediately after the write-off was Multiple Choice A) $11,400. B) $10,830. C) $10,490. D) $11,060.
Answer:
B) $10,830.
Explanation:
AR 11400
Allowance 570
net 10830
allowane 340
AR 340
AR 11060
Allowance 230
net 10830
The is no change in the net account receivable
Compare and contrast the idea of extrinsic and intrinsic rewards with Herzberg’s Two-Factor theory of motivation? Does the idea of intrinsic and extrinsic rewards agree in principle with Herzberg, or not? How effectively have you seen intrinsic and extrinsic rewards used in the workplace?
Answer: EXTRINSIC AND INTRINSIC REWARDS CAN BE EXPLAINED AS FOLLOWS :-
Explanation:
Herzberg explained the reward factor into two types.
The first factors were those motivating the employees and exerting them to enhance their performance continuously these factors were called motivators while the factors keeping employees away from dissatisfaction were called hygiene factors.
The idea of extrinsic and intrinsic factors is vary similar to herzberg theory as this theory states external and internal factor as factors affecting performance of employee. In this theory external factors were reasonable pay and other benefits, similar to the hygiene factors and internal factors were achievement recognition etc which are similar to motivators.
So , we can agree that idea of intrinsic and extrinsic factors agree with principle of herzberg.
.
Since the establishment of corporate culture we can see the that external factors were there at the workplace but in present time organisations are now taking care of intrinsic factors as well for long run benefits.
Intrinsic and extrinsic rewards pertain to internal and external motivating factors respectively. Herzberg’s Two-Factor theory suggests extrinsic rewards prevent dissatisfaction, but only intrinsic rewards motivate people. The role and impact of these rewards have varied effectiveness in the workplace.
Explanation:The concept of intrinsic and extrinsic rewards pertains to the sources of motivation that drive people's actions. Intrinsic motivation refers to the internal drives such as personal fulfillment, growth, and happiness that motivate a person to take certain actions. On the other hand, extrinsic motivation comes from the external stimuli like money, praise, and recognition.
Herzberg’s Two-Factor theory, on the other hand, suggests two distinct groups of factors that influence motivation. Hygiene factors - equivalent to extrinsic rewards - can prevent dissatisfaction, but cannot motivate someone, while motivators - similar to intrinsic rewards - cause job satisfaction and motivate people to perform better.
Therefore, while there is some overlap between the concepts, the idea of intrinsic and extrinsic rewards and Herzberg’s Two-Factor theory differ in that Herzberg doesn’t see extrinsic factors as genuine motivators, but only as factors preventing dissatisfaction. In the workplace, intrinsic rewards have been observed to produce long-lasting effects on performance and job satisfaction. Extrinsic rewards - while also effective at boosting motivation - can sometimes reduce intrinsic motivation if they are expected or overtly used to control behavior.
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Suds's Bottling Company does bottling, labeling, and distribution work for several local microbreweries. The demand rate for Wortman's beer is 600 cases (24 bottles each) per week. Suds's bottling production rate is 2 comma 300 cases per week, and the setup cost is $700. The value of inventory is $11.50 per case, and the annual holding cost is 30 percent of the inventory value. Suds's Bottling Company operates 52 weeks per year. What is the economic production lot size?
Answer:
The economic production lot size will be 3,558 cases
Explanation:
We should use the economic order quantity formula
[tex]Q_{opt} = \sqrt{\frac{2DS}{H}}[/tex]
How to Remember:
Demand per year and order cost goes in the dividend.
Holding cost goes in the divisor.
D= annual demand = 600 x 52 = 31,200
S= setup cost = 700
H = Annua holding cost is 30% of invenotry value:
11.50 x 30% = 3.45
[tex]Q_{opt} = \sqrt{\frac{2\times31,200\times700}{3.45}}[/tex]
EOQ =3558
Final answer:
The question involves calculating the economic production lot size for Suds's Bottling Company for Wortman's beer using the EPQ formula, considering various given costs and rates, such as demand rate, production rate, setup cost, value of inventory, and holding cost rate.
Explanation:
The question asks for the calculation of the economic production lot size for Wortman's beer, being produced and distributed by Suds's Bottling Company. To find this, we use the Economic Production Quantity (EPQ) formula, which is designed to determine the most efficient quantity to order that minimizes the total holding costs and setup costs during production. Given that the demand rate is 600 cases per week, the production rate is 2,300 cases per week, the setup cost is $700, the value of inventory is $11.50 per case, and the annual holding cost rate is 30% of the inventory value, we can proceed with the calculation. The EPQ formula is: EPQ = sqrt((2DS/H) * (P/(P-D))), where D = demand rate (600 cases/week), S = setup cost ($700), H = holding cost per unit per year ($11.50 * 30%), and P = production rate (2,300 cases/week). Plugging in these numbers, we calculate the economic production lot size Suds's should aim for to minimize costs while meeting demand efficiently.
Ian loaned his friend $30,000 to start a new business. He considers this loan to be an investment, and therefore requires his friend to pay him an interest rate of 8% on the loan. He also expects his friend to pay back the loan over the next four years by making annual payments at the end of each year. Ian texted and asked that you help him calculate the annual payments that he should expect to receive so that he can recover his initial investment and earn the agreed-upon 8% on his investment.
Answer:
C = 9057.624134
Explanation:
This will be done by calculate the quota of French Loan System, because the cuota must be the same for the four years.
[tex]C = V* \frac{(1+r)^{time} * r}{(1+r)^{time} - 1}[/tex]
Where:
V = the principal of the loan
C= quota
[tex]C = 30,000* \frac{(1+0.08)^{4} * 0.08}{(1+0.08)^{4} - 1}[/tex]
C = 9057.624134
C = $9057.62
Andy invests in Orelon Corp., a plastic manufacturing company. As a stockholder, he owns a part of the company and he holds the right to vote on company issues. However, he is entitled to dividends only when the company's board of directors decides to. According to the company policies, if Orelon Corp. faces dissolution in the future, Andy will receive his assets only after the company satisfies the claim of the preferred stockholders. Based on the given information, it can be concluded that Andy is a _____ stockholder.
Answer:
Andy is a common stockholder
Explanation:
In case of dissolution, the company must pay his creditors in a specific order.
Based on the given information, we can say that Andy is a common stock holder, because they are the last in line for the company's assets . This means that the corporation must pay all creditors and bondholders first, then preferred shareholders and last, common stockholders
Given the facts, Andy is a common stockholder of Orelon Corp. He has voting rights proportional to his ownership, but his dividends and claim on assets are secondary to those of preferred stockholders.
Explanation:Based on the given information, it can be concluded that Andy is a common stockholder in Orelon Corp. Common stockholders, also known as shareholders, are individuals who own shares of stock in a public company, which gives them a partial ownership claim on the company. However, they have less claim on the company's assets and earnings than preferred stockholders.
Common stockholders have the right to vote for the company's board of directors and their votes are usually proportional to the amount of stock they own. The board of directors then hire top executives to run the company on a daily basis. And as Andy only receives dividends when they are approved by the board, and his assets are only returned after the claims of preferred stockholders are satisfied, his status as a common stockholder is confirmed.
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Project A has a predicted payback period of 2.5 and Project B has a predicted payback period of 5. Based on this information we can conclude that Select one: A. more information should be gathered before deciding on which project, if either, is desirable. B. Project A is preferred to Project B. C. Project B provides twice the return of Project A. D. Project B is preferred to Project A, but it is not necessarily twice as profitable.
Answer:
A. more information should be gathered before deciding on which project, if either, is desirable.
Explanation:
The lower Payback Period is not sufficient information to decide which project is more profitable. The payback period indicates when in the life of a project the initial investment principal cash flow is achieved.
But to decide about a certain project it is better to know the interest yield, it is also important to get the life of the project and other information.
For example:
a.- 250 investment 100 per year payback in 2.5-year life 3 years
b.- 500 investment 100 per year payback in 5-year life 20 years
While A payback occurs before project B is better
Job 593 was recently completed. The following data have been recorded on its job cost sheet: Direct materials $2,472 Direct labor-hours 74 labor-hours Direct labor wage rate $ 19 per labor-hour Machine-hours 134 machine-hours The Corporation applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $20 per machine-hour. The total cost that would be recorded on the job cost sheet for Job 593 would be:
Answer:
Total Cost Job 593 6557
Explanation:
Job 593
[tex]cost = materials + labor + overhead[/tex]
DM 2,471
DL 1,406 ( 74 labor hours x $19 labor rate)
FO 2,680 (134 machine hours x 20 FO rate)
Total Cost 6557
Remember, for Direct Labor and machien hours, you needto multiply the amount of hour applied in the job by the rate.
Outsourcing decision:-Walker, Inc. currently manufactures 4,000 motors for its electric scooters annually. Direct material costs are $44,000 and direct labor total $16,000 annually. Overhead totals $18 per unit of which $5 is variable. Eighty percent of the fixed overhead is unavoidable. Swingly, Inc. has contacted Walker with an offer to sell the motors for $24 each. Should Walker continue making motors or buy from Swingly?
Answer:
Walker shall continue to make such motors as there will be savings of $5,600
Explanation:
Variable cost per unit
Direct material = $44,000/4,000 = $11
Direct labor cost = $16,000/4,000 = $4
Variable overhead = $5
Total variable overhead = $20
Total Fixed cost = ($18 - $5) [tex]\times[/tex] 4,000 units = $52,000
Total cost of manufacturing = $52,000 + $20[tex]\times[/tex] 4,000
= $52,000 + $80,000 = $132,000
In case of buying
Fixed cost = $52,000 [tex]\times[/tex] 80% = $41,600
Variable cost = $24 [tex]\times[/tex] 4,000 = $96,000
Total cost in case of buying = $137,600
Since the cost of buying motors is expensive than manufacturing, Motors shall be manufactured by Walker Inc.
In that case it saves = $137,600 - $132,000 = $5,600
On June 30, 2018, K Co. had outstanding 10%, $19,000,000 face value bonds maturing on June 30, 2023. Interest is payable semiannually every June 30 and December 31. On June 30, 2018, after amortization was recorded for the period, the unamortized bond premium was $69,000. On that date, K acquired all its outstanding bonds on the open market at 99 and retired them. At June 30, 2018, what amount should K Co. recognize as gain on redemption of bonds before income taxes?
Answer:
K Co would recognize $259,000 as gain on redemption of bonds before income taxes.
Explanation:
Given information available to us -
Face value of the bond@10% = $19,000,000 (on June 30,2018)
Unamortized bond premium = $69,000
Interest is payable semi annually on every June 30 and December 31
On June 30 K acquired all outstanding bonds at 99% from the open
market and retired them.
So for calculating the gain the first would be to calculate the face value of the bonds on June 30, 2018, which would be equal to =
Face value of the bond + unamortized bond premium
Book value of the bonds = $19,000,000 + $69,000
= $19,069,000
and now we will subtract the redemption price from the book value to see how much gain will come,
GAIN= Book value of bonds - 99% of the face value of the bonds
= $19,069,000 - $18,810,000
= $259,000
Final answer:
K Co. should recognize a gain of $259,000 on the redemption of the bonds before income taxes, calculated by subtracting the bond repurchase price at 99% of face value from the carrying amount with the unamortized bond premium.
Explanation:
To determine the gain on redemption of bonds before income taxes, we need to consider the carrying amount of the bonds and the price at which they were repurchased. K Co.'s bonds had a face value of $19,000,000 and an unamortized bond premium of $69,000, giving them a carrying amount of $19,069,000 ($19,000,000 + $69,000). On June 30, 2018, K Co. repurchased the bonds at 99% of their face value, which means they paid 99% of $19,000,000, equaling $18,810,000.
To calculate the gain, subtract the repurchase price from the carrying amount: $19,069,000 - $18,810,000 = $259,000. Therefore, K Co. should recognize a gain of $259,000 on the redemption of the bonds before income taxes.
Suppose that the US Federal Reserve Board was able to confirm that the US economy is in the brink of a recession, operating at a GDP level (Y1) that is well below its full-employment capacity (YF). Your tasks are: a. Name one monetary policy, and specify the policy tool to use, that the Fed could make to help boost the economy. b. Using the AD-AS theory, show and EXPLAIN the expected short run and long run effect of this policy on the US economy.
Answer:
a.) To combat recession the federal reserve board can adopt expansionary monetary policy. The fed can reduce the cash reserve ratio.
b.) The aggregate output and price is going to increase in short run. In the long run though economy will be operating at equilibrium level.
Explanation:
With the decline in the cash reserve ratio the total reserves with the banks will increase. This will boost credit credit creation. As the money supply in the economy increases the aggregate demand will increase. This will further lead to increase in price and output level.
In the medium term, the aggregate supply will also increase though not as much as demand, so there will be excess of demand. The price level will rise further.
In the long run though output will always be at the equilibrium level.
P7-9: Common stock value: Constant growth McCracken Roofing Inc. common stock paid a dividend of $1.20 per share last year. The company expects earnings and dividends to grow at a rate of 5% per year for the foreseeable future. a. What required rate of return for this stock would result in a price per share of $28? b. If McCracken expects both earnings and dividends to grow at an annual rate of 10%, what required rate of return would result in a price per share of $28?
Answer:
a) rate of return = 0.095 = 9.5%
b) rate of return = 0.147143 = 14.7143%
Explanation:
a) using the constant growth model:
[tex]P = \frac{D0 (1+g)}{ke - g)}[/tex]
[tex]28=\frac{1.2(1.05)}{ke-0.05} \\[/tex]
therefore[tex]ke =\frac{1.2(1.05)}{28} +0.05[/tex]
[tex]ke = 0.095 =9.5%[/tex]
b) using the working from above, we showed that
[tex]ke=\frac{Do(1+g)}{P0} + g[/tex]
given g= 10%, P0=28 and D0=1.2
[tex]ke = \frac{1.20(1+0.1)}{28} + 0.1 = 0.147142857 = 14.7143%[/tex]
Final answer:
The required rate of return for McCracken Roofing Inc.'s stock with a dividend growth rate of 5% for a price of $28 is approximately 14.29%. With a growth rate of 10%, it's the same since the stock price is held constant at $28.
Explanation:
The student's questions relate to calculating the required rate of return for a stock given its dividend payout and growth rate to result in a specific stock price. The method for this calculation involves using the Gordon Growth Model, which connects the current dividend payment, the growth rate of dividends, and the required rate of return to derive the stock price.
Part a:
The first part of the question asks what required rate of return would result in a price per share of $28 when the stock paid a dividend of $1.20 last year with a growth rate of 5%.
We use the formula:
Price = Dividend per share / (Required rate of return - Growth rate)
Rearranging for the required rate of return gives us:
Required rate of return = (Dividend per share / Price) + Growth rate
With the given numbers:
Required rate of return = ($1.20 / $28) + 0.05
Required rate of return = 0.092857 + 0.05
Required rate of return = 0.142857 or 14.2857%
Part b:
The second part changes the growth rate to 10%. Using the same method:
Required rate of return = ($1.20 / $28) + 0.10
Required rate of return = 0.142857 or 14.2857%
Note: In practice, required rates of return would also consider the risk premium, which accounts for the uncertainty and risk associated with future dividend payments.
Capital structure decisions include all of the following EXCEPT: Deciding how to pay for long term projects. Deciding the mix of debt and equity for the firm. Deciding the total amount of debt the firm should take on. Deciding what assets to purchase.
Answer: the one that is not a capital structure decision is deciding what assets to purchase.
Explanation: The capital structure is how a firm finances its overall operations and growth by using different sources of funds. Debt comes in the form of bond issues or long-term notes payable, while equity is classified as common stock, preferred stock or retained earnings.
Your question asks which of the statements does not occur when making a capital structure decision.
Answer: Deciding what assets to purchaseThe reason why "Deciding what assets to purchase" is the correct answer because this is something that someone can't make an decision on when making capital structure decisions.
Capital structure is a way a business/company/corporation finances their assets with debt, equity, or securities that they have.
The capital structure would be depended on their liabilities.
All in all Capital structure is the financial calculations of a business/company's debt, equity, and securities. They can't make a decision on what assets to purchase, due to the fact that they're financing what they already have, without any decision on what assets they should get.
I hope this helps!Best regards,MasterInvestorIf the discount rate is 10% and the cost of a project is $100 investment today with an expected payoff of $50 at the end of year 1 and an expected payoff $80 in year 2, should the project be undertaken?
Answer:
Yes, the project should be accepted.
Explanation:
We will calculate Net Present Value (NPV) of the project. For that cash inflows will be discounted at the rate given i.e. 10%
Current outflow = $100
Inflow at end of year 1 = $50, discounted value =
[tex]{\frac{1}{1+0.1}^1[/tex] X $50 = $45.45
Inflow at end of year 2 = $80, discounted value =
[tex]{\frac{1}{1+0.1}^2[/tex] X $80 = $66.115
NPV = Net inflow - Net outflow = $45.45 + $66.115 - $100 = $11.565
Since NPV is positive,
The project should be accepted.
You are given the following information for Thrice Corp.: Decrease in inventory $ 630 Decrease in accounts payable 265 Increase in notes payable 250 Increase in accounts receivable 280 Did cash go up or down? By how much?
Answer:
The cash balance would increase by $335
Explanation:
The given question shows the operating activities of the cash flow statement which deals in increasing and decrease of current assets and liabilities.
1. Decrease in inventory $ 630 increase the cash balance.
2. Decrease in accounts payable $265 decrease the cash balance. As payment would be made regarding purchase
3. Increase in notes payable $250 increase the cash balance because cash is received.
4. Increase in accounts receivable $280 decrease the cash balance because there is not any surety of cash.
After considering these cash effects, we get to know whether cash would be increased or decreased by applying the equation which is shown below:
Cash balance = Decrease in inventory + Increase in notes payable - Decrease in accounts payable - Increase in accounts receivable
= $ 630 + $250 - $265 - $280
= $335
These effects show the source and use of cash funds.
Thus, the cash balance would increase by $335.
Cash balance refers to the amount of money which is hold by the bank on a specific period of time.
The amount of cash balance would go up by $335 during the year.
What is cash balance?A cash balance shows that a company has cash on hand and can use that cash however it wishes. Cash includes more than just the physical conventional bills and coins.
Computation of cash balance:
[tex]\text{Decrease in Inventory} + \text{Increase in notes payable} - \text{Decrease in AP} - \text{Increase in AR}\\\\\\\text{Cash Balance} = \$ 630 + \$250 - \$265 - \$280\\\\\\\text{Cash Balance} =\$335[/tex]
Where,
AP = Accounts Receivable, and
AR = Accounts Receivable.
In the above case, The increasing and decreasing items, are:
1. Decrease in inventory by $630, increase the cash balance.
2. Decrease in accounts payable by $265 also decrease the cash balance.
3. Increase in notes payable by $250 also increase the cash balance because cash is obtained.
4. Increase in accounts receivable by $280, decrease the cash balance because there is not any sure thing of cash.
Therefore, the amount of cash balance would go up by $335.
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Maloney, Inc., has an odd dividend policy. The company has just paid a dividend of $2 per share and has announced that it will increase the dividend by $6 per share for each of the next five years, and then never pay another dividend. If you require a return of 12 percent on the company’s stock, how much will you pay for a share today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
The stock price that an investor should be willing to pay today given Maloney, Inc.'s unique dividend policy can be calculated using the present value of dividends for each year over the next five years and the required rate of return of 12 percent.
Explanation:The subject of this question is related to the field of finance, particularly in the topic of company dividends and stock valuation. Maloney, Inc. has announced a unique dividend policy where it will increase the dividend by $6 per share for the next five years and then cease to pay any dividends thereafter. As an investor who is expecting a 12 percent return on your investments, it is crucial to determine the present value of these expected dividends to decide the maximum price you would pay for a share today.
Using the concept of the present value of a series of cash flows (which in this case are dividends), you can calculate the price of a share. The formula for calculating the present value is: PV = D / (1 + r)n where D is the dividend, r is the required rate of return, and n is the number of periods. Apply this formula for each of the next five years and sum them up to get the current price of the share, as follows:
Year 1: $8 / (1.12)1
Year 2: $14 / (1.12)2
Year 3: $20 / (1.12)3
Year 4: $26 / (1.12)4
Year 5: $32 / (1.12)5
By adding the present value of dividends for each year, you find the price you should be willing to pay for a share today considering your required rate of return.
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The price you would be willing to pay for a share of Maloney, Inc., today, given the required rate of return of 12%, is approximately $60.346.
To determine the current price of Maloney, Inc.'s stock today, we need to calculate the present value of the dividends that will be paid over the next five years, and also consider the price of the stock at the end of the fifth year when no more dividends will be paid.
Given:
- Current dividend: $2 per share
- Dividend growth rate: $6 per share per year for 5 years
- Required return (discount rate): 12%
Step 1: Calculate Dividends for Years 1 to 5
The dividends for each year are as follows:
- Year 1: $2 per share
- Year 2: $8 per share (2 + 6)
- Year 3: $14 per share (8 + 6)
- Year 4: $20 per share (14 + 6)
- Year 5: $26 per share (20 + 6)
Step 2: Calculate Present Value of Dividends
Now, calculate the present value (PV) of the dividends using the formula for the present value of a growing annuity:
[tex]PV = \frac{D_1}{(1 + r)^1} + \frac{D_2}{(1 + r)^2} + \frac{D_3}{(1 + r)^3} + \frac{D_4}{(1 + r)^4} + \frac{D_5}{(1 + r)^5}[/tex]
Where:
[tex]D_1 = $2 \\\\ D_2 = $8 \\\\ D_3 = $14 \\\\ D_4 = $20 \\\\ D_5 = $26 \\\\ r = 12\% or 0.12[/tex]
Let's calculate each term:
[tex]PV = \frac{2}{(1 + 0.12)^1} + \frac{8}{(1 + 0.12)^2} + \frac{14}{(1 + 0.12)^3} + \frac{20}{(1 + 0.12)^4} + \frac{26}{(1 + 0.12)^5} \\\\ PV = \frac{2}{1.12} + \frac{8}{1.12^2} + \frac{14}{1.12^3} + \frac{20}{1.12^4} + \frac{26}{1.12^5} \\\\[/tex]
Calculating each term:
[tex]PV = \frac{2}{1.12} + \frac{8}{(1.12)^2} + \frac{14}{(1.12)^3} + \frac{20}{(1.12)^4} + \frac{26}{(1.12)^5} \\\\ PV \approx 1.79 + 6.38 + 9.96 + 12.71 + 14.75 \\\\ PV \approx 45.59[/tex]
Step 3: Calculate Price of Stock Today
Finally, add the present value of the dividends to the price of the stock at the end of Year 5 (when no more dividends will be paid), discounted back to the present value:
[tex]\text{Price today} = PV + \frac{D_5}{(1 + r)^5} \\\\ \text{Price today} = 45.59 + \frac{26}{(1.12)^5}[/tex]
Calculate [tex]\frac{26}{(1.12)^5}[/tex] :
[tex]\frac{26}{(1.12)^5} \approx \frac{26}{1.762 } \approx 14.756 \\\\ \text{Price today} = 45.59 + 14.756 \\\\ \text{Price today} \approx 60.346[/tex]
Therefore, the price you should pay for a share of Maloney, Inc.'s stock today is approximately 60.346 dollars per share.
Suppose investors can earn a return of 2% per 6 months on a Treasury note with 6 months remaining until maturity. The face value of the T-bill is $10,000. What price would you expect a 6-month maturity Treasury bill to sell for? (Round your answer to 2 decimal places.)
The expected price for the 6-month maturity Treasury bill would be approximately $9,901.47.
The price of a Treasury bill (T-bill) can be calculated using the formula for the present value of future cash flows. In this case, the T-bill will mature in 6 months and pay a face value of $10,000.
The price of a T-bill is calculated by using the present value formula:
[tex]P = FV/ (1+r)^n[/tex]
Where:
P is the price of the T-bill
F is the face value of the T-bill ($10,000 in this case)
r is the interest rate per period (2% or 0.02 in this case, since it's given as a percentage)
n is the number of periods until maturity (0.5 years or 0.5 periods in this case, since the T-bill matures in 6 months)
Plugging in the values:
[tex]PV = 10,000/(1+0.02)^{0.5}[/tex]
= 9,901.47.
Therefore, the expected price for the 6-month maturity Treasury bill would be approximately $9,901.47.
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Final answer:
The price of a 6-month maturity Treasury bill can be calculated using the formula Price = Face Value / (1 + (Discount Rate * Time)). In this case, the T-bill with 6 months remaining sells for $9,803.92.
Explanation:
A Treasury bill (T-bill) is a short-term debt security issued by the US government. Its price is determined by the discount rate, which is the difference between the face value of the bill and the price at which it is sold. To calculate the price of a T-bill, you can use the formula:
Price = Face Value / (1 + (Discount Rate * Time)),
where the time is the number of periods until maturity.
In this case, the T-bill has 6 months remaining until maturity and offers a return of 2% per 6 months. To determine the price, we plug in the values:
Price = $10,000 / (1 + (0.02 * 1)),
Calculating, we get:
Price = $10,000 / (1.02).
Rounding to 2 decimal places, the expected price of the T-bill is $9,803.92.
Irving’s Rib Shack is a regional chain of barbecue restaurants. They have a long-standing policy that the recipe for their signature barbecue sauce is not to be made public. What type of intellectual property protection keeps the recipe secret?
Answer:
The correct answer is trade secret
Explanation:
Trade secret can be considered as any secret or confidential information regarding business that provides a company with a competitive advantage over other company's in the market. Trade secret can be anything like commercial secrets, advertising strategies, recipe formula or manufacturing secrets etc. So therefore by reading the question it is quite clear that the intellectual property protection that keeps the recipe a secret is trade secret.
Irving's Rib Shack's recipe for their signature barbecue sauce is protected as a trade secret. This method of intellectual property protection is the same one utilized to keep the Coca-Cola formula private.
Explanation:The intellectual property protection that keeps Irving's Rib Shack's signature barbecue sauce recipe secret is referred to as trade secrets. This body of law grants protection to commercially valuable pieces of information that provide an enterprise a competitive edge, such as the secret recipe for Coca-Cola. In the case of Irving's Rib Shack, they protect their barbecue sauce recipe by not making it public, not through patent or copyright law, but by simply keeping it confidential, which is the nature of a trade secret.
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You receive a credit card application from Shady Banks Savings and Loan offering an introductory rate of .5 percent per year, compounded monthly for the first six months, increasing thereafter to 17.9 percent compounded monthly. Assume you transfer the $6,900 balance from your existing credit card and make no subsequent payments. How much interest will you owe at the end of the first year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Answer:
FV $6,955.86
Explanation:
.5% per year compounded monthly during six month
then
19% per year compounded monthly during six month
[tex]Principal \: (1 + rate/n)^{time*n}\: (1 + rate/n)^{time*n} } = FV[/tex]
We have to use the 0.5 rate for the first six month, and then the 19% ate for the following six month
[tex]Principal \: (1 + 0.005/12)^{(6/12)*12}\: (1 + .19/12)^{(6/12)*12} } = FV[/tex]
FV 6,955.859156
FV $6,955.86
A credit card balance of $6,900 at the offered interest rates would result in approximately $1,076 interest owed at the end of the year.
Explanation:The subject of this question is financial mathematics, specifically interest calculation. Given the information in the question, we can calculate the interest charged on a credit card balance of $6,900, first at the introductory interest rate and then at the regular rate.
For the first six months, the interest rate is 0.5% per year, compounded monthly. We need to first convert this annual rate to a monthly rate by dividing by 12, giving us approximately 0.04167% per month. This means that every month, the balance will grow by that rate.
To calculate the interest accrued over these six months, we can use the formula for compound interest which is Principal * (1 + Interest Rate) to the power of Time given in months. This gives us a new balance of approximately $6,931
For the next six months, the interest rate increases to 17.9% per year, compounded monthly, which is approximately 1.49% per month. Again, we use the compound interest formula, but this time with the new balance as the principal. This gives us a final balance of approximately $7,976
The total interest owed at the end of the year is the final balance minus the initial balance, which is $7,976 - $6,900 = $1,076
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Paige Company estimates that unit sales will be 10,700 in quarter 1, 13,100 in quarter 2, 14,200 in quarter 3, and 18,300 in quarter 4. Using a sales price of $84 per unit. Prepare the sales budget by quarters for the year ending December 31, 2017. PAIGE COMPANY Sales Budget Quarter 1 2 3 4 Year Expected unit sales Unit selling price $ $ $ $ $ Total sales $ $ $ $ $
To prepare the sales budget, multiply the estimated unit sales for each quarter by the selling price per unit. Total sales for the year is the sum of all the quarters' sales.
Explanation:To prepare the sales budget for Paige Company, you multiply the estimated unit sales for each quarter by the unit selling price.
For Quarter 1, this is 10,700 units * $84/unit = $898,800.
For Quarter 2, this is 13,100 units * $84/unit = $1,100,400.
For Quarter 3, this is 14,200 units * $84/unit = $1,192,800.
For Quarter 4, this is 18,300 units * $84/unit = $1,537,200.
The total sales for the year is the sum of each quarter's sales: $898,800 + $1,100,400 + $1,192,800 + $1,537,200 = $4,729,200.
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The sales budget for Paige Company for the year ending December 31, 2017 can be calculated based on the projected unit sales and the unit price. For each quarter, multiply the projected unit sales by the unit price of $84, and then sum up the total sales for all quarters. The total sales for the year is $4,731,200.
Explanation:The sales budget for Paige Company can be calculated by multiplying the estimated unit sales for each quarter by the sales price per unit which is $84.
For Quarter 1: Unit sales = 10,700, Total Sales = 10,700 * $84 = $898,800.
For Quarter 2: Unit sales = 13,100, Total Sales = 13,100 * $84 = $1,102,400.
For Quarter 3: Unit sales = 14,200, Total Sales = 14,200 * $84 = $1,192,800.
For Quarter 4: Unit sales = 18,300, Total Sales = 18,300 * $84 = $1,537,200.
Adding up the total sales for each quarter will give the total sales for the year, which is $898,800 + $1,102,400 + $1,192,800 + $1,537,200 = $4,731,200. Thus, the total sales budget for Paige Company for the year ending December 31, 2017 is $4,731,200.
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First City Bank pays 7 percent simple interest on its savings account balances, whereas Second City Bank pays 7 percent interest compounded annually. If you made a deposit of $12,000 in each bank, how much more money would you earn from your Second City Bank account at the end of 9 years?
hey there!:
First city bank = $64,000 deposited for 9 years at 7% with simple interest then after 9 years I will have a total of $104,320
Second city bank = $64,000 deposited for 9 years at 7% with compound interest then after 9 years I will have a total of $117,661.39.
Therefore we will make $13,341.39 more through the second city bank.
Hope this helps!
If you made a deposit of $12,000 in each bank, you would earn $1,561.87 more from your Second City Bank account at the end of 9 years.
Explanation:If you made a deposit of $12,000 in each bank, the simple interest earned from the First City Bank account at the end of 9 years would be $7,560 (7% of $12,000 for 9 years). On the other hand, the compound interest earned from the Second City Bank account at the end of 9 years would be $9,121.87 (compounded annually). Therefore, the difference in the amount of money earned from the Second City Bank account would be $9,121.87 - $7,560, which is $1,561.87.
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The farmer produces 119 bushels of wheat at a total cost of $3 per bushel. He sells all of the wheat to Firm F for $5 per bushel. Firm F produces 51 pounds of flour from the wheat at a total cost of $6 per pound (including the amount paid to the farmer for the wheat). Firm F sells 45 pounds of flour to consumers for $10 per pound. There are no other firms in this simple economy. In total, how much profit do the farmer and Firm F earn? Enter a whole number with no dollar sign.
The farmer earns a profit of $238 and Firm F earns a profit of $144, resulting in a total profit of $382.
Explanation:To calculate the profit earned by the farmer and Firm F, we need to calculate their costs and revenues separately. The farmer produces 119 bushels of wheat at a cost of $3 per bushel, resulting in a total cost of 119*3 = $357. The revenue earned by the farmer is 119*5 = $595.
On the other hand, Firm F produces 51 pounds of flour at a cost of $6 per pound, resulting in a total cost of 51*6 = $306 (including the amount paid to the farmer for the wheat). The revenue earned by Firm F is 45*10 = $450.
To calculate the profit, we subtract the total cost from the revenue for both the farmer and Firm F. The profit earned by the farmer is 595 - 357 = $238, and the profit earned by Firm F is 450 - 306 = $144. Therefore, the total profit earned by the farmer and Firm F is 238 + 144 = $382.
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The farmer earns a profit of $238, and Firm F earns a profit of $144, leading to a total profit of $382 for both the farmer and Firm F combined.
The farmer sells 119 bushels of wheat at $5 per bushel after producing it at a total cost of $3 per bushel.
The total revenue for the farmer is 119 bushels * $5 = $595 and the total cost is 119 bushels * $3 = $357.
Therefore, the farmer's profit is $595 - $357 = $238.
Firm F produces 51 pounds of flour from the wheat at a total cost of $6 per pound, which includes the cost of wheat from the farmer.
Firm F's total cost is 51 pounds * $6 = $306.
It sells 45 pounds of flour at $10 per pound, earning 45 pounds * $10 = $450.
Hence, Firm F's profit is $450 - $306 = $144.
The total profit earned by the farmer and Firm F is the sum of their individual profits, which is $238 (farmer's profit) + $144 (Firm F's profit) = $382.
ABC began a defined benefit pension plan for its employees on Jan 1, 2018. The following data are provided for 2018 as of Dec 31, 2018: Projected benefit obligation is $634 Accumulated benefit obligation is $418.44 Plan assets at fair value is $821 Pension expense is $192.48 Employer's cash contribution (end of year) is $361 What amount should ABC report as a net pension liability (asset) at Dec 31, 2018. (Enter net pension liability as a positive amount)
Answer: $187 ⇒ Amount should ABC report as a net pension liability (asset) at Dec 31, 2018
Explanation:
Given that,
Data for 2018 as of Dec 31, 2018 are as follows:
Projected benefit obligation = $634
Accumulated benefit obligation = $418.44
Plan assets at fair value = $821
Pension expense = $192.48
Employer's cash contribution (end of year) = $361
The amount should company report as a net pension liability at Dec 31, 2018 as follows:
Net Pension Liability = Projected benefit obligation - Plan assets at fair value
= $634 - $821
= $187 ⇒ Amount should ABC report as a net pension liability (asset) at Dec 31, 2018
Information for Kent Corp. for the year 2018: Reconciliation of pretax accounting income and taxable income: Pretax accounting income $ 180,400 Permanent differences (15,700 ) 164,700 Temporary difference-depreciation (13,100 ) Taxable income $ 151,600 Cumulative future taxable amounts all from depreciation temporary differences: As of December 31, 2017 $ 13,600 As of December 31, 2018 $ 26,700 The enacted tax rate was 28% for 2017 and thereafter. What should be the balance in Kent's deferred tax liability account as of December 31, 2018?
Answer:
There should be $3668 as balance in the Kent's deferred tax liability account .
Explanation:
A deferred income tax liability is that type of liability which a firm records in its balance sheet because the income which firm has recorded in its book is more than the actual tax which a firm has to pay.
For calculating the deferred tax liability here we will multiply the given tax rate to the cumulative taxable amounts which all are from depreciation temporary differences and take their difference as deferred tax liability.
DEFERRED TAX LIABILITY =
$26,700 X 28% - $13,600 x 28%
= $7476 - $3808
= $ 3668
Assume that you are considering the purchase of a 15-year bond with an annual coupon rate of 9.5%. The bond has face value of $1,000 and makes semiannual interest payments. If you require an 11.0% nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?
Answer:
We are going to pay $892.137 or less for the bonds.
Explanation:
We need to calculate the present value of the bond at 11% interet rate
Cashflow from the bond:
Principal x interest = interest service
1,000 x 9.5% = 95
Present value of annuity of 95 during 15 year at 11%
[tex]C \times \frac{1-(1+r)^{-time} }{rate} = PV\\[/tex]
[tex]95 * \frac{1-(1+.11)^{-15} }{.11} = PV\\[/tex]
Present value of the interest service 683,1326097
Second we have to calculate the present value of the 1,000 principal in 15 years
[tex]\frac{Amount}{(1+rate)^{time}} ) = PV[/tex]
[tex]\frac{1,000}{(1+0.11)^{15}} ) = PV[/tex]
209.0043467
Finally we add both together for the present value fothe bond at our rate
209.0043467+ 683,1326097 = 892.1369564 = 892.137
As of December 31, 2018, Warner Corporation reported the following: Dividends payable $ 32,000 Treasury stock 570,000 Paid-in capital—share repurchase 32,000 Other paid-in capital accounts 5,200,000 Retained earnings 4,200,000 During 2019, half of the treasury stock was resold for $250,000; net income was $570,000; cash dividends declared were $1,380,000; and stock dividends declared were $620,000. What was shareholders' equity as of December 31, 2018?
Answer: $9,182,000
Explanation: This question can be done as follows :-
Total shareholders equity = paid in capitals + other paid in capitals + retained earnings - treasury stock
Putting the values into equation we get :-
Total shareholders = $32,000 + $5,200,000 + $4,200,000 - $250,000
equity
= $9,182,000
Using the percentage-of-receivables method for recording bad debt expense, estimated uncollectible accounts are $31700. If the balance of the Allowance for Doubtful Accounts is $7560 debit before adjustment, what is the amount of bad debt expense for that period?
Answer:
The bad debt expense would be 39,260 for this period
Explanation:
We need to adjust the allowance to match the estimated uncollectible accounts:
31,700 estimated uncolelctible accounts
Allowance for Doubful Account current balance 7,560 debit
If we do the Allowance t account we would have something like this:
[tex]\left[\begin{array}{cc}Debit&Credit\\7,700&Adjustment\\-&31700\end{array}\right][/tex]
[tex]Balance = credit - Debit[/tex]
So to get the adjustment, which is in the credit we will do:
[tex]Balance + Debit = Credit[/tex]
[tex]31,700 + 7,560 = 39,260[/tex]
Now to balance the entry on which we are crediting the allowance for 39,260 we need to recognize an expense for bad debt with the same ammount.
On January 1, Puckett Company paid $1.71 million for 57,000 shares of Harrison’s voting common stock, which represents a 40 percent investment. No allocation to goodwill or other specific account was made. Significant influence over Harrison is achieved by this acquisition and so Puckett applies the equity method. Harrison distributed a dividend of $3 per share during the year and reported net income of $590,000. What is the balance in the Investment in Harrison account found in Puckett’s financial records as of December 31?
Answer:
Total 1,775,000
Explanation:
1.71m for 57,000 shares -->40% investment
$3 dividends per share
net income of 590,000
1.,710,000
+ 40% of net income 590,000 = 236,000
- 57,000 x $3 dividends per share = -171,000
The dividends under the equity method mean it is moving cash from one box (Harrison) to the main company (Puckett) so they decrease the Harrison valuation and increase cash, giving no effect on the assets of Puckett.
Total 1,775,000