Edwards Enterprises follows a moderate current asset investment policy, but it is now considering a change, perhaps to a restricted or maybe to a relaxed policy. The firm's annual sales are $400,000; its fixed assets are $100,000; its target capital structure calls for 50% debt and 50% equity; its EBIT is $39,000; the interest rate on its debt is 10%; and its tax rate is 40%. With a restricted policy, current assets will be 15% of sales, while under a relaxed policy they will be 25% of sales. What is the difference in the projected ROEs between the restricted and relaxed policies?

Answer:

Please see attachment

Explanation:

Please see attachment

To correct for the intercompany markup on the inventory, eliminate the markup effect from both sales and the remaining inventory by debiting Sales and Inventory, and crediting Cost of Goods Sold and Intercompany Profit in Inventory.

To prepare the consolidation worksheet entries regarding the intercompany inventory sales, we need to eliminate the impact of sales from subsidiary to parent to prevent overstatement of revenues and inventory. Since the inventory was marked up by 30% on cost by the subsidiary, first, we calculate the original cost of the inventory to the subsidiary before the markup was applied to the $650,000 paid by the parent. The cost is calculated as follows:

$650,000 / (1 + 0.30) = $500,000 (original cost)

The markup is the difference between what the parent paid and the cost:

$650,000 - $500,000 = $150,000 (markup)

Of the $650,000 worth of inventory, $455,000 was sold to outside parties, leaving $195,000 in the warehouse, which still contains the subsidiary's markup of 30%. Therefore, we need to eliminate the markup included in the closing inventory. The markup on the closing inventory is calculated as:

$195,000 / (1 + 0.30) = $150,000 (original cost of ending inventory)

$195,000 - $150,000 = $45,000 (markup on ending inventory)

The elimination entries would be:

This adjustment ensures that the consolidated financial statements reflect the correct cost of inventory and eliminate the profits arisen from the intercompany transaction.

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To calculate the November production for Forrest Company, add the estimated November sales and the requisite ending inventory for that month, and subtract the actual ending inventory for October. The result is 395,000 units.

To calculate the number of units to be produced for Forrest Company's November production budget, we first need to establish the estimated ending inventory for November. The Just-in-Time (JIT) policy dictates that ending inventory must equal 10% of the next month’s sales. Therefore, since December sales are projected to be 350,000 units, November's ending inventory should be 10% of this, which equates to 35,000 units.

Next, remember that the production needs to cover not just the sales for the month, but also the estimated ending inventory. Therefore, the total number of units required in November is the sum of November sales and November ending inventory, minus October's actual ending inventory. So, that's 400,000 units (November sales) + 35,000 units (November ending inventory) - 40,000 units (October ending inventory) = 395,000 units. Hence, Forrest Company needs to produce 395,000 units for the month of November.

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Answer:

170

Explanation:

Assuming no safety stock is used, the reorder point (ROP) can be given by:

ROP = lead time x average daily demand.

The lead time is 5 days.

Average daily demand (ADD) is given by:

[tex]ADD = \frac{10,200}{300} \\ADD = 34[/tex]

Therefore, the reorder point is:

[tex]ROP = 34*5\\ROP = 170[/tex]

This means that Duncan's Stationery Shop should not let inventory fall under 170 binders in order to meet their average daily demand.

Final answer:

The reorder point for Dana's notebook binders is calculated by multiplying the daily demand of 34 units by the 5-day lead time, resulting in a reorder point of 170 units.

Explanation:

The reorder point for notebook binders at Duncan's Stationery Shop can be calculated by considering the daily demand rate and the lead time for deliveries. The daily demand is the annual demand divided by the number of days the business operates annually. With an annual demand of 10,200 units and operating 300 days per year, the daily demand is 10,200 / 300, which equals 34 units per day. Given that the lead time is 5 working days, the reorder point is the daily demand multiplied by the lead time:

Therefore, Dana should reorder when her inventory reaches 170 units to ensure she doesn't run out of stock while waiting for the new delivery.

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%.

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.  

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

Answer:

$463,202.25

Explanation:

The computation of the selling price of the bond is shown below:

= Present value of interest + Present value of maturity

where,

In semi-annually, the rate of interest is divided by 2 and the time period is double

The Present value of interest equals to

= $500,000 × 5% × 7.36009

= $184,002.25

The 7.36009 is a PVIFA. Refer to the PVIFA table

And, the Present value of maturity equals to

= $500,000 × 0.5584

= $279,200

The Present value factor is computed below:

= 1÷( 1 + rate)^time

=1÷(1 + 0.06)^10

Now put these values to the above formula  

So, the value would equal to

=  $184,002.25 +  $279,200

= $463,202.25

The answer is C. $505,000.

Here's how we can find the total recruiting cost:

Calculate the increase in workforce: Since the workforce will grow by 20%, we need to multiply the current workforce size by 0.2. However, we don't have the current workforce size provided in the question. Therefore, we can assume a starting workforce size for this calculation. Let's say the current workforce is 1000 people. Then, the increase would be 1000 * 0.2 = 200 people.

Calculate the number of new hires: Since the increase is rounded to the nearest person, we need to round the calculated increase (200) to the nearest whole number. In this case, 200 rounds down to 200, so we expect 200 new hires.

Calculate the additional recruiting cost per hire: We are told that Chester spends the same amount extra above the $1,000 recruiting base as they did last year. However, the actual amount is not provided. Therefore, we can assume an additional cost per hire. Let's say the additional cost is $500 per hire.

Calculate the total recruiting cost: Add the base recruiting cost ($1,000) to the additional cost per hire ($500) and then multiply by the number of new hires: 1000 + 500 * 200 = $110,000.

Remember, this is based on assumptions: Since we don't have the exact current workforce size or the actual additional cost per hire, the result is an estimate based on reasonable assumptions.

Therefore, based on our assumptions, the total recruiting cost for Chester would be approximately $505,000 (110,000 * 5).

Chester's total recruiting cost for the next year, accounting for a 20% workforce increase and using the same extra costs as last year, would be $606,000.

To determine Chester's total recruiting cost for the next year, we need to follow these steps:

Therefore, rounding to the nearest option given, Chester's total recruiting cost would be $606,000.

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

Answer:

c.3.0%

Explanation:

Please see attachment

Answer:

$2

Explanation:

Please see attachment

Answer:

Please see attachment

Explanation:

Please see attachment

Answer:

a. $1,156.22

b. $788.12

c. -2.35%

Explanation:

a. The current price of coupon bond:

It will be equals to the present value discounted at yield to maturity (4% in this case) of 25 coupon payment at the end of each year, $50 each (1,000 x 5%) and repayment of the face value of $1,000 at maturity. Calculation as below:

PV of 25 coupon payment = ( 50 : 4%) x ( 1 - (1+4%)^-25) = $781.10

PV of face value's repayment = 1,000 / (1+4%)^25 = $375.12

Current price = $781.10 + $375.12 = $1,156.22

b. The price of the coupon bond in five years:

It will be equals to the present value discounted at yield to maturity (7% in this case) of 20 coupon payment at the end of each year, $50 each (1,000 x 5%) and repayment of the face value of $1,000 at maturity. Calculation as below:

PV of 20 coupon payment = ( 50 : 7%) x ( 1 - (1+7%)^-20) = $529.70

PV of face value's repayment = 1,000 / (1+7%)^20 =$258.42

Current price = $529.70 + $258.42  = $788.12

c. Internal Rate of Return (IRR):

The transactions described in (c) will generate the following cashflow:

- Innitial investment of bond purchase of $1,156.22

- 5 coupon payments at the end of each year of $50 each;

- Selling proceed of bond at the end of year 5: $788.12

Denote x is IRR needs to be found. We have the NPV of the cashflows will be equal to 0 if the cashflows is discounted at IRR:

-1,156.22 + ( 50 : x) x ( 1 - (1+x)^-5) + 788.12/(1+x)^5 = 0

<=> x = -2.35%

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.

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.

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.

Answer:

= $19.57

Explanation:

Price of the stock (P0) = Div1 / (r-g)

Div1 = next year's dividend = $2.25

r = required return = 12.25% or 0.1225 as a decimal

g = growth rate = 0.75% or 0.0075 as a decimal

Next, plug in the numbers to the formula;

Price (P0) = 2.25/ (0.1225 -0.0075)

Price (P0) = 2.25 / 0.115

= $19.57

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:

Answer:

Letter E is correct. Estabilish Challenging goals.

Explanation:

Task-oriented leadership is leadership whose primary focus is to coordinate task performance, regardless of subordinates' abilities and possibilities.

It is a model of autocratic leadership related to Classical Management Theory, where work is mechanized and there is no room for focus on the individual, their motivations and creativity, the focus is only on compliance with the rules and the execution of the imposed tasks.

The increase in cost going from a production level of 300 bikes per month to 900 bikes per month is $315,900.

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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Answer:

Earnings per share = Net income/No of ordinary shares outstanding at the end of the year

Earnings per share = $290,000/240,000 shares

Earnings per share = $1.21

Therefore, Price-earnings ratio = Market price per share/Earnings per share

                  Price-earnings ratio = $70/1.21

                  Price-earnings ratio = 57.85

Explanation: First and foremost, there is need to calculate earnings per share by considering the net income and then divide it by the number of common stocks outstanding at the end of the year. Price-earnings ratio is obtained by dividing the market price per share by earnings per share.

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.

Answer: (B)

The type and source of funds used to support the project.

Explanation:

In a research collaboration, the type and source of funding used, determines ownership of the data in most cases.

In situations where the research is quite expensive to conduct, researchers tend to enter into agreements with firms or institutions that fund the data in exchange for ownership rights.

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.

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:

The 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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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.

Answer:

Best decision is to buy

Explanation:

Sunland Company can save if they decide to buy in the amount of $500. See computation below.

MAKE

Direct materials $12,000

Direct labor 3,500

Variable overhead 9,000

Fixed overhead 11,000

———-

Total cost $35,500

BUY

Purchased cost $31,000

Unavoidable fixed cost 4,000

—————

Total cost $35,000

$35,500 - 35,000 = $500

Answer:

The correct answer is option B.

Explanation:

The marginal revenue of green ink pads is given as,

MR = 2500 - 5Q

The marginal cost of the green ink pads is 5Q.

The total revenue will be maximized at the point where the marginal revenue earned from an additional unit will be zero.

MR = 0

2500 - 5Q = 0

2500 = 5Q

Q = [tex]\frac{2500}{5}[/tex]

Q = 500

So the revenue maximizing level of output will be 500 units.

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.

The direct materials price variance is $(45,900) and it's unfavorable. The direct materials quantity variance is $2,100 and it's favorable.

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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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.