Final answer:
By setting up two equations based on the CAPM formula and the provided expected returns and betas for assets A and B, we solve for the risk-free rate of return, which is found to be 5.0%. The correct answer is option (A)
Explanation:
The Security Market Line (SML) depicts the relationship between an asset's expected return and its beta with respect to the market. It is based on the Capital Asset Pricing Model (CAPM), which is defined as:
Expected Return = Risk-Free Rate + Beta x (Market Return - Risk-Free Rate)
Based on the information given for assets A and B, we can set up two equations using their expected returns and betas:
1. 0.15 = Risk-Free Rate + 1.7 x (Market Return - Risk-Free Rate) for Asset A
2. 0.12 = Risk-Free Rate + 1.1 x (Market Return - Risk-Free Rate) for Asset B
To find the Risk-Free Rate, we have a system of two equations with two unknowns (Risk-Free Rate and Market Return). Solving this system algebraically:
Isolate the Risk-Free Rate terms on one side and simplify the equations.Find the value of Market Return by solving any of the equations.Substitute the value of Market Return back into either equation to find the Risk-Free Rate.After solving, we find that the risk-free rate of return is 5.0% (Option a).
_________ policy involves the decision to pay out earnings to shareholders or to retain and reinvest them in the firm. When distributing income to stockholders there are three key issues to consider: (1) How much should be distributed? (2) Should the distribution be in the form of dividends, or should the cash be passed on to shareholders by _________ stock?
(3) How stable should the distribution be? When deciding how much cash to distribute, a firm's managers must remember that the firm's objective is to_______ shareholder value. The target_______ ratio is defined as the percentage of net income distributed as cash dividends, and it should be based on investors' preferences for dividends versus capital gains. Any change in this ratio will have two opposing effects: (1) If dividends are increased, then taken alone this will cause the firm's stock price to_______ . (2) However, an increase in dividends will also cause the firm's expected growth rate to_______ and this will tend to _______the firm's stock price. The _______dividend policy is the one that strikes a balance between current dividends and future growth _______and the firm's stock price.
Answer:
The blanks anwers are below
Explanation:
Kindly consider blanks in order:
Payout policy
Repurchasing
Maximize
Payout
Rise/Increase
Decline
Decrease
Sustainaible
maximizes
Some blanks may not match. The answers are correct although.
You expect a share of stock to pay dividends of $1.00, $1.25, and $1.50 in each of the three years. You believe the stock will sell for $20 at the end of the third year.
What is the stock price if the discount rate for the stock is 10%?
Answer:
$18.095417
Explanation:
To obtain the current stock price, bring all paid dividends and the stock selling price to present value at a 10% rate per year:
[tex]P=\frac{(1.00)}{(1+0.10)}+\frac{(1.25)}{(1+0.10)^2}+\frac{(20+1.50)}{(1+0.10)^3}\\P= \$18.095417[/tex]
*Note that for the dividends paid after the first year, only one period was considered, and for the dividends paid after the second year, only two periods were considered.
The stock price is $18.095417
Lake House. Harry has two houses, a house on the lake and a house in town. Rebecca wants to buy the house on the lake. Harry and Rebecca orally agree that Rebecca will buy the house on the lake for $300,000. Harry hurriedly writes out a contract providing that he would sell "his house" to Rebecca for $300,000. Harry signs the top of the document. Rebecca does not sign at all. No merger clause is included in the contract. Harry backs out of the contract, and Rebecca sues him. He tells the judge that the statute of frauds is not satisfied because he did not sign the document at the end and because Rebecca did not sign at all. He also tells the judge that, at any rate, the agreement referred to the house in town, not the house on the lake; and that under the parol evidence rule, he had the right to identify the correct house. Which of the following is true regarding Harry's assertion that the statute of frauds is not satisfied because Rebecca did not sign the document?
1)Is there an enforceable agreement? Which elements of an enforceable agreement exist?
2)Why or why not is there an enforceable agreement? Can Rebecca sue him?
3)Can Harry testify about the $20,000 gift? Why or why not?
Answer:
1. Yes
2. Yes
3. No
Explanation:
1 . Yes, there is an enforceable agreement between the seller (harry) and the buyer (Rebecca).
Elements of an enforceable agreement that exist between the contracting parties are:
Offer: Harry makes an offer to sell the house on the lake to Rebecca.
Acceptance: Rebecca accepts to buy the house on the lake from Harry for a consideration.
Consideration: Both the parties agree for a consideration i.e. $300,000.
Competency: Both the parties are competent and have capacity to enter into a contract.
Lawful purpose: Agreement between the parties was to transfer the ownership of the property from seller to the buyer. Hence, it is a lawful purpose.
2.Yes, it is an enforceable agreement because even though few essential terms were missing in the written agreement, the seller Rebecca would be allowed to prove her intention under due to the fact that the contract did not include merger clause. The court will look into the evidences or oral negotiations between the parties before entering into the contract.
The following essential elements were missing in the agreement at the time of entering into a contract:
The agreement should contain essential terms of the contract: name of the parties, subject matter, consideration.
Signature of both the parties.
Harry has only mentioned to sell “his house” and did not specify which house. This ‘issue’ can be resolved by parol evidence rule – because the agreement did not contain ‘no merger clause’ the court may allow to look outside the agreement in order to identify the intention of the parties. Therefore, Rebecca, under parol evidence rule, will be allowed by the court to identify the subject matter in case of the ambiguity.
Moreover, only the seller i.e. Harry signed the contract and not both the parties. This issue can be resolved by parol evidence rule. The court will look into the intention of the parties at the time of entering into the contract and hence, can make out that Rebecca wanted to buy the house on the lake.
Rebecca, therefore, can sue Harry.
3 . No, Harry cannot testify about the $25,000 gift because of the operation of the parol evidence rule. According to the parol evidence rule, any oral or written agreement (oral in this case) between the parties will not be taken into consideration that contradicts or varies the written contract.
Hence, Harry cannot testify about the $25,000 housewarming gift.
A security analyst is reviewing output from a CVE-based vulnerability scanner. Before
conducting the scan, the analyst was careful to select only Windows-based servers in a specific
datacenter. The scan revealed that the datacenter includes 27 machines running Windows 2003
Server Edition (Win2003SE). In 2015, there were 36 new vulnerabilities discovered in the Win2003SE
environment. Which of the following statements are MOST likely applicable? (Choose two.)
A. Remediation is likely to require some form of compensating control.
B. Microsoft's published schedule for updates and patches for Win2003SE have continued
uninterrupted.
C. Third-party vendors have addressed all of the necessary updates and patches required by
Win2003SE.
D. The resulting report on the vulnerability scan should include some reference that the scan of the
datacenter included 27 Win2003SE machines that should be scheduled for replacement and
deactivation.
E. Remediation of all Win2003SE machines requires changes to configuration settings and
compensating controls to be made through Microsoft Security Center's Win2003SE Advanced
Configuration Toolkit.
Please explain for thumbs up.
Answer:
The answers are Letters D and E.
Explanation:
The resulting report on the vulnerability scan should include some reference that the scan of the datacenter included 27 Win2003SE machines that should be scheduled for replacement and deactivation.
Remediation of all Win2003SE machines requires changes to configuration settings and compensating controls to be made through Microsoft Security Center's Win2003SE Advanced Configuration Toolkit.
. PPF Model – Assume the Real GDP in this economy is composed of a $3500 b Private Sector and a $1100 b Public Sector after "G" increases by $100 b. A small, initial movement in the PPF Model will be from Point ______ half-way toward Point _____
Answer: R to T
Explanation:
The economy is still in recession, but possible start of a recovery.
In a research report, the action statements that will help solve the problem at hand through the creation of a competitive advantage is most likely to be included in the _____.
Group of answer choices
A. recommendations
B. limitations section
C. appendixes
D. research methods
E. section data
F. analysis and findings section
Answer:
A. recommendations
Explanation:
One of the most important parts of research reports, business case studies or business plans is the recommendation part.
Research reports are usually made by financial analysts, usually in order to provide an idea for lucrative investment or just to assess a particular financial instrument, stock or currency.
After presenting the summary and conducting proper analyses comes the recommendation section. In this section, strategic solutions and action plans are presented, given that they are the rational output of the needed analyses and prerequisites related to research.
Every recommendation represents an actionable solution that should be implemented or pursued in order to gain some benefits. Here are some recommendations:
- Investment recommendations - Analysts may discover it is extremely lucrative to invest in a particular industry.
- Purchase of particular shares - After proper research, it may be implied that shares of a particular company are stable in the long run, making them appealing for a steady income through dividends.
Calculating Economic Value Added East Mullett Manufacturing earned operating income last year as shown in the following income statement: Sales $630,000 Cost of goods sold 380,000 Gross margin $250,000 Selling and administrative expense 174,400 Operating income $ 75,600 Less: Income taxes (@ 40%) 30,240 Net income $ 45,360 Total capital employed equaled $381,000. East Mullett's actual cost of capital is 8 percent. Required: Calculate the EVA for East Mullett Manufacturing. $
Answer:
$14,880
Explanation:
The formula to compute EVA is shown below:
= Net operating income or earnings after taxes - (Total capital employed × cost)
= $45,360 - ($381,000 × 8%)
= $45,360 - $30,480
= $14,880
We simply applied the economic value added formula so that the accurate value can come.
All other information which is given is not relevant. Hence, ignored it
Oaktree Company purchased new equipment and made the following expenditures:
Purchase price $ 64,000
Sales tax 4,100
Freight charges for shipment of equipment 890
Insurance on the equipment for the first year 1,090
Installation of equipment 2,900
The equipment, including sales tax, was purchased on open account, with payment due in 30 days. The other expenditures listed above were paid in cash.
Required:
Prepare the necessary journal entries to record the above expenditures. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
1) Record the purchase of equipment
2) Record any expenditures not capitalized in the purchase of equipment
Answer:
The Journal entries are as follows:
(1)
Equipment A/c Dr. $71,890
To cash $3,790
To accounts payable $68,100
(To record the purchase of equipment)
Workings:
Equipment value:
= Purchase price + Sales tax + Freight charges for shipment of equipment + Installation of equipment
= 64,000 +4,100 + 890 + 2,900
= $71,890
Cash Paid:
= Freight charges for shipment of equipment + Installation of equipment
= 890 + 2,900
= $3,790
Accounts payable = Purchase price + Sales tax
= 64,000 +4,100
= $68,100
(2)
Prepaid Insurance A/c Dr. $1,090
To cash A/c $1,090
(To record any expenditures not capitalized in the purchase of equipment)
The company first records the purchase of the equipment by debiting Equipment Account $68,090 and crediting Accounts Payable same amount. Other expenditures such as freight, insurance, and installation costs are separately recorded by debiting their respective expense accounts and crediting Cash account.
Explanation:The necessary journal entries for Oaktree Company to record the expenditures for the purchase and associated costs of equipment are as follows:
Equipment Purchase: Debit Equipment Account $68,090 (which includes both the $64,000 purchase price and $4,100 sales tax). Credit Accounts Payable $68,090. Other expenditures: Debit Freight Charges $890, Debit Equipment Insurance $1,090, Debit Installation Costs $2,900. Credit Cash Account $4,880. These are not capitalized as part of the equipment as they are separate cost incurred due to the equipment purchase but are not part of the machinery's intrinsic value. Learn more about Equipment Purchase Accounting here:
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Edna Recording Studios, Inc., reported earnings available to common stock of $4 comma 200 comma 0004,200,000 last year. From those earnings, the company paid a dividend of $1.261.26 on each of its 1 comma 000 comma 0001,000,000 common shares outstanding. The capital structure of the company includes 4040% debt, 1010% preferred stock, and 5050% common stock. It is taxed at a rate of 2121%. a. If the market price of the common stock is $40 and divendends are expected to grow at a rate of 6% per year for the forseeable future, what is the company's cost of retained earnings financing?
b. If underpricing and floatation costs on new shares of common stock amount to $7.00 per share, what is the company's cost of new common stock financing?
c. The company can issue $2.00 dividend preferred stock for a market price of $25.00 per share. Flotation costs would amount to $3.00 per share. What is the cost of perferred stock financing?
d. The company can issue $1,000-par-value, 10% coupon, 5-year bonds that can be sold for $1,200 each. Floatation costs would amount to $25.00 per bond. Use the estimation formula to figure the approximate cost of debt financing.
e. What is the WACC?
Answer:
Check the following calculations
Explanation:
a. Cost of Retained Earnings(Ke) = [Dividend (1+growth)/Market price] + growth Cost of Retained Earnings
=[1.26 (1+0.06)/40] + 0.06
=0.09339
=9.339%
=9.34%
b. Company Cost of New Common Stock
(Ks)=[Dividend (1+growth)/(Market price - floatation costs ] + growth Rate
=[1.26 (1+0.06)/(40-7)]+0.06
=0.10047
=10.047%
=10%
c. Cost of Preferred Stock
Kp=Prefered Dividend/(market price - Flotation cost)
=2/(25-3)
=0.090909
=9.09%
d. cost of debt financing
Kd= [{Coupon +(FV-RV)/T}/(FV+RV)/2] x [1 - 0.40]
=[{100+(1000-1175)/5}/(1000+1175)/2] x [1-0.40]
=[65/1087.5] x 0.60
=0.035862
=3.586%
=3.59%
e. WACC
The maximum investment that Edna Recording Studios can make in new projects before it must issue new common stock
And maintaining the same capital structure
total capital fund before raised
that is out [4,200,000 - 1000,000 x 1.26] / 0.5 =$5,880,000
I WACC for the project that are finance from old fund
WACC= Ke x E/V +Kp x P/V + Kd x D/V
= 9.339 x 0.50 + 9.09 x 0.10 + 3.586 x 0.4
=7.0129% [this wacc is for procets finance from 0 to $5,880,000 FUND]
II WACC for the project that is financed from revised raised fund above $5,880,000. Assuming fund is raised from all the three sources like that maintain same ratio of capital structure means percentage of fund in the capital structure
WACC= Ke x E/V +Kp x P/V + Kd x D/V
= 10.047 x 0.50 + 9.09 x 0.10 + 3.586 x 0.4
=7.3669% [this wacc is for the projects from above $5,880,000]
Kp=Cost of preferred stock
Ke = cost of equity
Kd = cost of debt
D = market value of the firm’s debt
V = E + D+P
E/V = percentage of financing that is equity = 50%
D/V = percentage of financing that is debt=40%
P/V=Percentage of financing that is preferred stock=10%
On January 1, Innovative Solutions, Inc. issued $220,000 in bonds at face value. The bonds have a stated interest rate of 5 percent. The bonds mature in 10 years and pay interest once per year on December 31.Required:1, 2 & 3. Complete the required journal entries to record the bond issuance, interest payment on December 31, early retirement of the bonds. Assume the bonds were retired immediately after the first interest payment at a quoted price of 103. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
Answer:
Explanation:
The journal entries are shown below/:
On January 1
Cash A/c Dr $220,000
To Bonds payable A/c $220,000
(Being the issuance of bond is recorded)
On December 31
Interest expense A/c Dr $11,000
To Cash A/c $11,000
(Being the interest expense is recorded)
The computation is shown below:
= Face value of bond × interest rate
= $220,000 × ×5%
= $11,000
Bonds payable A/c Dr $220,000
Loss on redemption A/c Dr $6,600
To Bonds payable A/c $226,600 ($220,000 × 1.03)
(Being the retirement of the bond is recorded)
Journal entries for bond transactions include recording the initial bond issuance at face value, the annual interest payment based on the stated interest rate, and the early retirement entry recording the loss due to retirement at a premium.
To record the bond issuance, interest payment, and early retirement of the bonds for Innovative Solutions, Inc., we need to make three separate journal entries. The bond was issued at face value, thus no premium or discount is involved.
1. Journal Entry for Bond Issuance:
Dr Cash 220,000
Cr Bonds Payable 220,000
This entry reflects the receipt of cash and the obligation to pay back the bonds' face value at maturity.
2. Journal Entry for Interest Payment:
Dr Interest Expense 11,000
Cr Cash 11,000
This entry accounts for the annual interest payment, which is 5% of 220,000.
3. Journal Entry for Early Retirement:
Assuming the bonds were retired immediately after the first interest payment at a quoted price of 103, which means the company will pay 103% of the face value to retire the bonds:
Dr Bonds Payable 220,000
Dr Loss on Bond Retirement 6,600 (3% of 220,000)
Cr Cash 226,600 (103% of 220,000)
This entry removes the bond liability and recognizes the loss on retirement due to paying more than the face value.
Total budgeted fixed overhead cost for the year $ 250,000 Actual fixed overhead cost for the year $ 254,000 Budgeted direct labor-hours (denominator level of activity) 25,000 Actual direct labor-hours 27,000 Standard direct labor-hours allowed for the actual output 26,000 Required: 1. Compute the fixed portion of the predetermined overhead rate for the year. (Round Fixed portion of the predetermined overhead rate to 2 decimal places.) 2. Compute the fixed overhead budget variance and volume variance. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input all amounts as positive values.)
Answer:
1. $10
2. The fixed overhead budget variance and volume variance is $4,000 unfavorable and $10,000 favorable respectively
Explanation:
1. The computation of the predetermined overhead rate for the year is shown below:
Predetermined overhead rate = (Total estimated budgeting fixed manufacturing overhead) ÷ (estimated direct labor-hours)
= $250,000 ÷ 25,000 hours
= $10
2. The computation of the fixed overhead budget variance and volume variance is shown below:
Fixed overhead budget variance = Actual fixed overhead cost for the year - Total budgeted fixed overhead cost for the year
= $254,000 - $250,000
= $4,000 unfavorable
Volume variance = (Budgeted direct labor hours - standard direct labor hours) × predetermined overhead rate
= (25,000 hours - 26,000 hours) × $10
= $10,000 favorable
Surf City's ad Manager, Dan, calls the billboard company to buy the billboard. He speaks with Jim, a salesperson. Jim asks how long Dan intends to run the campaign. Dan replies he expects to keep an outdoor message up along the interstate for 10 years or more. Jim responds that while a 30-sheet poster is a good choice, more permanence and impact can be achieved with a(n)A. junior poster.B. painted bulletin.C. spectacular.D. inflatable panel.E. inside bus.
Answer:
The answer is letter B. Painted Bulletin
Explanation:
Painted Bulletin, because you can move them to different choice locations every 3 months. This way you can advertise your product, service, and store all over the town.
Puget Sound Divers is a company that provides diving services such as underwater ship repairs to clients in the Puget Sound area. The company’s planning budget for May appears below:
Puget Sound Divers Planning Budget For the Month Ended May 31
Budgeted diving-hours (q) 350
Revenue ($420.00q) $ 147,000
Expenses:
Wages and salaries ($11,500 $130.00q) 57,000
Supplies ($4.00q) 1,400
Equipment rental ($2,200 $25.00q) 10,950
Insurance ($3,900) 3,900
Miscellaneous ($510 $1.44q) 1,014
Total expense 74,264
Net operating income $ 72,736
Required:
During May, the company’s actual activity was 340 diving-hours. Compute the flexible budget of activity.
Answer:
operating income 84740.4
Explanation:
The flexible budget will work out the numbers for a level of activity of 340 units
Revenue $420 x 340 = 142,800
Wages and salaries $11,500 fixed component + $130 x 340 = 55,700
Supplies $4.00 x 340 = 1,360
Insurnace (fixed) $3,900
Miscellaneous $510 fixed component + $1.44 x 340 = 999,6
Operating Income:
Revenues 142,800
total expenses (58,059.6)
operating income 84740.4
What does the IS curve show? A. It shows equilibrium points in the goods marketlong dashthe combinations of the real interest rate and equilibrium output. B. It shows equilibrium points in the goods marketlong dashthe combinations of planned investment spending and net exports. C. It shows equilibrium points in the goods marketlong dashthe combinations of the real interest rate and net exports. D. It shows equilibrium points in the goods marketlong dashthe combinations of planned expenditure and equilibrium output.
Answer:
Option (A) is correct.
Explanation:
Investment spending curve refers to the curve shows various combination of real interest rate and the equilibrium output. There is a negative relationship between the real interest rate and output which means that an increase in the real interest rate will reduce the output of an economy and if there is a fall in the real interest rate then as a result there is an increase in the output.
A call option with an exercise price of $30 and four months to expiration has a price of $4.10. The stock is currently priced at $29.80, and the risk-free rate is 4 percent per year, compounded continuously. What is the price of a put option with the same exercise price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Answer:
price is $3.90
Explanation:
given data
exercise price = $30
four months to expiration price = $4.10
stock currently priced = $29.80
risk free rate = 4 % per year
to find out
What is the price of a put option with the same exercise price
solution
we know that put call parity that is express as
S + P = C + E × [tex]e^{-rt}[/tex] ........................1
here S is stock price and P is put price and R is risk free rate and C is call price and t is time to maturity and E is exercise price
so put here all these value in equation 1 we get
P = C + E × [tex]e^{-rt}[/tex] - S
P = 4.10 + 30 × [tex]e^{-0.04*\frac{4}{12}}[/tex] - 29.80
P = 3.90
so price is $3.90
The price of a put option with the same exercise price as the call option is $4.30.
Explanation:To find the price of a put option with the same exercise price as the call option, we can use the put-call parity formula. The put-call parity formula states that the price of a call option plus the present value of the exercise price equals the price of a put option plus the current stock price. We can rearrange this formula to solve for the price of the put option:
Put Price = Call Price + Exercise Price - Stock Price
Substituting the given values, we have:
Put Price = $4.10 + $30 - $29.80 = $4.30
Therefore, the price of a put option with the same exercise price is $4.30.
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The Alford Group had 280,000 shares of common stock outstanding at January 1, 2016. The following activities affected common shares during the year. There are no potential common shares outstanding. 2016 Feb. 28 Purchased 12,000 shares of treasury stock. Oct. 31 Sold the treasury shares purchased on February 28. Nov. 30 Issued 48,000 new shares. Dec. 31 Net income for 2016 is $1,242,000. 2017 Jan. 15 Declared and issued a 2-for-1 stock split. Dec. 31 Net income for 2017 is $1,242,000. Required: 1. Determine the 2016 EPS 2. Determine the 2017 EPS 3. At what amount will the 2016 EPS be presented in the 2017 comparative financial statements?
Answer:
Please see attachment
Explanation:
Please see attachment
Selected data taken from a recent year’s financial statements of trading card company Topps Company, Inc. are as follows (in millions). Net sales $326.7 Current liabilities, beginning of year 41.1 Current liabilities, end of year 62.4 Net cash provided by operating activities 10.4 Total liabilities, beginning of year 65.2 Total liabilities, end of year 73.2 Capital expenditures 3.7 Cash dividends 6.2 Compute the free cash flow
Answer:
$0.5 million
Explanation:
Given: Net sales= $326.7 million
Current liabilities, beginning of year $41.1 million
Current liabilities, end of year $62.4 million
Net cash provided by operating activities $10.4 million
Total liabilities, beginning of year $65.2 million
Total liabilities, end of year $73.2 million
Capital expenditures $3.7 million
Cash dividends $6.2 million
Now, compute free cash flow.
Formula: Free cash flow= [tex](\textrm{ Net cash provided by operating activities - capital expenditure - cash dividend})[/tex]
Free cash flow= [tex](10.4 - 3.7 - 6.2) = 10.4 - 9.9[/tex]
∴ Free cash flow= $0.5 million
Free cash flow of firm is useful to know the profitability of company excluding all non cash expense from firm´s income statement.
he following information relates to a company’s defined benefit pension plan at December 31:
Accumulated benefit obligation: $1,035,000
Projected benefit obligation: 1,250,000
Prior service cost: 113,000
Net gain on plan assets: 167,000
Plan assets (fair value): 737,000
What amount should the company report as its pension liability at December 31?
Final answer:
The company should report a pension liability of $513,000 at December 31, calculated by subtracting the fair value of the plan assets ($737,000) from the Projected Benefit Obligation ($1,250,000).
Explanation:
To calculate the company's pension liability at December 31, we need to look at the Projected Benefit Obligation (PBO) and the fair value of the plan assets. The company's PBO is $1,250,000 and the plan assets are valued at $737,000. The pension liability is simply the PBO minus the fair value of plan assets. Therefore, the pension liability equals $1,250,000 - $737,000 = $513,000.
This means the company should report a pension liability of $513,000 at December 31. This is the amount by which the obligations exceed the plan's assets. Note that neither the accumulated benefit obligation, prior service cost, nor the net gain on plan assets affect the calculation of the pension liability.
Sunland Company had these transactions during the current period. June 12 Issued 84,000 shares of $1 par value common stock for cash of $315,000. July 11 Issued 4,000 shares of $105 par value preferred stock for cash at $113 per share. Nov. 28 Purchased 3,100 shares of treasury stock for $7,700.
Prepare the journal entries.
Answer:
Please see attachment
Explanation:
Please see attachment
Kong Inc. reported net income of $298,000 during 2018 and paid dividends of $26,000 on common stock. It also has 10,000 shares of 6%, $100 par value cumulative preferred stock outstanding. Common stockholders' equity was $1,200,000 on January 1, 2018, and $1,600,000 on December 31, 2018. The company's return on common stockholders' equity for 2018 is: A. 17.4% B. 17.0% C. 15.1% D. 21.3%
Answer:
B. 17.0%
Explanation:
The computation of the return on common stockholders' equity is shown below:
= (Net income - preference dividend) ÷ (Average Common stockholders' equity)
where,
Net income is $298,000
Preference dividend = 10,000 shares × $100 × 6% = $60,000
And, the Average Common stockholders' equity would be
= (Opening Common stockholders' equity + Ending Common stockholders' equity) ÷ 2
= ($1,200,000 + $1,600,000) ÷ 2
= $1,400,000
Now put these values to the above formula
So, the value would equal to
= ($298,000 - $60,000) ÷ ($1,400,000)
= 17%
Accounting Fundamentals of Healthcare ManagementWorking capital techniques focus specifically on what aspects of an organization’s finances?What specific task does a manager undertake when handling working capital issues?What are the three primary reasons an organization holds cash or cash equivalents?What is the accounts receivable cycle? Why is this task especially important for health care organizations?What is the goal of the EOQ? How does it differ from JIT inventory?What are the steps in managing the revenue cycle?Should an organization take a discount of 1.5/10 N/ 30 on a $9,000 invoice or simply pay the bill when due?
Answer:
Check the following calculations
Explanation:
1. Working capital techniques focuses on short term borrowings of an organisation. An organisations meet its working capital needs by borrowing the funds for short term and meet the funds it requires to manage the operational requirements. This is the reason why short term borrowing limits of any organisation is linked directly to the value of its working capital ie., Inventories, receivables etc.,
2. A manager typically focusses on reducing the receivables by improving the collections from overdue debtors and on evaluating whether the inventories are procured optimally or purchased in bulk more than the requirement and negotiates with vendors for increased credit terms. He also works on ensuring that the short term borrowings are represented by the drawing power available from its current assets. If there is any gap, he would work on borrowing long term funds and utilise it to meet the shortfall in working capital with necessary approvals.
3.Accounts receivable cycle represents the no of days between the date of invoicing to a customer to the date of realisation of billed amount from the customer. In health care industry, most of the revenues are settled through insurance claim process. Insurance companies typically delay the settlement stating deficiencies in the documents submitted. This would result in increased ageing of receivables. Unless closely monitored and followed up, the realisation of dues would be a concern in this industry.
4. Goal of Economic Order Quantity (EOQ) is to minimise the inventory holding costs and the costs of ordering a product by optimally assessing the quantity to order .Here , the key assumption is the demand quantity would be certain and constant throughout the period. Just in Time (JIT) inventory is a manufacturing system which focuses to produce or procure products only when the demand arise. Hence, the focus is mainly on time reduction between the time of order and time of sourcing the material. JIT doesnt assume any static demand.
5. Revenue cycle in a Health care industry represents the difference between the date of admission of a patient and the date of receipt of fees . Steps involved in managing revenue cycle in a health care industry are provided below:
- Developing a robust system to track and monitor the revenue cycle for each patient
- Agreeing on a clear SOP (Standard operating procedure) with Insurance companies in submission and settlement of claims
- Review of revenue cycle by Top management team and raising relevant queries and actionable points to improve the status
Decision on offering cash discount.
It is prudent to collect after 30 days instead of giving cash discount as shown below
Mark Welsch deposits $8,000 in an account that earns interest at an annual rate of 8%, compounded quarterly. The $8,000 plus earned interest must remain in the account 4 years before it can be withdrawn. How much money will be in the account at the end of 4 years?
Final answer:
Mark Welsch will have approximately $11,790.85 in his account at the end of 4 years, after depositing $8,000 with an interest rate of 8% compounded quarterly.
Explanation:
To calculate the future value of Mark Welsch's deposit, we need to apply the formula for compound interest. The general formula is A = P[tex](1 + r/n)^{nt}[/tex], where:
P is the principal amount (the initial amount of money)r is the annual interest rate (in decimal form)n is the number of times the interest is compounded per yeart is the time the money is invested for, in yearsIn this scenario:
P = $8,000r = 8% or 0.08 in decimaln = 4 (since the interest is compounded quarterly)t = 4 yearsSubstituting these values into the compound interest formula:
A = 8000[tex](1 + 0.08/4)^{ 4*4}[/tex]
Let's do the math:
Divide the annual interest rate by the number of compounding periods: 0.08/4 = 0.02.Add 1 to the result of step 1: 1 + 0.02 = 1.02.Raise the result of step 2 to the power of the total number of compounding periods: 1.0216 (since 4 years times 4 quarters per year equals 16 quarters).Multiply the principal amount by the result of step 3: $8000 * 1.0216.The final calculation gives us the future value of the investment.Upon performing the calculations, we find that A is approximately $11,790.85.
This is the amount of money Mark will have in his account at the end of 4 years, including the principal and the compound interest earned over time.
After researching Valero Energy common stock, Sandra Pearson is convinced the stock is overpriced. She contacts her account executive and arranges to sell short 500 shares of Valero Energy. At the time of the sale, a share of common stock had a value of $73. Three months later, Valero Energy is selling for $20 a share, and Sandra instructs her broker to cover her short transaction. Total commissions to buy and sell the stock were $65. What is her profit for this short transaction?
Answer:
$26,435
Explanation:
Given that,
Short shares sold = 500
Share of common stock had a value = $73
Three months later, Valero Energy is selling = $20 a share
Profit for this short transaction:
= Sales - Purchase - Brokerage
= (500 shares × $73) - (500 shares × $20) - $65
= $36,500 - $10,000 - $65
= $26,435
Therefore, her profit for this short transaction is $26,435.
Assume that you are a common stockholder of Inside Incorporated. If the company needed additional capital, and maintaining your current level of voting control was important, would you prefer to have it issue additional common stock or additional preferred stock
Answer:
Additional Preferred Stock
Explanation:
Preferred Stock always provides a preferential right in terms of distribution of earnings. But in no manner it increases the common equity, or the number of participants in common equity.
Also, there is no voting right attached with the preference shares of a company.
As when new equity will be issued the number of shareholders will increase and also the share percentage held currently will fall.
Accordingly the voting right and voting control will fall.
As investor do not desire the above, the preference share capital shall be issued so that there is no decline in voting share or control of the investor.
As a common stockholder maintaining voting control, you would prefer additional preferred stock issuance as it generally doesn't offer voting rights, hence, your voting control isn't diluted. On the contrary, issuing additional common stock reduces a shareholder's voting control.
Explanation:As a common stockholder, if you want to maintain your current level of voting control in Inside Incorporated, you would prefer the company to issue additional preferred stock and not common stock.
When additional common stock is issued, your percentage share of the voting rights in the company would decrease. Issuing common stock dilutes the existing shares, thereby reducing a shareholder's voting control. However, when Inside Incorporated issues additional preferred stock, it does not dilute your voting control since preferred stockholders usually have no voting rights.
Preferred stockholders have a higher claim on dividends and assets in case of liquidation than common stockholders, but do not participate in the voting process of the company. This means as a common stockholder, your voting rights and control over the company would remain intact even with the issuance of additional preferred stock.
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Use this information for Chicks Corporation to answer the question that follow. Chicks Corporation had $1,100,000 in invested assets, sales of $1,210,000, income from operations amounting to $302,500, and a desired minimum return of 15%. The profit margin for Chicks is
a. 15%
b. 25%
c. 27.5%
d. 22%
Answer:
Option B.
Explanation:
Given information:
Assets = $1,100,000
Sales = $1,210,000
Income or profit = $302,500
Formula for profit margin is
[tex]\text{Profit margin}=\dfrac{Profit}{Sales}\times 100[/tex]
Substitute the given values in the above formula.
[tex]\text{Profit margin}=\dfrac{302500}{1210000}\times 100[/tex]
On simplification we get
[tex]\text{Profit margin}=25\%[/tex]
The profit margin for Chicks is 25%.
Therefore, the correct option is B.
Antiques R Us is a mature manufacturing firm. The company just paid a dividend of $9.15, but management expects to reduce the payout by 5 percent per year, indefinitely. If you require a return of 15 percent on this stock, what will you pay for a share today?
Final answer:
Using the Gordon Growth Model, you should be willing to pay $43.4625 for a share of Antiques R Us today, considering the expected 5% annual decrease in dividends and the required 15% rate of return.
Explanation:
To determine the price you would pay for a share of Antiques R Us, given that dividends are expected to decrease by 5 percent indefinitely, we can use the Gordon Growth Model (also known as the Dividend Discount Model). The model takes into account the next period's expected dividend, the required rate of return on the stock, and the expected dividend growth rate. The formula for the price of the stock when dividends are declining at a constant rate is:
P = D1 / (r - g)
where:
P is the price of the stock todayD1 is the dividend next yearr is the required rate of return (15% in this case)g is the growth rate of dividends (-5% in this case)Since the company just paid a dividend of $9.15, the next year's expected dividend, D1, is $9.15 * (1 - 0.05) = $8.6925. Plugging the values into the formula gives us:
P = $8.6925 / (0.15 - (-0.05)) = $8.6925 / 0.20 = $43.4625
Therefore, you should be willing to pay $43.4625 for a share of Antiques R Us today.
In October, Pine Company reports 18,600 actual direct labor hours, and it incurs $126,540 of manufacturing overhead costs. Standard hours allowed for the work done is 22,200 hours. The predetermined overhead rate is $5.75 per direct labor hour. Compute the total overhead variance.
Answer:
The total overhead variance in hours taken is 3,600 hours
The total overhead cost variance is $1,110
Explanation:
The variance is about the different between budget/ standard and actual figures.
Standard hours allowed for the work done is 22,200 hours; and the predetermined overhead rate is $5.75 per direct labor hour. So total cost budgeted for work done is $127,650 = $5.57 x 22,200 hours
The total overhead variance in hours taken = standard hours of 22,200 - actual direct labor hours of 18,600 = 3,600 hours
The total overhead cost variance = standard cost - actual cost = $127,650 - $126,540 = $1,110
To compute the total overhead variance in this scenario, you subtract the standard overhead from the actual overhead ($126,540 - $127,650). The total overhead variance for Pine company in October amounts to -$1,110. A negative variance indicates less overhead cost than what was expected.
Explanation:In business, particularly in manufacturing, overhead variance is the difference between the actual overhead incurred and the standard overhead. Standard overhead is predetermined, typically computed based on direct labor hours.
To compute the total overhead variance in this scenario, we have to define actual overhead as indicated by the $126,540. Standard overhead is calculated as the product of the predetermined overhead rate of $5.75 and the standard hours allowed which amounts to $5.75× 22,200 = $127,650.
The total overhead variance is thus the difference between these two amounts: Actual overhead - Standard overhead = $126,540 - $127,650 = -$1,110. Therefore, the total overhead variance for Pine company in October is -$1,110 - a negative variance indicates less overhead cost than what was expected or budgeted for which can be seen as favorable.
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Recently, some executives for highway construction companies agreed to stop competing with each other on price and to meet every three months to decide their price for the next quarter.
In this situation:
A. the Sherman Act has been violated.
B. the Robinson-Patman Act has been violated by price discrimination.
C. the executives are exercising their right to free trade.
D. the unfair trade practice acts have been violated.
E. as long as prices don't increase—the executives have done nothing wrong.
What is meant by assessment?
a. Activities that occur between two or more businesses.
b. Provides services for connecting network resources across network domains.
c. Documenting rules, procedures, and guidelines to be tested against a system.
d. The encryption key that is held privately by the user.
Answer: Option C
Explanation: In simple words, assessment refers to checking something or someone in respect of its quality, quantity or other such characteristic as such. Usually assessment is done by comparing the actual results with some criteria that was set before.
By doing assessment one can not only find out if there is any problem he or she can also evaluate what were the reasons and whats steps should be taken further to resolve it.
Hence from the above we can conclude that the correct option is C .
Answer:
C. Documenting rules, procedures, and guidelines to be tested against a system.
You purchased 1,000 shares of the New Fund at a price of $23 per share at the beginning of the year. You paid a front-end load of 2.5%. The securities in which the fund invests increase in value by 9% during the year. The fund's expense ratio is 1.3%.
What is your rate of return on the fund if you sell your shares at the end of the year?
Answer:
5%
Explanation:
Front-end load = 2.5%
The cost of 1,000 shares:
= (1,000 × $23) ÷ (1 - 0.025)
= $23,590
NAV at the end of the year = NAV in the beginning × (1 + r - expense ratio)
= $23 × (1 + 0.09 - 0.013)
= $23 × 1.077
= $24.771
Value of 1,000 shares at the end of the year:
= NAV at the end of the year × 1,000 shares
= $24.771 × 1,000
= $24,771
Rate of return:
= (Value of shares at the end ÷ Value of shares in the beginning) - 1
= ($24,771 ÷ $23,590) - 1
= 0.05006 or 5%