For which capital component must you make a tax adjustment when calculating a firm’s weighted average cost of capital (WACC)?
a. Debt
b. Equity
c. Preferred stock
Omni Consumer Products Company (OCP) can borrow funds at an interest rate of 12.50% for a period of seven years. Its marginal federal-plus-state tax rate is 30%. OCP’s after-tax cost of debt is (rounded to two decimal places).
At the present time, Omni Consumer Products Company (OCP) has 20-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,382.73 per bond, carry a coupon rate of 13%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 30%. If OCP wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? (Note: Round your YTM rate to two decimal place.)

The Fed can control the price level and nominal GDP by manipulating the money supply, assuming a constant velocity. If the Fed aims for stable price levels, the rise in nominal GDP has to be due to an increased real output. For a 10% inflation, the Fed should increase the money supply by 15%, encompassing both increased output and price levels.

This question applies the formula of the Quantity Theory of Money, which is Money Supply × Velocity = Nominal GDP. This formula is also referencing to the concept that nominal GDP equals the Price Level multiplied by Real GDP.

If the Fed keeps the money supply constant and velocity stays the same, but real output increases (i.e. Real GDP increases by 5%), then the nominal GDP would increase as well. For the price level to remain stable, the increase in nominal GDP must be entirely due to the increase in real output (i.e. the 5% increase in Real GDP), hence no change in the price level.

However, if the Fed wants an inflation rate of 10%, it should increase the money supply by 15% (5% for real GDP growth and 10% for inflation). This is because with the assumed constant velocity, an increase in the money supply would lead to an increase in nominal GDP either through inflation (increase in prices) or through an increase in the output of the economy (Real GDP).

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Answer:

$133.26

Explanation:

Please see attachment

Answer:

True

Explanation:

Allowance is made to be ready and prepared for any kind of loss to be incurred, or expense to be beared. Based on relative information and estimate an approximate amount is provided for.

When an yearly allowance is made for bad debts losses, the purpose is to meet the loss of bad debts due to current year sales on credit.

As the allowance is made yearly, and that represents the system of providing for losses, and to meet the criteria of matching principle to match revenue with its related costs, this is essential.

Thus, the statement is question is True.

Answer:

$65,500

Explanation:

Data provided in the question:

                                              2019       2018

Cash ​                                 $42,500 ​   $42,000

Short-term Investments ​   28,000     ​19,000

Net Accounts Receivable ​102,000    ​98,000

Merchandise Inventory     ​166,000    ​148,000

Total Assets                       ​527,000    ​547,000

Total Current Liabilities ​    273,000 ​   285,000

​Long-term Note Payable   ​64,000      ​60,000

Now,

Working capital = Current assets - Current liabilities

Also,

Current assets (i.e for the year 2019 )

= Cash + Short-term Investments + Net Accounts Receivable + Merchandise Inventory

= $42,500 + $28,000 + $102,000 + $166,000

= $338,500

and,

Current liabilities =  $273,000

Therefore,

Working capital for 2019 = $338,500 - $273,000

= $65,500

Answer:

D. $45 of W-2 income.

Explanation:

Please see attachment.

Answer:

C. Distributing paychecks and pay stubs for retail employees

Explanation:

Distribution centers are basically the alternative for warehouses in case of emergency, that is for temporary purposes. It helps in meeting the need in case of emergency that might occur in case of any storage facility not available.

It provides for basic management of inventory and stock at the time of procuring it, storing it, and then deploying it as and when needed.

It nowhere involves any step where the distribution center is responsible for any kind of payments through paychecks to any vendor supplying the goods, or that providing transportation of goods.

Answer:

New Break Even volume  74.42 or 74 units

Explanation:

Assuming the following given data:

A . Fixed Cost  $893

B . Sale price per bottle  $28

C = $ 14 + 2= $16   ----> New Variable cost per bottle

D = B - C  -----> New unit contribution margin  $12

E = A/D  -------> New Break Even volume  74.42 or 74 units

Answer: Dysfunctional conflict

Explanation:

This is a team conflicts that have negative consequences on the firm.

The conflict is not multicultural because their cultures doe have an impact on the conflict results, it's equally not functional because it's not bringing in a positive results, Both gender and intergroup do not also have an effect on the conflict.

The conflict within Joe Tanney's team, which arises from differing technology preferences and their impact on work processes, represents functional conflict. This type of conflict is associated with constructive disagreements that can lead to improved team performance and organizational efficiency when managed appropriately.

The type of conflict exhibited by members of Joe's team is known as functional conflict. Functional conflict is a healthy, constructive disagreement that occurs among a group of people such as a work team. It stems from differing ideas and opinions regarding task-related issues and can often result in improvements to processes or problem-solving outcomes. Given that Joe Tanney's team is tasked with streamlining an antiquated process and the conflict arises from different preferences for technologies and their effects on collaboration, cost, and time management, it fits within the definition of functional conflict. This type of conflict, as opposed to being destructive, can enhance the effectiveness of the team when managed properly and lead to a more efficient organizational process.

Answer:

15%

Explanation:

Use Dividend discount model to find the required return of equity  or cost of equity capital;

Return r formula;

[tex]=\frac{D1}{P0} +g[/tex]

whereby; D1 = Next year's dividend = $2.10

P0 = Current price = $17.50

Growth rate; g = 3% or 0.03 as a decimal

Next, plug in the numbers to the formula above to calculate the cost of equity;

r [tex]=\frac{2.10}{17.50} +0.03\\ \\ =0.12+ 0.03[/tex]

r = 0.15 or 15%

Therefore, cost of equity is 15%

The cost of equity capital for Gangland Water Guns, Inc. is 15%, calculated using the Gordon Growth Model (GGM) with a dividend of $2.10, a growth rate of 3%, and a current stock price of $17.50.

The cost of equity capital for Gangland Water Guns, Inc. can be calculated using the Gordon Growth Model (GGM), which determines the present value of an infinite series of dividends that grow at a constant rate. The formula for the GGM is P = D1 / (k - g), where P is the current stock price, D1 is the dividend in one year, k is the cost of equity, and g is the growth rate of dividends. In this scenario, we have a dividend (D1) of $2.10, a growth rate (g) of 3 percent, and a current stock price (P) of $17.50. To find the cost of equity (k), we rearrange the formula to k = (D1 / P) + g. Plugging in the values, k = ($2.10 / $17.50) + 0.03. This yields a cost of equity capital of 15%.

Answer:

A) the risk that oil prices rise, increasing production costs 

Explanation:

A diversifiable risk also known as unsystemic risk is risk that is specific only to a company. It can be mitigated against by diversifying a portfolio.

The risk that the CEO is killed in a plane crash , the risk of a key employee being hired away by a competitor and the risk of a product liability lawsuit are all specific to the company and are all diversifiable risks.

The risk that oil prices rise, increasing production costs is non diversificable risk.

Non diversificable risk is risk that can affect the whole industry or economy. Non diversificable risk cannot be avoided by diversifying the portfolio.

The risk that oil prices rise, increasing production costs isn't company specific, it would affect the whole industry or economy.

Answer:

A)

Explanation:

Answer:

A. The planning and building of the libraries represent an impact lag of this policy

Explanation:

Impact lag, is the time it takes for monetary and fiscal policies to smooth out the economic cycle or respond to an adverse economic event, to affect the economy once they have been implemented.

Recognition lag is the time lag between when an actual economic shock such as sudden boom or bust and when it is recognized by economists, central bankers and the government.

Answer:

d. independent samples t-test for means.

Explanation:

The technique independent sample t-test for means is an statistical tool used for calculating a difference between two mean values calculated.

As in the given instance there are two types of sample population which represents different samples.

Thus, they shall be compared effectively with this tool so that the more favorable option shall be chosen properly.

The independent t-test sample mean is helpful in this instance.

Answer:

10.45 %

Explanation:

Please see attachment

Answer:

Assets increase by $10,000

Total stockholders' equity increases by $10,000

Explanation:

Since in the question, it is given that, the purchase value of equipment is $100,000 and the exchanged value is $110,000

So, the difference of $10,000 ($110,000 - $100,000) would reflect that the assets would increase by $10,000 and the total stockholders' equity is also increased by $10,000

The exchange value is a combination of $70,000 in trade allowance and $40,000 was paid in cash

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

Sheridan Company’s standard labor cost per unit of output is $33.00 (3.00 hours x $11.00 per hour). During August, the company incurs 2,970 hours of direct labor at an hourly cost of $12.10 per hour in making 1,100 units of finished product.

Direct labor efficiency variance= (SQ - AQ)*standard rate

Direct labor efficiency variance= (3,300hs - 2,970hs)*11= $3,630 favorable

Direct labor rate variance= (Standard Rate - Actual Rate)*Actual Quantity

Direct labor rate variance= (11 - 12.1)*2,970= $3,267 unfavorable

Millie's taxable income for 2017 is $138,000 leading to taxes due of $48,300. The changes in deferred tax amounts result in a deferred tax asset of $140,000. The total tax expense for 2017 is $188,300.

To determine Millie's taxable income for 2017, we start with the pre-tax financial income of $400,000. We then subtract the contingent liability of $900,000, recognized for financial reporting purposes, but deductible for tax purposes. Likewise, we need to subtract the $400,000 of the gross profit, which is taxable as an installment sale in 2018. Conversely, the $38,000 interest earned on the State of Montana bonds are not taxable and, thus, added back to our total. Therefore, Millie's taxable income for 2017 is $138,000.

To calculate the taxes due, we simply multiply by the tax rate of 35%, giving a result of $48,300.

The changes in deferred tax amounts are the tax effects of differences between financial income and taxable income. For Millie, this is the tax effect of the $400,000 gross profit, yielding a deferred tax asset of $140,000 ($400,000 * 35%).

Finally, the tax expense for Millie for 2017 is the sum of current tax expense ($48,300) and deferred tax expense (increase in deferred tax assets of $140,000), hence, $188,300.

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Answer:

b. 924.70

Explanation:

First it's needed to calculate the YTM of the current bonds, issued 2 years ago, if we applied the Present Value formula to the Principal and Coupons we get the YTM to the current bonds.

With a market price of $950, we can find the YTM of these bonds today, when there are 13 years left until the expiration date, the YTM is 8,66%.

If we apply this 8,66% rate to the new bond issue, we can obtain the price that could be accepted for the market.

Bond Value  

Principal Present Value  =  F /  (1 + r)^t  

Coupon Present Value   =  C x [1 - 1/(1 +r)^t] / r  

YTM of the Bond that was issued 2 years ago.  

The price of this bond it's $340 + $610 = $950  

Present Value of Bonds $340 = $1,000/(1+0,0866)^13    

Present Value of Coupons $610 =  $80 (Coupon) x 7,63  

7,63 =   [1 - 1/(1+0,0866)^13 ]/ 0,0866  

The bond price to be issued:    

The price of this bond it's $436 + $489 = $924,70    

Present Value of Bonds $436 = $1,000/(1+0,0866)^10      

Present Value of Coupons $489 =  $75 (Coupon) x 6,52    

6,52 =   [1 - 1/(1+0,0866)^10 ]/ 0,0866    

Answer

The answer and procedures of the exercise are attached in the following image.

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.  

The secretary has an average utilization rate of 80%. The probability of more than four pages waiting or being processed can't be accurately provided without additional data. Similarly, the average number of pages waiting to be processed can't be determined without additional data.

The subject of this question is Business, specifically related to operations management, and appropriate for a College level course. The questions focus on determining the secretary's average utilization rate, the probability of a certain number of pages being processed, and the average number of pages waiting to be processed.

a) The average utilization rate of the secretary can be calculated by dividing the average rate at which the work (requests for document processing) arrives by the rate at which the work is done. In this case, the rate of arrival is 8 pages per hour and the rate of work done is 10 pages per hour. So, the utilization rate is 8/10 or 0.8, which is 80%.

b) The probability that more than four pages are waiting or being word processed is more complex to calculate and generally requires the use of a Poisson distribution formula or tables. As the question doesn't provide enough information, this aspect can't be accurately answered.

c) The average number of pages waiting to be word processed is calculated by the formula (λ^2)/(μ*(μ-λ)), where λ is the arrival rate and μ is the service rate. However, without additional data, a specific number cannot be given.

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Answer:

a-1.

Steinberg's debt:

Steinberg's equity:

a-2.

Dietrich's debt:

Dietrich's equity:

b. Disagree as the values of the two companies are the same ( please see below Explanation for further clarification)

Explanation:

It is clear to determine that the value of debt and equity of the two firms is the present value of cash flow received in 1 year, discounted at 12%.

a-1.

In one year:

- Debt holder of Steinberg will receive $910,000 regardless of its EBIT. -=> Thus, Steinberg's debt present value = 910,000 / 1.12 = $812,500

- Given the probability of expansion and recession, Steinberg's shareholder will receive the amount equal EBIT -  amount paid to its debt holders: 0.8 x (3,700,000 - 910,000) + 0.2 x (1,100,000-910,000) = $2,270,000.

=> Thus, Steinberg's equity present value = $2,270,000/ 1.12 = $2,026,786

=> Value of Steinberg = D+E = 812,500 + 2,026,786 = $2,839,286 ( note: no tax applied)

a-2.

In one year:

- Debt holder of Dietrich will receive $1,200,000 when the business expands while only $1,100,000 when the business goes into recession (i.e business loss is 100,000):  0.8 x 1,200,000 + 0.2 x 1,100,000 = $1,180,000

=> Thus, Dietrich's debt present value = 1,180,000 / 1.12 = $1,053,571

- Given the probability of expansion and recession, Dietrich's shareholder will receive the amount equal EBIT -  amount paid to its debt holders: 0.8 x (3,700,000 - 1,200,000) + 0.2 x (1,100,000-1,100,000) = $2,000,000.

=> Thus, Dietrich's equity present value = 2,000,000 / 1.12 = $1,785,714

=> Value of Steinberg = D+E =$1,053,571+$1,785,714  = $2,839,286( note: no tax applied)

a-3.

From the calculation, it is clear that the values of the two companies are the same.

Answer:

(D) I is true, and II is false

Explanation:

Increasing returns to scale means that during a production process, as input increases, output increases but by a larger proportion.

Economies of scale refers to the decrease in average cost per unit as a firm increases its output.

The increase in output brought about by increasing returns to scale causes cost per unit to decrease (which is economies of scale).

Therefore increasing returns to scale causes economies of scale.

Answer:

Explanation:

The journal entry is shown below:

Cash A/c Dr $21,000   (3,000 shares × $7)

      To Common stock A/c $21,000

(Being the  issuance of the shares are recorded)

For recording this transaction, we debited the cash account and credited the common stock account so that the correct posting can be done for $21,000 by considering the number of share and price per share

Answer:

Explanation:

The preparation of the sales budget for 4 quarters are shown below:

Particulars  Quarter 1     Quarter 2      Quarter 3      Quarter 4      Total

Estimated

Unit sales    10,500           12,400              14,100         18,800           55,800

Unit sales

price             $85                $85                   $85             $85              $85  

Total sales   $892,500     $1,054,000      1,198,500    1,598,00  $4,743,000

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:

Please see attachment

Explanation:

Please see attachment .

Please note that B= Bruno

Answer:

Annual depreciation= $16,000

Explanation:

Giving the following information:

A lumber company purchases and installs a wood chipper for $280,000. The chipper’s useful life is 15 years. The estimated salvage value at the end of 15 years is $40,000.

Annual depreciation= (original cost - salvage value)/estimated life (years)

Annual depreciation= (280,000 - 40,000)/15= $16,000

Answer:

Preferred stock can be callable

Explanation:

The preferred stock can be purchase by the firm thus, callable.

Preferred stock generally has a stated liquidation value of $1,000 per share

FALSE: There is no fixed value for the preferred stock

Dividend payments to preferred shareholders are tax-deductible expenses for the issuing firm

FALSE: the dividends aren't deductible

Preferred dividends are generally variable in amount

FALSE: preferred stock has a fixed percentage return that can be accumulative.

Preferred shareholders receive preferential treatment over bondholders in a liquidation.

FALSE: they don't

Answer:

The net change in cash during the period is $18,000

Explanation:

The net change in cash during the period is computed as:

Net change in cash during the period = Net Cash provided by the operating activities - Net Cash used by the investing activities + Net Cash provided by the financing activities

where

Net Cash provided by the operating activities is $45,000

Net Cash used by the investing activities is ($29,000)

Net Cash provided by the financing activities is $2,000

Putting the values above:

= $45,000 - $29,000 + $2,000

= $16,000 + $2,000

= $18,000

The net change in cash for Delaware Coatings Company in the year 2019 is calculated by summing the cash flows from operating, investing, and financing activities, resulting in a net increase of $18,000.

The student is asking about calculating the net change in cash during the year for the Delaware Coatings Company when using the indirect method for the statement of cash flows. To find the net change in cash, you add up the net cash provided by (or used in) operating activities, investing activities, and financing activities for the period.

In this case, you have the following:
Net cash provided by operating activities: $45,000
Net cash used for investing activities: ($29,000)
Net cash provided by financing activities: $2,000

By adding these figures together ($45,000 - $29,000 + $2,000), the net change in cash during the year 2019 for the company is $18,000.

Answer

The answer and procedures of the exercise are attached in the following image.

Explanation  

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Without additional data, it's not possible to calculate Lumpkin Company's cost of goods sold for Q1. However, given the company's policy and the provided cost of goods sold for April, their ending inventory at the end of Q1 would be $4,000.

To find the amount of cost of goods sold that the Lumpkin Company will report on its first quarter pro forma income statement, we would need the company's sales forecast and direct cost of the goods for the first quarter. However, as you only provided April's budgeted cost of goods sold ($40,000), we can't calculate the first quarter cost of goods sold without additional information.

Regarding the ending inventory, Lumpkin's policy is to maintain an ending inventory balance equal to 10 percent of the following month's cost of goods sold. Again, to compute the ending inventory for the end of Q1, we would need the company's projected cost of goods sold for April (the month following Q1) which you've mentioned as $40,000. Thus, using this, Lumpkin's ending inventory for Q1 would be $40,000 * 10% = $4,000.

Remember, the above solution is based on the information available and any additional data may affect the result.

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