Answer:
all transaciton made at the moment the lease begins.
lease receivables 200,001.13 debit
sales revenues 200,001.13 credit
cost of good sold 160,000 debit
inventory 160,000 credit
cash 35,013 debit
lease receivables 35,013 credit
Explanation:
Present value of the lease payments
[tex]C \times \frac{1-(1+r)^{-time} }{rate} = PV\\[/tex]
C 35,013.00
time 8
rate 0.11
[tex]35013 \times \frac{1-(1+0.11)^{-8} }{0.11} = PV\\[/tex]
PV $200,001.1278
The company will delcare this interest receivables and recognize the sales reveneue
It will also recognize the cost of good sold and decrease in inventory (it is equipment for the lessee but inventory for the lessor)
Then for each payment will recognzie a portion of interest revenue and decrease the lease receivables As the payment is at the beginning there is not interest revenue
Juhasz Corporation makes a product with the following standards for direct labor and variable overhead: Standard Quantity Standard Price or Hours or Rate Direct labor 0.70 hours $ 37.00 per hour Variable overhead 0.70 hours $ 5.70 per hour In August the company produced 9,600 units using 6,850 direct labor-hours. The actual variable overhead cost was $36,990. The company applies variable overhead on the basis of direct labor-hours. The variable overhead efficiency variance for August is:a. $702 Ub. $741 Uc. $702 Fd. $741 F
Answer:
741 U
Explanation:
Please see attachment
Final answer:
The variable overhead efficiency variance for Juhasz Corporation in August is $741 Unfavorable (U) because more hours were worked than were allowed by the standard.
Explanation:
To calculate the variable overhead efficiency variance, we need to compare the standard quantity of variable overhead hours for the actual production with the actual hours worked, multiplied by the standard variable overhead rate. First, we determine the standard quantity of hours allowed for the actual production, which is 9,600 units × 0.70 hours/unit = 6,720 hours. The difference between the standard hours allowed and the actual hours worked is 6,720 hours - 6,850 hours = -130 hours, indicating that more hours were worked than were allowed, which is inefficient. We determine the variance by multiplying the difference in hours by the standard variable overhead rate of $5.70/hour: -130 hours × $5.70/hour = -$741. Therefore, the variable overhead efficiency variance for August is $741 Unfavorable (U), because the actual hours spent on production were greater than the standard hours allowed for the actual production.
The following transactions occurred during July: Received $900 cash for services performed during July. Received $5,350 cash from the issuance of common stock to owners. What is the amount of revenue that will be reported on the income statement for the month ended July 31?
Answer:
$900
Explanation:
In the income statement, the total revenues and the total expenses are recorded.
If the total revenues are more than the total expenditure then the company earns net income
And, If the total revenues are less than the total expenditure then the company have a net loss
This net income or net loss would reflect in the statement of the retained earning account.
So, only $900 would be reported on the income statement as the other transaction reflect the financing activity
Two Brothers Moving prepared the following sales budget: Month Cash Sales Credit Sales March $ 19 comma 000 $ 5 comma 000 April $ 40 comma 000 $ 20 comma 000 May $ 38 comma 000 $ 39 comma 000 June $ 51 comma 000 $ 48 comma 000 Credit collections are 10% in the month of sale, 65% in the month following the sale, and 20% two months following the sale. The remaining 5% is expected to be uncollectible. What are the total cash collections in May at Two Brothers Moving?
Answer:
The total cash collections in May at Two Brothers Moving is projected to be at $17,900.
Explanation:
Please find the below for detailed explanation and calculations:
The May cash collection of Two Brothers Moving is budgeted to include the following collection from credit sales:
10% of Credit Sales in May + 65% of Credit Sales in April + 20% of Credit Sales in March = 10% x $39,000 + 65% x $20,000 + 20% x $5,000 = $17,900.
As a result, the total cash collections in May of Two Brothers Moving is projected at $17,900.
Reducing the complexity of a product and improving a product's maintainability are activities of: Select one: a. product lifecycle management (PLM). b. product-by-value analysis. c. manufacturability and value engineering. d. organizing for product development. e. design for destruction (DFD).
Answer: Option C
Explanation: In simple words, manufacturability and value engineering refers to the process under which an organisation thoroughly studies its existing product for the objective of making changes that leads to increased sales.
The value under such method can be increased either by reducing the cost or by improving the quality of that product and quality of a product can be increased by making it less complex, user friendly and highly durable.
Hence the correct option is C.
Reducing the complexity of a product and improving its maintainability are activities of manufacturability and value engineering, focusing on simplicity, sustainability, and cost-effectiveness. This approach embraces technological innovation and life-cycle assessment to minimize environmental impacts and enhance product longevity.
The activities of reducing the complexity of a product and improving a product's maintainability can best be associated with c. manufacturability and value engineering. Manufacturability and value engineering focus on designing products to simplify manufacturing processes, reduce costs, and ensure ease of maintenance. This approach often involves technological innovation, optimizing design for better lifecycle performance, including sustainability and efficiency during use and end-of-life disposal. The ultimate goal is to create products that are not only less complex to manufacture but also easier and less costly to maintain, aligning with the principles of reducing environmental impact and enhancing product longevity.
Life-cycle assessment is a critical component in understanding and minimizing the environmental footprint of a product from conception through disposal. It encompasses analyzing the consumption of material and energy, the release of wastes, and the potential for recycling or reusing components. This comprehensive view allows for the identification of opportunities to use materials which have lower environmental impacts and are easier to recover at the end of the product's life, thereby contributing to the overall reduced material diversity in products.
You own a stock portfolio invested 25 percent in Stock Q, 25 percent in Stock R, 15 percent in Stock S, and 35 percent in Stock T. The betas for these four stocks are 1.28, 0.45, 1.78, and 1.22, respectively. What is the portfolio beta?
Answer:
1.1265
Explanation:
The computation of the portfolio beta is shown below:
= Stock Q portfolio percentage × beta of Stock Q + Stock R portfolio percentage × beta of Stock R + Stock S portfolio percentage × beta of Stock S + Stock T portfolio percentage × beta of Stock Q
= 0.25 × 1.28 + 0.25 × 0.45 + 0.15 × 1.78 + 0.35 × 1.22
= 0.32 + 0.1125 + 0.267 + 0.427
= 1.1265
Assume that an investment is forecasted to produce the followingâ returns:
-aâ 10% probability of aâ $1,400 return;
-aâ 50% probability of aâ $6,600 return;
-aâ 40% probability of aâ $1,500 return.
What is the expected amount of return this investment willâ produce?
Answer:
$4,040
Explanation:
The formula to compute the expected rate of return is shown below:
Expected rate of return = (Probability 1 × Possible Returns 1) + (Probability 2 × Possible Returns 2) + (Probability 3 × Possible Returns 3)
= (0.10 × $1,400) + (0.50 × $6,600) + (0.40 × $1,500)
= $140 + $3,300 + $600
= $4,040
Simply we multiplied the probabilities with this return so that the correct amount of return would be come
The controller for Clint Eastwood Co. is attempting to determine the amount of cash to be reported on its December 31, 2017 balance sheet. The following is provided.
1. Commercial savings account of $600,000 and a commercial checking account balance of $900,000 are held at First National Bank of Yojimbo.
2. Money market fund account held at Volonte Co. (a mutual fund organization) permits Eastwood to write checks on this balance, $5,000,000.
3. Travel advances of $180,000 for executive travel for the first quarter of next year (employee to reimburse through salary reduction)
4. A separate cash fund in the amount of $1,500,000 is restricted for the retirement of long-term debt.
5. Petty cash fund of $1,000
6. An I.O.U. from Marianne Koch, a company customer, in the amount of $190,000
7. A bank overdraft of $110,000 has occurred at one of the banks the company uses to deposit its cash receipts. At the present time, the company has no deposits at this bank
8. The comp[any has two certificates of deposits, each totaling $500,000. These CDs have a maturity of 120 days.
The amount of cash to be reported on Clint Eastwood Co.'s December 31, 2017 balance sheet is $8,871,000.
Explanation:The amount of cash to be reported on Clint Eastwood Co.'s December 31, 2017 balance sheet is calculated by considering a combination of cash and cash equivalents. Cash and cash equivalents include:
Commercial savings account and commercial checking account balances at First National Bank of Yojimbo - $600,000 + $900,000 = $1,500,000Money market fund account at Volonte Co. - $5,000,000Travel advances - $180,000Petty cash fund - $1,000I.O.U. from Marianne Koch - $190,000Bank overdraft - $0 (since the company has no deposits at the bank)Certificates of deposits - $1,000,000Total cash to be reported on the balance sheet = $1,500,000 + $5,000,000 + $180,000 + $1,000 + $190,000 + $0 + $1,000,000 = $8,871,000. Therefore, the amount of cash to be reported on Clint Eastwood Co.'s December 31, 2017 balance sheet is $8,871,000.
Your uncle will sell you his bicycle shop for $250,000, with "seller financing," at a 6.0% nominal annual rate. The terms of the loan would require you to make 12 equal end-of-month payments per year for 4 years, and then make an additional final (balloon) payment of $50,000 at the end of the last month. What would your equal monthly payments be?
$4,029.37
$4,241.44
$4,464.67
$4,699.66
$4,947.01
Answer:
$4,947.01
Explanation:
In this question, we use the present value formula which is shown in the spreadsheet.
The NPER represents the time period.
Given that,
Future value = $50,000
Present value = $250,000
Rate of interest = 6% ÷ 12 months = 0.5 months
NPER = 4 years × 12 months = 48 months
The formula is shown below:
= PMT(Rate,NPER,PV,-FV,type)
The future value comes in negative
So, after solving this, the answer would be $4,947.01
Assuming you make an additional final (balloon) payment of $50,000 at the end of the last month, your monthly payments is:$4,947.01.
Monthly paymentBased on the given information we would make use of financial calculator to find the PMT by inputting the below data
PMT(Rate,NPER,PV,-FV,type)
Where:
Future value= $50,000
Present value= $250,000
Interest rate= 6%/12 = 0.5%
Nper= 4 years × 12= 48 months
Hence;
PMT=$4,947.01
Inconclusion your monthly payments is:$4,947.01.
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Whitewall Tire Co. just paid an annual dividend of $1.70 on its common shares.
If Whitewall is expected to increase its annual dividend by 2.10 percent per year into the foreseeable future and the current price of Whitewall's common shares is $20.44, what is the cost of common stock for Whitewall?
Answer:
10.59%
Explanation:
First, find next year's dividend using dividend discount model formula;
D1 = D0 (1+g)
D0 = current dividend paid = 1.70
D1 = expected next year's dividend
g = growth rate = 2.10% or 0.0210 as a decimal
therefore. D1 = 1.70 (1+0.0210)
D1 = 1.70 *1.0210
D1 = 1.7357
With the current price of $20.44, find the cost of stock (r) ;
r = [tex]\frac{D1}{P0} + g[/tex]
P0 = Current price
r = [tex]\frac{1.7357}{20.44} + 0.0210\\ \\ =0.0849 +0.0210\\ \\ =0.1059[/tex]
As a percentage, the cost of stock is 10.59%
At Scorla Automobiles, a few machines in the assembly section were faulty and had to be shut down till they were repaired. This reduced the output of automobiles for the quarter. In this case, the costs incurred by Scorla Automobiles for repairing the machines are an example of _____.A. prevention costsB. appraisal costsC. internal failure costsD. external failure costs
Answer:
internal cost of failure
Explanation:
In the processing and manufacturing sectors, there are broadly four main types of quality costs. Poor quality costs comprises of internal costs of failure and external costs of failure. while good quality cost comprises of cost of evaluation and cost of prevention.
Internal costs of failure are described as the costs incurred by the company due to production failures is found before the product is delivered to the consumer.
In this situation, such machines must be reduced in manufacturing section as they were found faulty, leading in lost power of machinery. This form of loss is known as internal cost of failure.
Answer:
Prevention costs.
Explanation:
Prevention costs are cost arising due to a need to improve the manufacturing process. The manufacturing process may be machine intensive or human capital intensive. in the case of Scorla Automobiles, the repairs of faulty machines will prevent internal failure cost which may arise due to product (final product) nonconformity to required quality standards and also external cost like legal lawsuits from customers due to product failure.
Which of the following statements is FALSE?
A) The geometric average return is a better description of the long-run historical performance
of an investment.
B) The geometric average return will always be above the arithmetic average return, and the
difference grows with the volatility of the annual returns.
C) The compounded geometric average return is most often used for comparative purposes.
D) We should use the arithmetic average return when we are trying to estimate an
investmentʹs expected return over a future horizon based on its past performance.
Answer:
The answer is letter B
Explanation:
The false statement is letter B, The geometric average return will always be above the arithmetic average return, and the difference grows with the volatility of the annual returns.
Because the geometric average return will always be bellow the arithmetic average return, and the difference grows with the volatility of the annual returns.
The practice of delegating authority to division-level managers by top management is:
a. decentralization.
b. good business practice.
c. centralization.
d. autonomy.
e. never done in business today
Answer:
The correct answer is (A)
Explanation:
Decentralisation is fundamentally the exchange of power and responsibility regarding public operations from the central government to halfway and nearby governments or semi free government associations or potentially the private part is a complex idea. Various sorts of decentralisation must to be recognised on the grounds that they have various qualities, strategy suggestions, and conditions for success. Types of decentralisation incorporate political, financial, and market decentralisation
On February 15, 2011, Spring Hope Corporation repurchases 1,200 shares of its outstanding common stock for $7 per share. On March 1, 2011, Spring Hope sells 300 shares of treasury stock for $11 per share. On May 18, 2011, Spring Hope sells the remaining 900 shares of its treasury stock for $4 per share. Prepare the journal entries to record these transactions: To record repurchase: Debit: Credit: To record sale on March 1 Debit Credit Credit
Answer:
hhhhhhmmmmmm not sure
For which of the countries described is a trade deficit most beneficial? A country with a lower-than-optimal savings rate. A country with a strong preference for imported consumption goods. No country benefits from a trade deficit. A country aggressively purchasing capital goods.
Answer:A country aggressively purchasing capital goods.
Explanation:
Capital goods are used as raw materials for the productions of other goods.
The dominance of a country in purchasing capital goods which leads to deficit in his balance of payment may not connotes negativity for the goods can be used to produce consumer goods for local consumption or export which will on the long run reduce the deficit.
For the quarter ended March 31, 2017, Croix Company accumulates the following sales data for its newest guitar, The Edge: $316,700 budget; $303,100 actual. In the second quarter, budgeted sales were $383,500, and actual sales were $387,400.
a. Prepare a static budget report for the second quarter and for the year to date. CROIX COMPANY Sales Budget Report For the Quarter Ended June 30, 2017.
b. Second Quarter Year to Date Product Line Budget Actual Difference Budget Actual Difference Guitar: The Edge $ $ $ $ $ $ Click if you would like to Show Work for this question: Open Show Work.
Answer:
Explanation:
The preparation of ta static budget report for the second quarter is shown below:
CROIX COMPANY
Sales Budget Report
For the Quarter Ended June 30, 2017
Second Quarter Year to date
Product Line Budget Actual Difference Budget Actual Difference
New Guitar $383,500 $387,400 $3,900 $700,200 $690,500 $9,700
Favorable Unfavorable
The year to date balances are computed below:
For Budget:
= $383,500 + $316,700
= $700,200
For Actual:
= $387,400 + $690,500
= 690,500
To prepare the sales budget report for Croix Company for the second quarter and year to date, compare budgeted and actual sales for The Edge guitar.
Croix Company Sales Budget Report
For the Quarter Ended June 30, 2017:
a. Second QuarterBudget: $383,500; Actual: $387,400b. Year to DateGuitar: The EdgeBudget: $700,200; Actual: $690,500; Difference: $9,700Daily demand for a product is 100 units, with a standard deviation of 25 units. The review period 10 days and the lead time is 6 days. At the time of review there are 50 units in stock. If 98 percent service probability is desired, how many units should be ordered.
Answer:
1755 units are ordered
Explanation:
given data
Daily demand = 100 units
standard deviation = 25 units
review period = 10 days
lead time = 6 days
stock = 50 units
service probability = 98 percent
to find out
how many units should be ordered
solution
order quantity is calculated in fix time period formula is express as
q = [tex]\bar{d}(L+R) + z \sigma_{L+R} - I[/tex] .........................a
here L is lead time and R is review time and σ is standard deviation and I is stock and d is Daily demand
so first we find here standard deviation that is
[tex]\sigma_{L+R} = \sqrt{L} * \sigma[/tex] ...................1
[tex]\sigma_{L+R} = \sqrt{25} * 25[/tex]
[tex]\sigma_{L+R} =100[/tex]
so the value of z is for 98 % service probability is 2.05
so put here value in equation 1
q = 100 × ( 6 +10) +(2.05) × 100 - 50
q = 1755 units
so 1755 units are ordered
To maintain a 98% service probability, we calculate the reorder point using daily demand, service level, lead time, and review period. As 1816.52 units is our reorder point and we currently have 50 units in stock, therefore the company should order approximately 1767 units.
Explanation:The calculation solves for the reorder point using the formula Reorder Point = Daily demand * (Lead time + Review period) + Service Level * Standard Deviation * sqrt(Review period + Lead time). Here, Daily demand is 100 units, Lead time is 6 days, Review period is 10 days, the Standard Deviation is 25 units, and the Service Level for a 98% service probability is approximately 2.06 (from z-value table).
So, Reorder Point = 100 * (6+10) + 2.06* 25 * sqrt(10 + 6) = 1816.52. The number of units that should be re-ordered is thus the reorder point minus the current stock, which results in 1816.52 - 50 = 1766.52. As we cannot order in fractions, we should round it up to 1767 units.
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During the year, Sheldon Company had net credit sales of $40,000. At the end of the year, before adjusting entries, the balance in Accounts Receivable was $11,500 (debit) and the balance in Allowance for Bad Debts was $670 (credit). If the company uses an income statement approach to estimate bad debts at 7%, what is the ending balance in the Allowance for Bad Debts account? O A. $1,475 OB. $3,470 ○ C. $2,130 OD, $2,800
Answer:
B. $3,470
Explanation:
An income statement approach to estimate bad debts involves the estimation of bad debt as a percentage of credit sales.
Given the following information about Sheldon Company;
net credit sales = $40,000
Accounts Receivable = $11,500
Allowance for Bad Debts = $670
Estimate of bad debts = 7% × $40,000
= $2,800
Ending balance in the Allowance for Bad Debts account = $2,800 + $670
= $3,470
You purchased 1,000 shares of the New Fund at a price of $39 per share at the beginning of the year. You paid a front-end load of 3.4%. The securities in which the fund invests increase in value by 8% during the year. The fund's expense ratio is 1.4%. What is your rate of return on the fund if you sell your shares at the end of the year? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Answer:
2.97%
Explanation:
cost of shares = (NAV0 × shares) ÷ (1 - FL)
= ($39 × 1,000) ÷ (1 - 0.034)
= 40,372.67
NAV1 = NAVo (1 + investment return - expense ratio)
= $39 × (1 + 0.08 - 0.014)
= 41.574
value of shares = NAV1 × Shares
= 41.574 × 1,000
= 41,574
Return = (value of shares ÷ cost of shares) - 1
= (41,574 ÷ 40,372.67) - 1
= 2.97%
Write short notes (i.e. 3-5 sentences and use relevant examples and graphs to illustrate these concepts) on the following concepts:
(a) Total Variable Cost
(b) Production Function
(c) Binding Price Ceilings
(d) Producers’ Surplus
(e) Demand Schedule
(f) A movement along a demand curve
(g) Explicit Cost
(h) Intellectual Property Rights
(i) Normal Profit
(j) Relatively Inelastic Supply
(k) Economic Profit
(l) Accounting Profit
Answer: a. This is all the cost associated with production of an item.
B. This is the relationship between physical input and quantities of output q=f(l, k).
C. This the price of a product below the equilibrium price.
D.difference between marginal feel accepted by producer for a product and how much can be received for selling at market price.
E. This is a table showing different quantity demand at different prices.
F. A movement along a demand curve occurs when a change in demand occurs because of change in price.
G. Direct payment injured while running a business that is wages, rent and materials.
H. These are new invention made by people in art, science, literature.
I. This is when total revenue balances with the total cost of carrying out production in a competitive market.
J. This is when a small change in product price cause large change in quantity of production of item.
K. Difference between revenues accrued from sales and cost of all inputs used with opportunity cost.
L. Difference between total monetary revenue and total monetary cost.
Explanation:the graphs attached gives the thorough explanation of a, b, c, d, e
G. Examples of intellectual property are trademarks, copyright and trademark secret.
L. The Answer: a. This is all the cost associated with production of an item.
B.q=f(l, k)
Sunland’s Shop can make 1000 units of a necessary component with the following costs: Direct Materials $21000 Direct Labor 6000 Variable Overhead 3000 Fixed Overhead ? The company can purchase the 1000 units externally for $39000. The unavoidable fixed costs are $2000 if the units are purchased externally. An analysis shows that at this external price, the company is indifferent between making or buying the part. What are the fixed overhead costs of making the component?
Answer:
$9,000
Explanation:
Total variable cost of manufacturing the components are as follows;
Direct materials $21,000
Direct labor 6,000
Variable overhead 3,000
————
Total $30,000
If we purchase the cost is $39,000 and the company is indifferent if they will manufacture or purchase. Therefore;
$39,000 - 30,000 = $9,000 (unavoidable fixed cost)
According to the ________ cheating model, assuming little or no product differentiation among a small number of firms, if one firm decides to cheat on a collusive agreement by reducing its prices, others will as well and, in the long run, firms in this industry will earn no economic profits.
Answer:
Cartel, oligopoly
Explanation:
In this kind of market with little producers and little differenciation among the products there are no incentives for other companies to enter because of the barriers, so it's extremely likely that if one of them reduces their prices this industry can't generate economic profits.
Let X1,X2,...,X144 be independent and identically distributed random variables, each with expected value ?= E[Xi] = 2 and variance \sigma ^2 = Var(Xi) = 4. Find an upper bound for P(X1+X2+···+X144 >144) using the following steps:
(a) Let Z=X1+ X2+...+X144, and use rules of Expectation and Variance to find E[Z]and Var[Z].
(b) Let a be the difference between 144 and E[Z].
(c) Apply Chebychev's Inequality to Z using the number a.
(d) Use the fact that Z is symmetrically distributed about its mean to connect your answer to (c) to the original question. (Hint: Draw a symmetric density curve for Z, and mark the values E[Z], (E[Z]+a) and (E[Z]?a.)
Label regions in the graph with their corresponding probabilities.)
Answer:
The procedures are below
Explanation:
Let X1,X2,...,X144 be independent and identically distributed random variables, each with expected value μ= E[Xi] = 2 and variance \sigma ^2= Var(Xi) = 4.
(a) Let Z=X1+ X2+...+X144, and use rules of Expectation and Variance to find E[Z]and Var[Z].
E(Z) = 144*E(xi) = 144*2 = 288
Var(Z) = 144*Var(Xi) = 144*4 = 576
sd (Z) = sqrt(576) = 24
(b) Let a be the difference between 144 and E[Z].
a = 144 - 288 = -144
(c) Apply Chebychev's Inequality to Z using the number a.
Statement of CHebyshev's inequality :
Let X (integrable) be a random variable with finite expected value μ and finite non-zero variance σ2. Then for any real number k > 0,
P(|X-mu| >=k*sigma) < = 1/k^2
Now we have to use this theorem for Z.
P(|Z-mu| >= k*24) < = 1/k^2
COmpare k*24 with 144
k*24 = 144
k = 144/24 = 6
P(|Z - 288| >= 144) <= 1/6^2
P(|Z - 288| >= 144) <= 0.0278
Assume you plan to travel to the Southern Hemisphere after final exams. You’ve narrowed your choices down to two that you like equally: Colombia or Australia. The total cost of your trip to Australia will be 5,000 Australian Dollars. The total cost of your trip to Colombia will be 5,000,000 Colombian Pesos. Based on the November 1, 2019 exchange rates, which trip is priced less in terms of U.S. Dollars? Show your work.
Answer:
The trip to Colombia is priced less at $1,497.07.
Explanation:
Using the following spot inter-bank market on November 1, 2019,
1 USD = 3339.85 COP (Colombian Pesos) and
1 USD = 1.4455 AUD (Australian Dollars
5,000 Australian Dollars on that day would be equivalent to
= [tex]\frac{5000}{1.4455}[/tex]
= $3,459.01
5,000,000 Colombian Pesos on that day would be equivalent to
= [tex]\frac{5000000}{3339.85}[/tex]
= $1,497.07
Considering the U.S Dollars equivalent of both cost, the trip to Colombia is priced less at $1,497.07.
You are considering an investment in Cruise, Inc. and want to evaluate the firm's free cash flow. From the income statement, you see that Cruise earned an EBIT of $206 million, paid taxes of $47 million, and its depreciation expense was $71 million. Cruise's gross fixed assets increased by $74 million from 2007 to 2008. The firm's current assets decreased by $14 million and spontaneous current liabilities increased by $6.4 million. What is Cruise's operating cash flow, investment in operating capital and free cash flow for 2008, respectively in millions?
Answer:
$230 million , $176.40 million
Explanation:
The operating cash flow is shown below:
= EBIT + Depreciation - Income tax expense
= $206 million +$71 million - $47 million
= $230 million
The computation of the free cash flow is shown below:
= Operating cash flows + Change in Net Working Capital - net capital Expenditure.
= $230 million + 20.4 million - $74 million
= $176.40 million
LA Diversified Inc. recently paid its annual dividend of $3. Dividends have consistently grown at a rate of 3.8%. The stock has a beta of 0.88. The current risk-free rate is 2.4% and the market return is 10.9%. Assuming that CAPM holds, what is the intrinsic value of this stock?
Answer:
$51.22
Explanation:
For computing the intrinsic value, first we have to determine the current year dividend and expected rate of return which is shown below:
The computation of the next year dividend is shown below:
= $3 + $3 × 3.8%
= $3 + 0.114
= $3.114
And, the expected rate of return would be
= Risk-free rate of return + Beta × (Market rate of return - Risk-free rate of return)
= 2.4% + 0.88 × (10.9% - 2.4%)
= 2.4% + 0.88 × 8.5%
= 2.4% + 7.48%
= 9.88%
Now the intrinsic value would be
= Next year dividend ÷ (Required rate of return - growth rate)
= $3.114 ÷ (9.88% - 3.8%)
= $3.114 ÷ 6.08%
= $51.22
The intrinsic value of the stock is $45.45, calculated using the dividend discount model and the Capital Asset Pricing Model.
Explanation:To calculate the intrinsic value of the stock, we can use the Capital Asset Pricing Model (CAPM).
First, we need to calculate the required rate of return using the CAPM formula:
Risk-free rate + Beta * (Market return - Risk-free rate)
Plugging in the given values:
Required rate of return = 2.4% + 0.88 * (10.9% - 2.4%) = 9.1%
To calculate the intrinsic value, we can use the dividend discount model:
Intrinsic value = Dividends per share / (Required rate of return - Dividend growth rate)
Plugging in the given values:
Intrinsic value = $3 / (9.1% - 3.8%) = $45.45
Therefore, the intrinsic value of the stock is $45.45.
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A corporation evaluates all capital investments using a 12% annual rate of return before taxes. The corporation must purchase a new tangent scanner.
The following estimates pertain to the two models available.
Scanx Holo-Scan initial cost ($) 90,000 170,000 life (yr) 5 5 salvage value ($) 15,000 50,000 annual cost ($) 44,000 70,000 generated annual income ($) 100,000 160,000
The present worth of costs and income for the two models indicates that Holo-Scan is worth about how much more than Scanx?
Answer
The answer and procedures of the exercise are attached in a microsoft excel document.
Explanation
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Discount-Mart (see Problem 16.8), as part of its new Lean program, has signed a long-term contract with Specialty Lighting and will place orders electronically for its halogen lamps. Ordering costs will drop to $.50 per order, but Discount Mart also reassessed its carrying costs and raised them to $20 per lamp.
a) What is the new economic order quantity?
b) How many orders will now be placed?
c) What is the total annual cost of managing the inventory with this policy?
Answer:
Please see attachment
Explanation:
Please see attachment
To determine the new economic order quantity, ordering cost per order, and total annual cost, the EOQ formula is applied using the given ordering costs and the increased carrying costs. The new EOQ is derived from these values and the annual demand (assumed known). From there, the annual number of orders and the total annual cost of inventory management can be calculated.
Explanation:To solve for the new economic order quantity (EOQ), we use the EOQ formula: EOQ = √(2DS/H), where D is the annual demand, S is the ordering cost per order, and H is the carrying cost per unit per year. Unfortunately, the annual demand (D) isn't provided in the question, so we will assume that it is given from the previous problem (Problem 16.8). Assuming D is known:
a) The new economic order quantity (EOQ) can be calculated by substituting the provided values of S which is $0.50, and H which is $20 into the formula.
b) The number of orders now placed annually would be D divided by the new EOQ.
c) To find the total annual cost, combine the annual ordering cost and the annual carrying cost. The annual ordering cost can be found by multiplying the ordering cost per order (S) by the number of orders (D/EOQ), while the annual carrying cost is the EOQ divided by 2, multiplied by the carrying cost per lamp (H).
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Standard Olive Company of California has a $1,000 par value convertible bond outstanding with a coupon rate of 8 percent and a maturity date of 20 years. It is rated Aa, and competitive, nonconvertible bonds of the same risk class carry a 18 percent yield. The conversion ratio is 30. Currently the common stock is selling for $30 per share on the New York Stock Exchange.
a. What is the conversion price? (Round your answer to 2 decimal places.)
b. What is the conversion value? (Round your answer to 2 decimal places.)
c. Compute the pure bond value. (Use semiannual analysis.) Use Appendix B and Appendix D as an approximate answer, but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
d. Calculate the crossover point at which the pure bond value equals conversion value. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Answer
The answer and procedures of the exercise are attached in the following images.
Explanation
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Indicate the effect of the transactions listed below on each of the following: working capital, current ratio, debt ratio, net income, and stockholders' equity. Use to indicate an increase, to indicate a decrease, and 0 to indicate no effect. Assume an initial current ratio of more than 1 to 1.
Working Current Debt Net Stockholders' Transaction Capital Ratio Ratio Income Equity
a. A cash dividend is declared and paid. ____ ____ ____ ____ ____
b. Cash is obtained through long-term bank loans. (Do not consider interest.) ____ ____ ____ ____ ____
c. Equipment is purchased with short-term notes. (Do not consider interest.) ____ ____ ____ ____ ____
d. Merchandise is purchased on credit. ____ ____ ____ ____ ____
e. A fixed asset is sold for more than book value. ____ ____ ____ ____ ____
Answer
The answer and procedures of the exercise are attached in a microsoft excel document.
Explanation
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Calculate the value of a preferred stock that pays a dividend of $6.50 per share when the market's required yield on similar shares is 14 percent. The value of the preferred stock is $ nothing per share.
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: