Answer:
In order to find the value of a preferred stock we discount its future payments at the required yield on the stock. Because the preferred stock is perpetual in nature, meaning it pays the same amount forever, we can find it's value by dividing its dividend by its required yield. So in this case the dividend is 6.5 and the required yield is 14% so the value of the preferred stock is
6.5/0.14= $46.42
Explanation:
Which of the following is correct? Use letters in alphabetical order to select options
A Sometimes recessions are close together.
B Recessions have never occurred very close together.
C Spending, income, and production do not fluctuate closely with real GDP.
D Economic fluctuations are easily predicted by competent economists.
Answer:
The correct answer is letter "A": Sometimes recessions are close together.
Explanation:
Recessions are downturn economic periods that are declared after two consecutive quarters with negative results. Recessions are not necessarily long-term periods. They sometimes are two consecutive slowdowns in the overall economy that last six months that later are followed by an uptrend. In some other cases, it takes years until there is a sign of recovery. For instance, in the U.S. during the '70s and '80s, there were two consecutive recession periods.
A merchandising company's budget includes the following data for January: Sales: $400,000; COGS: $270,000; Administrative salaries: $1,250; Sales commissions: 5% of sales; Advertising: $10,000; Salary for sales manager: $30,000; Miscellaneous administrative expenses: $5,000. The total selling expenses on the January selling expense budget will be
Answer: 60000
Explanation:
400,000 • 5% = 10,000+ 30,000= 60000
Answer: $61,250
Explanation:
A merchandising company's budget includes the following data for January: Sales: $400,000; COGS: $270,000; Administrative salaries: $1,250; Sales commissions: 5% of sales; Advertising: $10,000; Depreciation on store equipment: $25,000; Rent on administrative building: $30,000; Miscellaneous administrative expenses: $5,000. The total general and administrative expenses on the January general and administrative expense budget will be
a:
Administrative salaries: $1,250
+ Sales commissions: 5% of sales ($400,000.00) =$20,000
+ Advertising: $10,00
+ Rent on administrative building: $30,000
Exercise 11-10 Tamarisk, Inc. was organized on January 1, 2021. During its first year, the corporation issued 2,400 shares of $50 par value preferred stock and 135,000 shares of $10 par value common stock. At December 31, the company declared the following cash dividends: 2021, $5,800; 2022, $12,400; and2023, $28,300.Show the allocation of dividends to each class of stuck, assuming the preferred stock dividend is 5% and noncumulative.
Answer:
(1) $5,800; $0
(2) $6,000; $6,400
(3) $6,000; $22,300
Explanation:
Annual preferred dividend:
= Number of shares × par value × preferred stock dividend percent
= 2,400 × $50 × 5%
= $6,000
In 2021:
Allocation to preferred stock = $5,800
Allocation to Common Stock = $0
In 2022:
Allocation to preferred stock = $6,000
Allocation to Common Stock = $12,400 - $6,000
= $6,400
In 2023:
Allocation to preferred stock = $6,000
Allocation to Common Stock = $28,300 - $6,000
= $22,300
Jacob went to the grocery store to buy breakfast cereal. He picked up a few cereal boxes to look up their ingredients. However, after going through a few boxes, he gave up and picked two different cereal boxes at random. He did not think that collecting information about his options was worth his time. Jacob's decision is an example of _____.a. an affect-based decision
b. an attribute-based decision
c. bounded rationality
d. instrumental rationality.
Answer: The correct answer is "c. bounded rationality".
Explanation: Jacob's decision is an example of bounded rationality, because according to the theory of limited rationality, people make decisions only partially in a rational way because of our cognitive, information and time constraints.
The following data is available for Blaine Corporation at December 31, 2018:
Common stock, par $10 (authorized 30,000 shares) $250,000
Treasury Stock (at cost $15 per share) $ 900
Based on the data, how many shares of common stock have been issued?
A. 30,000
B. 25,000
C. 29,940
D. 24,940
Answer:
B. 25,000
Explanation:
Given important information here is common stock, par $10 authorized, 30,000 shares and $250,000 Treasury Stock.
To calculate how many shares of common stock have been issued we have to divide the total price of common stock/par value which is as follows:
Shares issued = 250,000/10
25,000 shares answer
Therefore the correct answer is 25,000 shares .
To determine the number of shares issued, subtract the treasury stock from the common stock and divide by the par value per share.
Explanation:
To determine the number of shares of common stock that have been issued, we need to subtract the Treasury Stock (at cost $15 per share) from the Common Stock listed. The Common Stock represents the total par value of the authorized shares, while the Treasury Stock represents the shares that the company has repurchased. Subtracting the Treasury Stock from the Common Stock, we get:
Common Stock issued = Common Stock - Treasury Stock
Common Stock issued = $250,000 - $900
Common Stock issued = $249,100
Since the par value of each share is $10, we can divide the total Common Stock issued by the par value per share:
Number of shares issued = Common Stock issued / Par value per share
Number of shares issued = $249,100 / $10
Number of shares issued = 24,910 shares
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Which of the following is an example of expansionary monetary policy?
(A) The president signing an executive order to raise the minimum wage of government employees.
(B) The Fed increasing the money supply to push interest rates lower.
(C) The Fed raising the discount rate for member banks.
(D) Congress passing a new government stimulus package.
Answer:
The correct answer is ( b)
Explanation:
Expansionary monetary policy is the point at which fed utilises its resources to decrease or increase the money supply. Fed usually increases the money supply to lower the interest rate. Expansionary fiscal policy is applied to improve the economic situation of a country as it increases GDP and reduces the interest rate. Monetary policy is an important tool to monitor and control the interest rate of a country.
The Fed increasing the money supply to push interest rates lower is an example of expansionary monetary policy. This method encourages spending and can stimulate the economy.
Explanation:The correct answer to the question is: (B) The Fed increasing the money supply to push interest rates lower. This action is an example of expansionary monetary policy. In this case, the Federal Reserve (the "Fed") increases the amount of money in the economy aiming to encourage consumer and business spending. Lower interest rates make it cheaper to borrow money, which can encourage spending and stimulate the economy. Options A, C and D are not examples of monetary policy as they do not involve actions by the central bank to manage the economy's money supply.
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Project Manager Mary Ann is not a member of PMI but has applied for PMI certification. She has a meeting with the representative of a potential seller, and gets into an argument with the representative. Mary Ann loses her cool and yells at the representative and tells him to "get out of her office." Which of the following is true about Mary Ann’s conduct? A. It is a violation of PMI’s Code of Ethics and Professional Conduct. B. Since Mary Ann is not a member of PMI, she is not subject to the Code of Ethics and Professional Conduct. C. While not a per se violation of PMI’s Code of Ethics and Professional Conduct, Mary Ann should aspire to a better standard of conduct. D. It is not a violation of the Institute for Supply Management’s Principles and Standards of Ethical Supply Management Conduct.
Answer: A.
Mary Ann's conduct "is a violation of PMI’s Code of Ethics and Professional Conduct."
Explanation:
The Project Management Institute (PMI) expects Project Management Professionals (PMP) and PMP aspirants to abide by the Code of Ethics. An applicant applying for a PMP exam has to sign the PMP candidate agreement and Release form. In signing the agreement, the applicant agrees to abide by the Code.
The Code states that members and aspirants of PMI must;
• Act responsibly,
• Have respect for themselves and for others,
• Act fairly and,
• Be honest in their dealings.
Therefore by yelling at the representative, Mary Ann is in violation of PMI’s Code of Ethics.
An analysis of the general ledger accounts indicates that delivery equipment, which cost $75,000 and on which accumulated depreciation totaled $58,000 on the date of sale, was sold for $20,200 during the year. Using this information, indicate the items to be reported on the statement of cash flows. Transactions Section of Statement of Cash Flows Added or Deducted $75,000 cost of office equipment $58,000 accumulated depreciation $20,200 sales price $3,200 gain on sale of equipment (assume the indirect method is used)
Answer:
Explanation:
Basically there are three types of activities:
1. Operating activities: It includes those transactions which affect the working capital, and it records transactions of cash receipts and cash payments.
2. Investing activities: It records those activities which include purchase and sale of the fixed assets
3. Financing activities: It records those activities which affect the long term liability and shareholder equity balance.
So, the items reported or not reported is shown below:
1. $75,000 cost of office equipment - not reported
2. $58,000 accumulated depreciation - not reported
3. $20,200 sales price - investing activities - added
4. $3,200 gain on sale of equipment - operating activities - deducted
The sale of the delivery equipment for $20,200 should be recorded as a cash inflow in the statement of cash flows. A gain of $3,200, resulting from the sale, is deducted from net income on the cash flow statement under the indirect method.
When a company sells an asset such as delivery equipment, the items that should be reported on the statement of cash flows involve the recording of cash received from the sale as well as the removal of the asset's cost and accumulated depreciation. In this case, the delivery equipment, which had a cost of $75,000 and accumulated depreciation of $58,000, is sold for $20,200. The cash inflow from the sale of the equipment is $20,200. Therefore, under the indirect method, the sale would result in a gain of $3,200 ($20,200 proceeds minus the book value of $17,000, which is cost minus accumulated depreciation).
Here is how each item is treated on the statement of cash flows:
The cash inflow from the sale of the equipment is $20,200.
The cost of the equipment ($75,000) and the accumulated depreciation ($58,000) are removed from the balance sheet accounts but do not affect the cash flow statement directly.
The gain of $3,200 is deducted from net income on the cash flow statement to reconcile net income to cash provided by operating activities, because it is a non-cash item that increased net income.
A firm is considering two location alternatives. At location A, fixed costs would be $4,000,000 per year, and variable costs $0.30 per unit. At alternative B, fixed costs would be $3,600,000 per year, with variable costs of $0.35 per unit. If annual demand is expected to be 10 million units, which plant offers the lowest total cost?A) plant A, because it is cheaper than Plant B for all volumes over 8,000,000 units B) plant B, because it is cheaper than Plant A for all volumes over 8,000,000 units. C) Plant A, because it is cheaper than Plant B for all volumes D) plant B, because it has the lower variable COM per unit E) Neither Plant A nor Plant B, because (he crossover point is at 10 million units.
Answer:
A) plant A, because it is cheaper than Plant B for all volumes over 8,000,000 units
Explanation:
Please see attachment.
The plant that offers the lowest total cost is plant A, because it is cheaper than Plant B for all volumes over 8,000,000 units.
Which plant should be chosen?In order to determine the plant that would be chosen, the total cost of each plant has to be determined.
Total cost = fixed cost + (variable cost x total output)
Total cost of plant A = $4,000,000 + (0.3 x 10 million) = $7million
Total cost of plant B = $3,600,000 + (0.35 X 10 million) = 7.1 million
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Classify each statement as either true or false.
A. If two short-term assets offer different interest rates, then investors will move their wealth towards the asset with the lower return.
B. There is no practical difference between long-term interest rates and short-term interest rates.
C. Money demand is affected by short-term interest rates and not long-term interest rates.
D. Interest rates on financial assets that mature in ten months or less are long-term interest rates.
E. The opportunity cost of holding money falls when short-term interest rates fall.
Answer
The answer and procedures of the exercise are attached in a microsoft excel document.
Explanation
Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in a single sheet with the formulas indications.
On September 1, year 1, Jackson borrowed $400,000 to refinance the original mortgage on her principal residence. Jackson paid 2 points to reduce her interest rate from 7.5 percent to 7 percent. The loan is for a 30-year period. How much can Mary deduct in year 1 for her points paid?
Answer:
$88.88 or $89 (Approx)
Explanation:
Each point is equal to the 1 percent so, 2 points is equal to the 2%.
Amount of points paid = Borrowed amount × Points percentage
= $400,000 × 2%
= $8,000
Total number of months = Year × Months in a year
= 30 × 12
= 360
Number of months in the deduction year = September to December
= 4
Amount of deduction:
= (Amount of points paid ÷ Total number of months) × Number of months in the deduction year
= ($8,000 ÷ 360) × 4
= $32,000 ÷ 360
= $88.88 or $89 (Approx)
On January 1, 2017, Doone Corporation acquired 70 percent of the outstanding voting stock of Rockne Company for $672,000 consideration. At the acquisition date, the fair value of the 30 percent noncontrolling interest was $288,000 and Rockne's assets and liabilities had a collective net fair value of $960,000. Doone uses the equity method in its internal records to account for its investment in Rockne. Rockne reports a net income of $370,000 in 2018. Since being acquired, Rockne has regularly supplied inventory to Doone at 25 percent more than cost. Sales to Doone amounted to $430,000 in 2017 and $530,000 in 2018. Approximately 40 percent of the inventory purchased during any one year is not used until the following year.a. What is the non-controlling interest's share of Rockne's 2018 income?b. Prepare Doone's 2018 consolidation entries required by the intra-entity inventory transfers.
Final answer:
The non-controlling interest's share of Rockne's 2018 income is $111,000, calculated as 30% of Rockne's net income. To prepare Doone's 2018 consolidation entries, the intra-entity inventory profits need to be removed by adjusting the inventory values and cost of goods sold.
Explanation:
The student is dealing with an accounting scenario where consolidation and non-controlling interest calculations are involved, typically in an advanced accounting or business degree course.
a. Non-controlling interest's share of Rockne's 2018 income
The non-controlling interest's share is calculated based on the percentage of the company they own. In this case, non-controllers own 30% of Rockne. The formula to calculate their share of the net income would be:
Net income × Non-controlling interest percentage = Non-controlling interest's share
Rockne's net income for 2018 is $370,000, so:
$370,000 × 30% = $111,000
b. Doone's 2018 consolidation entries
To prepare Doone's consolidation entries for the intra-entity inventory transfers, we need to:Determine the inventory sold above cost from Rockne to Doone: $530,000 × 25% markup.Calculate the amount of 2018 inventory still on hand by the end of the year: $530,000 × 40%.Adjust the beginning inventory to remove the markup from 2017's ending inventory that was sold in 2018.To remove the excess markup from 2018's ending inventory, Doone must credit Inventory and debit Cost of Goods Sold (COGS) or an Inventory Profit Elimination account for the markup amount.
You sit down with Caffe Gustoso's owners to discuss your online advertising plans. You tell the owners that if they decide to incorporate search marketing into the plan, there are three primary payment options: pay per action, pay per click, and pay per view. Search engines favor pay per view because they earn income each time the ad is displayed to the consumer, whereas pay per click generates income for the search engine only when the ad is actually clicked on. Pay per action generates search engine income based on an action such as a purchase. Search engines often provide preferred placement to ads that generate the most income. Which form of payment would you recommend for Caffè Gustoso's search marketing?
Answer: I recommend a plan in two steps:
Starts with a pay per view. Then in 6 months move to a pay per click.
Explanation: First they need to show their brand. Let the market know them. Once they have viewed the could move to a different and expensive less payment method
Answer and explanation:
The best option for Caffe Gustoso is to choose a pay per action advertising plan. Coffee itself is not like other items people would be interested in just checking on the internet. As we are talking about a drink, people are likely to try it. Thus, Caffe Gustoso would be making revenue only when customers are sure they will place an order for coffee which will generate an expense to the business but a sure income.
A company manufactures mountain bikes. The research department produced the marginal cost function C'(x)=700-(x/3) where 0 is less than or equal to x which is less than or equal to 900. C'(x) is in dollars and x is the number of bikes produced per month. Compute the increase in cost going from a production level of 300 bikes per month to 900 bikes per month. Set up a definite integral and evaluate it.
The increase in cost going from a production level of 300 bikes per month to 900 bikes per month is $315,900.
Explanation:To compute the increase in cost going from a production level of 300 bikes per month to 900 bikes per month, we need to find the total cost for each production level and then subtract the total costs. First, we integrate the marginal cost function C'(x) to get the total cost function C(x). The integral of 700-(x/3) with respect to x is 700x - (x^2)/6. Next, we evaluate the total cost at x=300 and x=900 to find the increase in cost. Plugging in these values into the total cost function, we get C(300) = 63000 and C(900) = 378900. The increase in cost is C(900) - C(300) = 378900 - 63000 = 315900 dollars.
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Hutto Corp. has set the following standard direct materials and direct labor costs per unit for the product it manufactures.
Direct materials (15 lbs. @ $3 per lb.) $45
Direct labor (2 hrs. @ $15 per hr.) 30
During May the company incurred the following actual costs to produce 9,000 units.
Direct materials (137,100 lbs. @ $2.80 per lb.) $ 383,880
Direct labor (21,600 hrs. @ $15.10 per hr.). 326,160
Required :
(1) Compute the direct materials price and quantity variances. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance.)
The direct materials price variance is $(45,900) and it's unfavorable. The direct materials quantity variance is $2,100 and it's favorable.
Explanation:To compute the direct materials price variance, we need to calculate the difference between the actual price per pound and the standard price per pound, and then multiply the difference by the actual pounds used. In this case, the actual price is $2.80 per pound and the standard price is $3.00 per pound. The actual pounds used is 137,100 pounds. Therefore, the direct materials price variance is $(45,900) and it's unfavorable.
To calculate the direct materials quantity variance, we subtract the standard pounds allowed (which is the standard pounds per unit multiplied by the actual units produced) from the actual pounds used. In this case, the standard pounds allowed is 9,000 units multiplied by 15 pounds per unit, which equals 135,000 pounds. The actual pounds used is 137,100 pounds. Therefore, the direct materials quantity variance is $2,100 and it's favorable.
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Jeffrey's preferences are described by U(R.C) = R"C", where R denotes leisure and c denotes consumption. Assume the price of consumption is 1, the wage rate is w, non-labor income is C, and Jeffrey has a total time available (for either work or leisure) equal to R. a. Draw the budget line and write its equation. b. Find the demand function for R' in terms of w, C and R. Hint: imagine you extend the budget line until it crosses the leisure axis. Use the shortcut seen in class to find demands when we have Cobb-Douglas preferences. c. Find the labor supply function, that is, R-R as a function of w, C and R. Is it positively or negatively related to w? Hint: define L' =R-R'. Compute Ollow and check its sign. Assume leisure is defined in hours. What is the value of w that will make Jeffery work eight hours? Express it in terms of C and R. Humans are living longer and longer. If we define R in terms of years of productive life, we can say that is becoming larger. What is the effect of a greater R on optimal leisure and consumption, ceteris paribus? f. Two presidential candidates are proposing alternative policies to increase labor income. Candidate A is proposing a cut in social programs that would decrease C by 20%. Candidate B is proposing a tax cut that would increase w by 20%. Which one would more effective? Explain your answer.
Ovate, Inc., earns $140,000 in book income before tax and is subject to a 35% marginal Federal income tax rate. Ovate records a single temporary' difference. Warranty expenses deducted for book purposes are $8,000 of which only $2,000 are deductible for tax purposes. Determine the amount of Onate's deferred tax asset or liability.
Answer:
Deferred tax asset = $2100
Explanation:
Deferred tax asset will be created since deduction allowable for tax purposes in current year is in less amount, the other $6000 deduction for warranty expenses will be allowable in future years. Hence, it has deferred tax asset of [(8000-2000)x35%] $2100.
A $63,000 machine with a 7-year class life was purchased 2 years ago. The machine will now be sold for $50,000 and replaced with a new machine costing $75,000, with a 5-year class life. The new machine will not increase sales, but will decrease operating costs by $16,000 per year. Simplified straight line depreciation is employed for both machines, and the marginal corporate tax rate is 34 percent. What is the incremental annual cash flow associated with the project?
The incremental annual cash flow associated with the project is $14,300.
To calculate the incremental annual cash flow associated with the project, we need to consider several factors including the sale of the old machine, the purchase of the new machine, changes in operating costs, and the impact of taxes. Let's break down each component step by step:
1. **Sale of Old Machine:**
- Original cost of old machine: $63,000
- Accumulated depreciation (2 years out of 7-year life): 2/7 * $63,000 = $18,000
- Book value of old machine at sale: $63,000 - $18,000 = $45,000
- Sale price of old machine: $50,000
- Gain on sale of old machine: $50,000 - $45,000 = $5,000
2. **Purchase of New Machine:**
- Cost of new machine: $75,000
3. **Operating Cost Savings:**
- Operating cost savings per year due to new machine: $16,000
4. **Tax Impact:**
- Marginal corporate tax rate: 34%
- Tax impact of gain on sale of old machine: $5,000 * 34% = $1,700
Now, let's calculate the incremental annual cash flow:
[tex]\[ \text{Incremental Cash Flow} = \text{Operating Cost Savings} - \text{Tax Impact on Gain} - \text{Cost of New Machine} \][/tex]
[tex]\[ \text{Incremental Cash Flow} = $16,000 - $1,700 - $75,000 \][/tex]
[tex]\[ \text{Incremental Cash Flow} = $14,300 \][/tex]
Therefore, the incremental annual cash flow associated with the project is $14,300.
You own a portfolio that has a total value of $215,000 and it is invested in Stock D with a beta of .86 and Stock E with a beta of 1.39. The beta of your portfolio is equal to the market beta. What is the dollar amount of your investment in Stock D?
Answer: BP = BD(WD) + BE(WE)
1 = 0.86(1-WE) + 1.39WE
1 = 0.86-0.86WE + 1.39WE
1 = 0.86 + 0.53WE
-0.53WE = -0.14
0.53WE = 0.14
WE = 0.14/0.53
WE = 0.2641509434
WD = 1 - WE
WD = 1 - 0.2641509434
WD = 0.7358490566
The dollar amount of investment in stock D = 0.7358490566 x $215,000
= $158,207.54
Explanation: The beta of the portfolio is 1, which corresponds to the beta of the market. The beta of the portfolio equals beta of each stock multiplied by the percentage of fund invested in each stock(weight). The weight of stock D is equal to 1 - weight of stock E. Therefore, we need to make weight of stock E the subject of the formula by solving the problem mathematically and collecting the like terms. The weight of stock E is 0.2641509434. The weight of stock E will be subtracted from 1 so as to obtain the weight of stock D, which is 0.7358490566. The dollar amount of stock D equal to $215,000 multiplied by 0.7358490566, which is $158,207.54.
The following accounts and balances are taken from Moore Company's adjusted trial balance:
Accounts Payable $8,000
Accounts Receivable 3,400
Accumulated Depreciation 1,400
Depreciation Expense 1,800
Dividends 2,800
Insurance Expense 2,300
Interest Revenue 1,240
Prepaid Insurance 2,220
Retained Earnings 10,600
Salary Expense 23,100
Service Revenue 35,800
Required :
What is the ending balance in Retained Earnings after the closing entries are completed?
Answer:
Retained earnings = Beginning period retained earnings +Net income - Cash dividends - Stock dividends.
We need to find the net income and in order to do that we need to identify all the revenues and expenses.
Interest Revenue= 1,240
Service Revenue = 35,800
Total revenue = 35,800 +1,240 = 37,040
Now we need to find all the expenses
Depreciation expense= 1800
Insurance expense= 2,300
Salary expense = 23,100
Total expense= 1,800 + 2,300 + 23,100= 27,200
Net income = 37,040 -27,200= 9,840
Now we will put all these values in our formula to find the ending balance in retained earnings.
Beginning period retained earnings = 10,600
Net income = 9,840
Cash dividends = 2,800
Stock dividends = 0
Ending retained earning balance = 10,600+ 9,840 -2,800= 17,640
Explanation:
Consider an overlapping generation set up with pay-as-you-go social security system in a hypothetical economy. There are 100 old retirees and 103 young workers at the current period. Old retirees earned $1,000 each when they were young. Young workers now earn $1,040 each. Suppose that the population growth is constant and there is a fixed payroll tax of 15%, which is used to finance the pay-as-you-go social security system. (a) what is the population growth rate, n? (b) How much is the total contribution of young workers to the social security system in the current period? (c) How much each retiree can receive from the social security system? (d) How much was the contribution of each old retiree when he or she was young? (e) What is the implicit return on the social security system?
Answer:
a) 3%
b) the new workers contribute 16,068 dollars
c)$160.68 each
d) the old workers contribute 15,000 when they made his contribution
e) rate of return 7.12%
Explanation:
growth rate: the increase in the workforce:
103 new workers / 100 retired - 1 = 0.03 = 3%
103 workers x 1,040 each x 15% = 16,068
assuming no other employee:
$16,068 pension fund / 100 retired persons = 160.68 dollars each
100 workers x 1,000 each x 15% = 15,000
e) the old retire contribute:
1,000 x 15% = 150
they receive 160.68
rate of return:
160.68 / 150 - 1 = 0.0712
A company has a minimum required rate of return of 9%. It is considering investing in a project that requires an investment of $210,000 and is expected to generate cash inflows of $90,000 at the end of each year for three years. The present value of future cash inflows for this project is:________
Answer:
$227,816.52
Explanation:
Using the financial calculator to find the present value;
Cash flow for first year = $90,000
Cash flow for second year = $90,000
Cash flow for third year = $90,000
I = 9%
Pv =$227,816.52
A service auditor's report on a service center should include a(n) :A. Detailed description of the service center's internal control.B. Statement that the user of the report may assess control risk at the minimum level.C. Indication that no assurance is provided.D. Opinion on the operating effectiveness of the service center's internal control.
Answer:
The answer is letter A.
Explanation:
Detailed description of the service center's internal control.
The actual selling expenses incurred in March 2017 by Fallon Company are as follows.
Variable Expenses Fixed Expenses
Sales commissions $14,178 Sales salaries $35,000
Advertising 10,036 Depreciation 7,200
Travel 8,305 Insurance 1,300
Delivery 3,382
(a) Prepare a flexible budget performance report for March, assuming that March sales were $166,100. Variable costs and their percentage relationship to sales are sales commissions 8%, advertising 6%, traveling 5%, and delivery 2%. Fixed selling expenses will consist of sales salaries $35,000, Depreciation on delivery equipment $7,200, and insurance on delivery equipment $1,300. (List variable costs before fixed costs.)
Answer:
The flexible budget performance report gives Net Income of $87,719 for the month of march 2017.
Explanation:
March 2017
Sales Revenue $166,100
Less: Variable Expenses
Sales Commission $13,288 (=Sales Revenue x 8%)
Advertising $9,966 (=Sales Revenue x 6%)
Travel $8,305 (=Sales Revenue x 5%)
Delivery $3,322 (=Sales Revenue x 2%)
Contribution $131,219 (=Sales Revenue - Variable Expenses)
Less: Fixed Expenses
Sales Salaries $35,000
Depreciation $7,200
Insurance $1,300
Net Income $87,719 (=Contribution - Fixed Expenses)
*Excel file is attached for your reference.
To prepare a flexible budget performance report for March 2017, follow these steps: calculate the flexible budget for variable and fixed expenses, compare it with the actual expenses, and calculate the performance variance. The actual expenses incurred by the Fallon Company can be compared with the flexible budget to determine the performance variance. In this case, the actual expenses were lower than the budgeted expenses, resulting in a negative performance variance.
Explanation:To prepare a flexible budget performance report for the month of March 2017, we need to calculate the flexible budget for variable expenses and fixed expenses, and then compare those with the actual expenses incurred by the Fallon Company. The variable expenses are calculated as a percentage of sales, while the fixed expenses remain the same. Once the flexible budget is prepared, we can compare it with the actual expenses to determine the performance variance.
Step-by-step:
Calculate the variable expenses using the given percentage relationships to sales:Sales commissions: 8% of $166,100 = $13,288Advertising: 6% of $166,100 = $9,966Travel: 5% of $166,100 = $8,305Delivery: 2% of $166,100 = $3,322Calculate the fixed expenses:Sales salaries: $35,000Depreciation on delivery equipment: $7,200Insurance on delivery equipment: $1,300Prepare the flexible budget by adding up the variable and fixed expenses:Total variable expenses: $13,288 + $9,966 + $8,305 + $3,322 = $34,881Total fixed expenses: $35,000 + $7,200 + $1,300 = $43,500Flexible budget (total expenses): $34,881 + $43,500 = $78,381Compare the flexible budget with the actual expenses, which are given:Actual variable expenses: $14,178Actual fixed expenses: $35,000 + $7,200 + $1,300 = $43,500Actual expenses (total): $14,178 + $43,500 = $57,678Calculate the performance variance:Performance variance = Actual expenses - Flexible budgetPerformance variance = $57,678 - $78,381 = -$20,703The flexible budget performance report for March 2017 shows a negative performance variance of -$20,703, indicating that the actual expenses were significantly lower than the budgeted expenses.
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The yield rate on a one year zero-coupon bond is currently 7% and the yield rate on a 2-year zero coupon bond is currently 8%. The Treasury plans to issue a two year bond with a 9% annual coupon, maturing at $100 par value. Determine the yield to maturity of the two year coupon bond.
Answer:
The Yield to maturity is 7.96%.
Explanation:
The two-year Treasury Bond will generate the cashflow as below:
Year 1: Coupon payment = 9% x 100 = $9
Year 2: Coupon payment + face value repayment = (9% x 100 + $100) = $109
Present value of the two cash flows above is : 9/1.07 + 109/1.08^2 = $101.86
The yield to maturity need to be found is the discounted rate of the two mention-above cash flows which equals the present value of the two cash flows to the present value of $101.86 as calculated above.
=> 9/ (1+YTM) + 109 / (1+YTM)^2 = 101.86 => YTM = 7.96%.
Suppose income increases by 25 percent and, as a result, the quantity of a particular brand of automobile demanded (holding the price for this particular automobile constant) increases by 49 percentThe income elasticity of demand for this brand of car is ____(Enter your response rounded to two decimal places and include a minus sign if appropriate.)This particular brand of automobile is a(n) _____ goodSuppose market research shows that a particular brand of truck is a normal good and a luxury. If so, then the income elasticity of demand for this truck isa.Less than 1 but greater than 0b. Negativec. Greater than 1d. Positivee. Zero
Answer:
The correct answer is: 1.96; Luxury good; option c.
Explanation:
The income of consumers increases by 25%.
The quantity demanded of a particular brand of the automobile as a result increases by 49%.
The income elasticity of demand is
= [tex]\frac{\Delta Q}{\Delta Y}[/tex]
= [tex]\frac{49}{25}[/tex]
= 1.96
A normal good is a good whose demand increases with the increase in the consumer's income. If the income elasticity is greater than 1, it implies that the good is a luxury good.
For a truck to be a normal good, its income elasticity should be positive and for a normal good, it should be greater than 1.
Edinburgh Exports has two divisions, L and H. Division L is the company’s low-risk division and would have a weighted average cost of capital of 8% if it was operated as an independent company. Division H is the company’s high-risk division and would have a weighted average cost of capital of 14% if it was operated as an independent company. Because the two divisions are the same size, the company has a composite weighted average cost of capital of 11%. Division H is considering a project with an expected return of 12%.
Should Edinburgh Co. accept or reject the prject?
A. Accept
B. Reject
On what grounds do you base your accept-reject decision?
A. Division H's project should be accepted, because its return is greater than the risk-based cost of capital for the divison.
B. Division H's project should be rejected, because its return is less than the risk-based cost of capital for the division.
Answer:
Part 1. B Reject
Part 2. Division H's project should be rejected, because its return is less than the risk-based cost of capital for the division.
Explanation:
Division H's project should be rejected, because its return is less than the risk-based cost of capital for the division.
Edinburgh Co. should reject the project because the expected return, 12%, is less than Division H's cost of capital, 14%. This indicates that the project is unlikely to generate a return above the required rate, meaning it won't bring value to the company.
Explanation:The decision to accept or reject a project should be based on whether the expected return is greater than or less than the cost of capital. In this case, Division H of Edinburgh Co. is considering a project with an expected return of 12%, while its weighted average cost of capital is 14%.
Because the expected return is less than the cost of capital, the project is unlikely to generate return above the required rate, hence it should be rejected. This method of deciding is used in companies to ensure they undertake projects that will bring value. Therefore, the correct answer is option B: the project should be rejected because its return is less than the risk-based cost of capital for the division.
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The CFO of Twine Enterprises expects sales to increase from $8,000,000 in 2010 to $12,000,000 in 2011. Current assets in 2010 are equal to $5,000,000. Using the percent of sales method, projected current assets for 2011 are equal to A. $7,500,000. B. $7,083,333. C. $5,500,000. D. $9,000,000.
Answer:
$7,500,000
Explanation:
For computing the projected current assets, first we have to determine the percentage of sales which is shown below:
= (2011 sales - 2010 sales) ÷ (2010 sales)
= ($12,000,000 - $8,000,000) ÷ ($8,000,000)
= 50%
Now the current assets would be
= Current assets + current assets × percent of sales
= $5,000,000 + $5,000,000 × 50%
= $5,000,000 + $2,500,000
= $7,500,000
Consider a hypothetical closed economy in which households spend $0.70 of each additional dollar they earn and save the remaining $0.30. The marginal propensity to consume (MPC) for this economy is , and the spending multiplier for this economy is . Suppose the government in this economy decides to decrease government purchases by $300 billion. The decrease in government purchases will _______
Answer:
1. 0.7
2. 3.3
3. -$210
Explanation:
1. The marginal propensity to consume refers to the amount that is spent on consumption for each of the extra income earned. Therefore, the marginal propensity to consume (MPC) is equal to 0.7.
2. The multiplier is calculated as follows:
Multiplier = 1 ÷ (1 - MPC)
= 1 ÷ (1 - 0.7)
= 3.33
3. A reduction in the government purchases by $300 billion then this will reduce the income level of the consumers and change the consumption level as follows:
= Change in government purchases × MPC
= $300 billion × 0.7
= -$210
Say that the average worker in the U.S. economy is eight times as productive as an average worker in Mexico. If the productivity of U.S. workers grows at 2% for 25 years and the productivity of Mexico’s workers grows at 6% for 25 years, which country will have higher worker productivity at that point?
Answer:
U.S. workers will have higher worker productivity at that point.
Explanation:
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