Answer:
The answer is given below;
Explanation:
Plan II EPS=Net Income/Weighted Average shares outstanding
=$450,000-(2,210,000*7%)/120,000=$2.46
Plan I =$450,000/170,000=$2.64
Earning per share for plan A and plan B is $2.65 and $2.46
Computation table:
Plan A(Equity) Plan B(Levered plan)
EBIT $450,000 $450,000
Less: Interest $154,700
Net income $450,000 $295,300
No. of out share 170,000 120,000
Earning per share $2.65 $2.46
Find out more information about 'Earning per share'.
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"A soybean farmer sells soybeans in a perfectly competitive market and hires labor in a perfectly competitive market. The market price of soybeans is $6 a bushel, the wage rate is $30, the farmer employs eight workers and the marginal product of the eighth worker is 4 bushels. What would you advise this farmer to do?"
Answer:
Reduce employment because the wage paid is more than the marginal revenue product.
Explanation:
If the wage rate is $30, then the marginal cost for the eight worker is $30.
The marginal revenue product of the eight worker is given by the marginal product multiplied by the price per bushel:
[tex]MR = 4\ bushels*\frac{\$6}{bushel}\\MR=\$24[/tex]
Since the marginal revenue product of the eight worker is less than the marginal cost (MR < MC), the farmer should reduce employment.
To advise the soybean farmer, we need to determine the value of the marginal product (VMP) of labor.
The farmer should reduce the number of workers employed because the value of the marginal product of the eighth worker ($24) is less than the wage rate ($30).
The VMP is calculated by multiplying the marginal product of labor by the market price of the output. In this case, the marginal product of the eighth worker is 4 bushels and the market price is $6 per bushel.
VMP = Marginal Product of Labor x Market Price
VMP = 4 bushels x $6/bushel
VMP = $24
The wage rate is $30, meaning the cost of hiring the eighth worker exceeds the revenue they generate ($24). Therefore, the farmer should reduce the number of workers employed to avoid a loss. A profit-maximizing farmer should hire workers up to the point where the VMP equals the wage rate.
You are to make monthly deposits of $700 into a retirement account that pays an APR of 10.2 percent compounded monthly. If your first deposit will be made one month from now, how large will your retirement account be in 32 years
Answer:
$20,41,995.21
Explanation:
The calculation of retirement account value is given below:-
Monthly deposit 700 pmt
Interest rate 0.102
years 32
Compounding per year 12
Monthly interest rate 0.0085 rate
Number of periods 384 nper
The formula is shown below
=FV(rate,nper,pmt,pv)
After applying the formula the Retirement account value is $20,41,995.21
and for better calculation please find the attachment.
Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $1 coming 3 years from today. The dividend should grow rapidly at a rate of 40% per year during Years 4 and 5; but after Year 5, growth should be a constant 5% per year. If the required return on Computech is 10%, what is the value of the stock today
Answer:
The value of the stock today is $28.48
Explanation:
To calculate the value of the stock today, we will use the Dividend discount model which bases the value of a stock based on the present value of the expected future dividends from the stock. The value of the stock today using this model should be,
P0 = 1 / (1+0.1)^3 + 1 * (1+0.4) / (1+0.1)^4 + 1 * (1+0.4)^2 / (1+0.1)^5 +
[ (1 * (1+0.4)^2 * (1+0.05) / (0.10 - 0.05)) / (1+0.1)^5 ]
P0 = $28.48
The value of Computech's stock today, considering the expected future dividends and growth rates, is $28.49.
The question asks for the value of Computech Corporation's stock today, given its expected future dividends and growth rates. To find this, we need to calculate the present value of all future dividends.
The problem specifies:
No dividends for the first 2 years.A dividend of $1 in Year 3.40% growth for Years 4 and 5.5% constant growth thereafter.First, calculate the dividends for the next few years:
Year 3: $1Year 4: $1 * 1.4 = $1.40Year 5: $1.40 * 1.4 = $1.96Year 6: $1.96 * 1.05 = $2.06 (and this grows at 5% annually thereafter)For the dividend growth from Year 6 and beyond, apply the Gordon Growth Model:
The formula for the present value of perpetuity growing at a constant rate (g) is: PV = D / (r - g),
where D is the dividend at the first year of constant growth, r is the required rate of return, and g is the growth rate.
PV of dividends from Year 6 onwards = $2.06 / (0.1 - 0.05) = $41.20
However, this must be discounted back to present value as of Year 5: $41.20 / (1.1)^5 = $25.58.
The present value of all dividends is then:
PV of dividends in Years 3, 4, 5 = $0.75 + $0.95 + $1.21 = $2.91PV of dividends from Year 6 onwards = $25.58Total present value = $2.91 + $25.58 = $28.49
Thus, the value of Computech's stock today is $28.49.
Olympic Sports has two issues of debt outstanding. One is a 8% coupon bond with a face value of $36 million, a maturity of 15 years, and a yield to maturity of 9%. The coupons are paid annually. The other bond issue has a maturity of 20 years, with coupons also paid annually, and a coupon rate of 9%. The face value of the issue is $41 million, and the issue sells for 95% of par value. The firm's tax rate is 40%.a. What is the before-tax cost of debt for Olympic? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Before-tax cost of debt %b. What is Olympic's after-tax cost of debt? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) After-tax cost of debt %
Answer:
Before-tax cost of debt is 17.00%
After-tax cost of debt is 10.20%
Explanation:
Before-tax cost of debt
Bond 1 = 8.00%
Bond 2= 9.00%
Total =17.00%
After-tax cost of debt
Bond 1 = 8.00%×(1-0.40) = 4.80%
Bond 2= 9.00%×(1-0.40) = 5.40%
Total = 10.20%
A bottling operation has a mean fill level of 10.01 ounces with a standard deviation of 0.25 ounces. Random samples of 20 bottles are periodically taken to monitor the process average and the process mean is tracked using a control chart. Determine the upper and lower control limits for the chart that will include roughly 92% of the sample means when the process is in control.
Answer:
The upper limit is 10.1
The lower limit is 9.91
Explanation:
Given that:
The mean fill level (μ) = 10.01 ounces,
Standard deviation (σ) = 0.25 ounces
Number of sample bottles (n) = 20
The limits of the sample mean = 92% = 0.92
α = 1 - 0.92 = 0.08
[tex]\frac{\alpha}{2}=0.04[/tex]
The z value of 0.04 is the same as the z value of 0.46 (0.5 - 0.04). From the probability distribution table:
[tex]z_{\frac{\alpha}{2}}=z_{0.04} = 1.75[/tex]
The margin of error (e) is given by:
[tex]e=z_{0.04}\frac{\sigma}{\sqrt{n} }=1.75*\frac{0.25}{\sqrt{20} } =0.1[/tex]
The upper limit = μ + e = 10.01 + 0.1= 10.1
The lower limit = 10.01 - 0.1 = 9.91
Case Study Three: Jeb and Josh are lifelong friends. Jeb is a wealthy wind-power tycoon, and Josh is an active outdoor enthusiast. They have decided to open a sporting goods store, Arcadia Sports, using Jeb’s considerable financial resources and Josh’s extensive knowledge of all things outdoors. In addition to selling sporting goods, the store will provide whitewater rafting, rock-climbing, and camping excursions. Jeb will not participate in the day-to-day operations of the store or in the excursions. Both Jeb and Josh have agreed to split the profits down the middle. On the first whitewater rafting excursion, a customer named Jane falls off the raft and suffers a severe concussion and permanent damage to her spine. Meanwhile, Jeb’s wind farms are shut down by government regulators, and he goes bankrupt, leaving extensive personal creditors looking to collect. Specifically, the following critical element must be addressed: Identify the main types of business entities and discuss the advantages and disadvantages of each
Answer:
1. Proprietorship-
Advantages
1. Easy to create and maintain
2. Business and owner are the same entity.
3. No double taxation- Business profits are included in proprietor's personal income taxes
Disadvantages
1. Owner is peronally liable for debts and other liabilities of the business.
2. Difficult to raise capital due to single ownership.
General Partnership
Advantages
1. Easy to create and maintain
2. No double taxation.
Disadvantages
1. All owners are jointly and personally liable for debts and other liabilities of the business.
2. A partner cannot transfer his shares without unanimous consent of all partners.
Limited Partnership
Advantages
1. Limited partners enjoy limited liability of the business.
2. Limitied partners can leave without dissolving partnership.
Disadvantages
1. Expensive to create then a general partnership.
2. General partners are jointly and personally liable for debts and other liabilities of the business.
Corporation
Advantages
1. Limited liaiblity of the owners of busines.
2. Easy to attract money.
Disadvantages
1. More expensive to create and maintain.
2. Complicated paperwork to be filed.
3. Double taxation
The speed of your automobile has a huge effect on fuel consumption. Traveling at 65 miles per hour (mph) instead of 55 mph can consume almost 20% more fuel. As a general rule, for every mile per hour over 55, you lose 2% in fuel economy. For example, if your automobile gets 30 miles per gallon at 55 mph, the fuel consumption is 21 miles per gallon at 70 mph. If you take a 400-mile trip and your average speed is 80 mph rather the posted speed limit of 70 mph, what is the extra cost of fuel if gasoline costs $ 3.00 per gallon?
Answer:
The extra cost of gasoline is $16.65
Explanation:
Let’s write the complete question;
The speed of your automobile has a huge effect on fuel consumption. Traveling at 65 miles per hour (mph) instead of 55 mph can consume almost 20% more fuel. As a general rule, for every mile per hour over 55, you lose 2% in fuel economy. For example, if your automobile gets 30 miles per gallon at 55 mph, the fuel consumption is 21 miles per gallon at 70 mph.
If you take a 400-mile trip and your average speed is 80 mph rather the posted speed limit of 70 mph, what is the extra cost of fuel if gasoline costs $ 3.00 per gallon? your car gets 30 miles per gallon (mpg) at 60 mph.
solution;
In this question, we are to calculate the extra cost of gasoline resulting from exceeding the supposed speed limit on a trip by a car given the cost of gasoline.
We proceed as follows;
Driving the speed limit:
Speed: 70 miles per hour (mph)
Fuel efficiency: 30 * [1-(70-60)*(2%)]= 30* 0.8 =24 mpg
Fuel amout for you 400-mile trip: 400/24= 16.67 gallon
Cost of fuel: 16.67 * $3= $50.01
Cost of time: 400/70 = 5.71 hrs
Exceeding the speed limit:
Speed: 80 miles per hour (mph)
Fuel efficiency: 30 *[1- (80-60)*(2%) ]= 30* 0.6 =18 mpg
Fuel amout for you 400-mile trip: 400/18= 22.22 gallon
Cost of fuel: 22.22 * $3= $66.66
Now to find the extra cost of fuel, we simply subtract the cost of fuel while exceeding the speed limit from the cost of fuel while driving within the speed limit.
That would be $66.66 - $50.01 = $16.65
Factory Overhead Cost Budget Sweet Tooth Candy Company budgeted the following costs for anticipated production for August: Advertising expenses $232,000 Manufacturing supplies 14,000 Power and light 48,000 Sales commissions 298,000 Factory insurance 30,000 Production supervisor wages 135,000 Production control wages 32,000 Executive officer salaries 310,000 Materials management wages 39,000 Factory depreciation 22,000 Prepare a factory overhead cost budget, separating variable and fixed costs. Assume that factory insurance and depreciation are the only fixed factory costs. Sweet Tooth Candy Company Factory Overhead Cost Budget For the Month Ending August 31 Variable factory overhead costs: $ Total variable factory overhead costs $ Fixed factory overhead costs: $ Total fixed factory overhead costs Total factory overhead costs
Answer:
Total factory overhead costs $ 281,000
Variable factory overhead costs: $ 229,000
Fixed factory overhead costs: $ 52,000
Explanation:
Sweet Tooth Candy Company
Factory Overhead Cost Budget
For the Month Ending August 31
Variable factory overhead costs: $ 229,000
Manufacturing supplies 14,000
Power and light 48,000
Production supervisor wages 135,000
Production control wages 32,000
Total variable factory overhead costs $ 229,000
Fixed factory overhead costs: $ 52,000
Factory insurance 30,000
Factory depreciation 22,000
Total fixed factory overhead costs $ 52,000
Total factory overhead costs $ 281,000
1)The following are not included in the factory Overheads as they are related to the Administration and Sales Department.
Advertising expenses $232,000
Sales commissions 298,000
Executive officer salaries 310,000
2) The following is Direct labor and is not included in the factory overhead costs.
Materials management wages 39,000
Strike offers to sell Bailey one thousand shirts for a stated price. The offer declares that shipment will be made by Dependable Truck Line. Bailey replies, "I accept your offer for one thousand shirts at the price quoted. Delivery to be by Yellow Express Truck Line." Both Strike and Bailey are merchants. Three weeks later, Strike ships the shirts by Dependable Truck Line, and Bailey refuses to accept delivery. Strike sues for breach of contract. Bailey claims that there never was a contract because his reply, which included a modification of carriers, did not constitute an acceptance. Bailey further claims that even if there had been a contract, Strike would have been in breach because Strike shipped the shirts by Dependable, contrary to the contract terms. Discuss fully Bailey’s claims. Miller, Roger LeRoy. Cengage Advantage Books: Business Law Today, The Essentials: Text and Summarized Cases (p. 323). Cengage Learning. Kindle Edition.
Answer: A contractual obligation om shipment is not enforceable.
Explanation: A contract is a legally binding agreement. For a contract to be legally binding it needs to have an offer and acceptance. Strike and Bailey are merchants who both agree on the stated quantity and price of shirts to be shipped. However, the declaration or condition of shipment is neither agreed nor accepted by both Strike and Bailey as Strike offered to deliver using 'Dependable Truck Line' while Bailey accepted delivery by 'Yellow Express Truck Line' that was never offered.
For a contract to exist, a complete offer and acceptance must exist on the full terms and conditions of te shipment in this case. However, there is no agreement by either party on the shipment therefore contractual obligation on shipment is not enforceable.
Leh Inc. recently borrowed $275,000 from its bank at a simple interest rate of 9 percent. The loan is for nine months and, according to the loan agreement, the interest should be added to the amount borrowed and the total amount to be repaid in monthly installments. Each monthly payment toward the loan amounts to:
Answer:
Monthly payment =$32,618.05
Explanation:
To arrive at the monthly installment, we would calculate the total interest due on the loan for nine months, add it to the principal and then divided the sum by 9 months
The monthly installment
= (Principal + total interest for 9 months)/ number of months
Interest for 9 months
= 9%× 9/12 × 275,000
= $18,562.5
Monthly installment
= (275,000 + $18,562.5)/9
=32,618.05 per month
This year, the Tastee Partnership reported income before guaranteed payments of $252,500. Stella owns a 85% profits interest and works 1,860 hours per year in the business. Euclid owns a 15% profits interest (with a basis of $30,000 at the beginning of the tax year) and performs no services for the partnership during the year. For services performed during the year, Stella receives a "salary" of $12,625 per month. Euclid withdrew $25,250 from the partnership during the year as a normal distribution of cash from Tastee (i.e., not for services). If required, round your answers to the nearest dollar. a. What is the amount of guaranteed payments made by the partnership this year
Answer:
The correct answer is $151,500.
Explanation:
According to the scenario, the computation of the given data are as follows:
We can calculate the amount of guaranteed payments made by the partnership this year by using following formula:
As in Guaranteed payment we can calculate the salaries Paid during the year.
So, Amount of guaranteed payment = Salaries paid to Stella for year
Where, Salary for Stella = $12,625 per month
So, Amount of guaranteed payment = $12,625 × 12
= $151,500
Marc is a university student seeking a degree in international business. He has received a scholarship for $6,000. This income was used as follows: Tuition and fees $2,400 Room and board $3,600 How much of the $6,000 is included in gross income
Answer and Explanation:
It has been given that Marc receives a scholarship of $6,000 out of which he pays a tuition fee of $2,400 and $3600 for his room rent and board expenses.
The value of the tuition fee will be deducted and $3,600 will be considered as Marc's gross income.
Gross income for Marc = $6,000 - $2,400
Gross income for Marc = $3,600
Estes Park, Inc., has declared a dividend of $6.80 per share. Suppose capital gains are not taxed, but dividends are taxed at 15 percent. New IRS regulations require that taxes be withheld at the time the dividend is paid. The company's stock sells for $119 per share, and the stock is about to go ex-dividend. What do you think the ex-dividend price will be?
Answer:
$113.22
Explanation:
First, we need to find the after-tax dividend;
After-tax Dividend = Dividend x (1 - t) = $6.80 x (1 - 0.15) = $5.78
Ex-Dividend Price = Stock Price - After-tax Dividend
= $119 - $5.78 = $113.22
On October 5, Metlock Company buys merchandise on account from Ivanhoe Company. The selling price of the goods is $5,240, and the cost to Ivanhoe Company is $3,180. On October 8, Metlock returned defective goods with a selling price of $640 and a scrap value of $310. Record the transactions of Metlock Company, assuming a perpetual approach.
Answer:
The answer is given below;
Explanation:
Inventory Dr.$5,240
Accounts Payable-Ivanhole Cr.$5,240
Accounts Payable-Ivanhole Dr.$640
Inventory Cr.$640
The scrap value given is irrelevant as the metlock will set off the account payable of ivanhole as the goods are returned to him.
Holt Company issues 10,000 shares of restricted stock to its new CEO, on January 1, 2020. The stock has a fair value of $260,000 on this date. The service period related to this restricted stock is 5 years. Vesting occurs if the CEO stays with the company for 5 years. The par value of the stock is $1. At December 31, 2021, the fair value of the stock is $180,000.
(a) Prepare the journal entries to record the restricted stock on January 1, 2020 (the date of grant) and December 31, 2021.
(b) On February 22, 2022, the CEO leaves the company. Prepare the journal entry (if any) to account for this forfeiture.
Answer:
Jan-01
Dr Unearned compensation $260,000
Cr common stock $10,000
Cr Paid in capital in excess of par $250,000
Dec-31
Dr Compensation expense $52,000
Cr unearned compensation $52,000
(b)
Feb-22
Dr Common stock $10,000
Dr Paid in capital in excess of par $250,000
Cr Compensation expense $104,000
Cr Unearned compensation $156,000
Explanation:
Holt Company
(a)
Jan-01
Dr Unearned compensation $260,000
Cr common stock $10,000
($10,000*1)
Cr Paid in capital in excess of par $250,000
Dec-31
Dr Compensation expense $52,000
Cr unearned compensation $52,000
($260,000/5)
(b)
Feb-22
Dr Common stock $10,000
Dr Paid in capital in excess of par $250,000
Cr Compensation expense $104,000
Cr Unearned compensation $156,000
($52,000*3)
Bonita Industries was organized on January 1, 2021. During its first year, the corporation issued 2,100 shares of $50 par value preferred stock and 125,000 shares of $10 par value common stock. At December 31, the company declared the following cash dividends: 2021, $6,000; 2022, $13,900; and 2023, $27,000.
a. Show the allocation of dividends to each class of stock, assuming the preferred stock dividend is 7% and noncumulative.
b. Show the allocation of dividends to each class of stock, assuming the preferred stock dividend is 8% and cumulative.
c. Journalize the declaration of the cash dividend at December 31, 2023, under part (b). (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Answer:
a. The allocation of dividends to each class of stock assuming 7% and cumulative is shown below:-
b. The allocation of dividends to each class of stock assuming 8% and cumulative is shown below:-
c. The Journal entry is shown below:-
Explanation:
a. Preferred dividend = Issued shares × Par value preferred stock × Preferred stock × Dividend percentage
= 2100 × $50 × 7%
= $7350
2021 2022 2023
Total dividend $6,000 $13,900 $27,000
Allocation to
preferred stock $6,000 $7,350 $7,350
Remainder to
common stock $0 $6,550 $19650
($13,900 - $7,350) ( $27,000 - $7,350)
b. Preferred dividend = Issued shares × Preferred stock × Preferred stock dividend percentage
= 2,100 × $50 × 8%
= $8,400
2021 2022 2023
Total dividend $6,000 $13,900 $27,000
Allocation to
preferred stock $6,000 $10,800 $8,400
$8400 + ($8,400 - 6,000)
Remainder to
common stock $0 $3,100 $18,600
The company announced $6000 in cash dividend in 2021, and the preferred dividend is $8400. Since the preference shares are cumulative, next year the remaining $2400 (8400-6000) dividend will be paid out.
3. Cash dividend Dr, $27,000
To Dividends payable $27,000
(Being dividends payable is recorded)
The dividends allocated would depend on whether the preferred stock is cumulative or noncumulative. Noncumulative dividends do not accumulate whereas cumulative dividends do. This would also change the way dividends are journalized at the end of the year.
Explanation:To answer this question, the key concept to understand is the difference between noncumulative and cumulative dividends. Noncumulative dividends are those for which the right to receive a payment does not accumulate if it is not paid. Cumulative preferred shares, on the other hand, accrue unpaid dividends, which must be paid before any additional dividends can be paid to common shareholders.
a. A 7% noncumulative dividend on preferred stock would result in a $7,350 (2,100 shares * $50 par value * 7%) dividend each year. If the company only declared $6,000 in 2021, only that amount would be paid. For the following years (2022 and 2023), the whole declared amount would go to the preferred stockholders first, until their dividend is fully paid ($7,350), the remainder goes to the common stockholders.
b. An 8% cumulative preferred stock would result in a $8,400 (2,100 shares * $50 par value * 8%) dividend each year. If the dividends are not paid in one year, they accumulate and are paid in the following years when sufficient dividends are declared. For example, in 2021, only $6,000 was declared, meaning $2,400 (8,400 - 6,000) will carry forward to the following year.
c. The journal entry at December 31, 2023, assuming the dividend is cumulative, would be:
Debit: Dividends $27,000
Credit: Cash $27,000
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A mechanical engineer must recommend an A/C system to a commercial building owner. The owner uses and MARR of 6%, but is not sure how long he will own the building. A conventional split system has a design life of 10 years, a cost of $52,000, and annual operating costs of $15,000. A chilled water system has an initial cost of $75,000 and annual operating costs of $14,000. Assuming each unit has no salvage value and will be identically replaced for the life of the building, determine how long the chilled water system needs to last for it to be the best choice (i.e. determine the break even useful life for the chilled water system). Express your answer in years to the nearest whole year.
Answer:
12 years
Explanation:
The chilled water system lasts for in line with the building. To calculate break even useful life of chilled water we assume no salvage value. The company uses MARR of 6% . The conventional system costs $52,000 and annual operating cost is $15,000. We can calculated the useful life by adding the system cost and its operating cost with multiplying minimum acceptable rate of return.
$52,000 * A/P (6%, 10) + $15,000 = 12 years.
Standby letters of credit A. are a promise by a large depositor to provide additional funds to a bank should the bank face an unexpectedly large deposit outflow. B. represent the unused balance on a bank credit card. C. are a promise by a bank to lend the borrower funds to pay off its maturing commercial paper. D. are a form of swaps.
Answer:
The correct answer is letter "C": are a promise by a bank to lend the borrower funds to pay off its maturing commercial paper.
Explanation:
A standby letter of credit is a document that serves as a guarantee in front of the default of a buyer or seller in an agreement between the two parties. For instance, if the buyer defaults for a given reason, the bank that grants the standby letter of credit is responsible for paying off the outstanding debt. Another example of when the standby letter of credit comes into action is when both the buyer and the seller are certain of their responsibilities but after delivering the goods to the buyer they do not meet the buyers' expectations.
Jane Roznowski wants to invest some money now to buy a new tractor in the future. If she wants to have $250,000 available in 6 years, how much does she need to invest now in a CD paying 4.65% interest compounded monthly?
Answer:
Present Value= $189,236.98
Explanation:
Giving the following information:
Future value= $250,000
Number of years= 6
Interest rate= 4.65% compounded monthly
First, we need to calculate the real interest rate:
Interest rate= 0.0465/12= 0.003875
Now, using the following formula, we can calculate the initial inventment:
PV= FV/ (1+i)^n
n= 6*12= 72
PV= 250,000/(1.003875^72)
PV= $189,236.98
Paychex Inc. (PAYX) recently paid a dividend of $0.84. The dividend is expected to grow at a 10 percent rate. The current stock price is $49.71. What is the return shareholders are expecting?
Answer:
The correct answer is 11.85%.
Explanation:
According to the scenario, the computation of the given data are as follows:
Current price = $49.71
Dividend paid = $0.84
Growth rate = 10%
So, Next year Dividend = $0.84 × 110% = $0.92
So, we can calculate the return by using following formula:
Return on stock = (Next year Dividend ÷ Current price ) + Growth rate
= ( $0.92 ÷ $49.71 ) + 0.10
= 11.85%
Paychex Inc. (PAYX) recently paid a dividend of $0.84. The dividend is expected to grow at a 10 percent rate. The current stock price is $49.71. 11.85% is the return shareholders are expecting.
According to the scenario, the computation
Of the given data are as follows:
Current price = $49.71
Dividend paid = $0.84
Growth rate = 10%
So, Next year Dividend = $0.84 x 110% =
$0.92
So, we can calculate the return by using
Following formula:
Return on stock= (Next year Dividend +
Current price ) + Growth rate
= ($0.92÷$49.71)+0.10
= 11.85%l
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Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors. An outside supplier has offered to sell one type of carburetor to Troy Engines, Ltd., for a cost of $36 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the carburetor internally:
Per Unit 20,000 Units per Year Direct materials $ 13 $ 260,000 Direct labor 11 220,000 Variable manufacturing overhead 4 80,000 Fixed manufacturing overhead, traceable 6 * 120,000 Fixed manufacturing overhead, allocated 9 180,000 Total cost $ 43 $ 860,000 *One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value).
Required:
1. Assuming the company has no alternative use for the facilities that are now being used to produce the carburetors, what would be the financial advantage (disadvantage) of buying 20,000 carburetors from the outside supplier?
2. Should the outside supplier’s offer be accepted?
3. Suppose that if the carburetors were purchased, Troy Engines, Ltd., could use the freed capacity to launch a new product. The segment margin of the new product would be $200,000 per year. Given this new assumption, what would be financial advantage (disadvantage) of buying 20,000 carburetors from the outside supplier?
4. Given the new assumption in requirement 3, should the outside supplier’s offer be accepted?
First, The Financial Disadvantage of $140,000
Second They Do not accept
Third, The Financial Advantage of $60,000
Fourth, Accept
Computation of Financial costs savings
When we consider the costs and also savings that will arise as a result of the Purchase
Purchase ($36 × 20,000) (720,000)
Direct materials ($ 13 × 20,000) 260,000
Direct labor ($11 × 20,000) 220,000
Variable manufacturing overhead ($4 × 20,000) 80,000
Fixed manufacturing overhead, traceable ($6 × 20,000) 120,000
Fixed manufacturing overhead, allocated ($9× 20,000) 180,000
Then Incremental Income / (loss) (140,000)
Do not accept as will result in the incremental loss of $140,000
Also, They Consider the costs and savings that will arise as a result of the Purchase
Purchase ($36 × 20,000) (720,000)
Then, New Segment 200,000
After that, Direct materials ($ 13 × 20,000) 260,000
Direct labor ($11 × 20,000) 220,000
Variable manufacturing overhead ($4 × 20,000) 80,000
Fixed manufacturing overhead, traceable ($6 × 20,000) 120,000
Fixed manufacturing overhead, allocated ($9× 20,000) 180,000
Incremental Income / (loss) 60,000
Therefore, Accept as this will result in an incremental profit of $60,000
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Highland Mining and Minerals Co. is considering the purchase of two gold mines. Only one investment will be made. The Australian gold mine will cost $1,600,000 and will produce $300,000 per year in years 5 through 15 and $500,000 per year in years 16 through 25. The U.S. gold mine will cost $2,000,000 and will produce $250,000 per year for the next 25 years. The cost of capital is 10 percent. Use Appendix D for an approximate answer but calculate your final answers using the formula and financial calculator methods. (Note: In looking up present value factors for this problem, you need to work with the concept of a deferred annuity for the Australian mine. The returns in years 5 through 15 actually represent 11 years; the returns in years 16 through 25 represent 10 years.)
Answer:
a) The Net present value of Australian Gold Mine = $466,300
The Net present value of U.S. Gold Mine = $ 269,250
b) The Net present value of Australian Gold Mine = - $393,900
At this increased cost of capital which is the discount rate ,the decision of selecting Australian Gold Mine should not be selected. in this case selecting the u.s Gold mine will be the best option
Explanation:
To evaluate Highland Mining and Minerals Co.'s potential investments in either an Australian or a U.S. gold mine, we calculate and compare the net present value of each project's cash flows. We use a deferred annuity calculation for the Australian mine's later starting cash flows and a standard annuity calculation for the U.S. mine. The mine with the higher NPV at the cost of capital of 10% would be the better investment.
The analysis of Highland Mining and Minerals Co.'s investment decision requires calculating the present value of cash flows for both the Australian and U.S. gold mines, considering a deferred annuity approach for the Australian mine's cash flows. For the Australian mine, we need to consider the cash flows as two separate annuities: the first starting from year 5 to year 15 and the second from year 16 to year 25. Similarly, the U.S. gold mine's cash flows are also an annuity but with a regular payment from year 1 to year 25.
To calculate the present value (PV) of the Australian mine, we use the formula for a deferred annuity which accounts for the fact that cash flows start in the future. The PV of the annuity from years 5 to 15 is computed by determining the PV as if the annuity started in year 1 and then discounting it back four more years to the present value. The PV of the annuity from years 16 to 25 is computed by first discounting it back to year 15 and then finding its present value.
For the U.S. mine, the calculation is more straightforward since it's a standard annuity where we simply use the annuity present value formula to calculate the total PV of cash flows from year 1 to year 25.
After calculating the present values, we compare them to the initial investments to determine the net present value (NPV) of each project. Highland Mining and Minerals Co. would therefore choose the investment with the higher NPV, as this is expected to generate more value for the company, given the cost of capital at 10%.
Executive Solutions is a strategy consulting firm. Other than the senior leadership (who manage the firm, but do not actively consult), the managers and staff are billed to clients on an hourly basis. The workload varies quite a bit from month to month requiring careful planning. Managers are billed to clients at a rate of $970 per hour and staff at a rate of $485 per hour. Managers are paid $295 per hour worked (including nonbillable time) and staff are paid $160 per hour. The current plan calls for managers to bill 1,270 hours in May and 820 hours in June. Staff are expected to bill 6,540 hours in May and 4,640 hours in June. Managers will work a total of 2,540 hours in both months and staff will work a total of 9,740 hours in both months. Other monthly costs (all fixed) are $553,500 SG&A, $228,500 in depreciation, and $353,500 in marketing. Required: Prepare a budgeted income statement for Executive Solutions for May and June (separately).
Answer:
Income(Loss) $960,600;($397,400)
Explanation:
EXECUTIVE SOLUTIONS
Budgeted Income Statement
May June
Revenues:
Managers$1,231,900 $795,400
Staff $3,171,900 $2,250,400
Total revenue (i)$4,403,800 $3,045,800
Expenses:
Manager
compensation$749,300 $749,300
Staff compensation$1,558,400 $1,558,400
Total
compensation (ii)$2,307,700 $2,307,700
SG&A $553,500 $553,500
Depreciation $228,500 $228,500
Marketing $353,500 $353,50
Total
expenses (iii)$1,135,500 $1,135,500
Income(Loss)
(i)-(ii)-(iii) $960,600 ($397,400)
BMay June
Revenues:
Managers
[1,270 hours x $ 970] $1,231,900
[820 hours x $970] $795,400
Staff
[ 6,540hours x $485] $3,171,900
[4,640 hours x $485] $2,250,400
Expenses:
Manager compensation$749,300 $749,300
[2,540 hours x $295]
Staff compensation $1,558,400 $1,558,400
[9,740 hours x $160]
Avon Barksdale's operation uses large quantities of prepaid cell phones, on average 500 per week with a standard deviation of 45. The lead time for their own brand of prepaid cell phones is 2 weeks and they have a lot size of 125 phones. If Mr. Barksdale sets his reorder point at 1,100 phones, what is his average cell phone inventory?
Answer:
162.5 phones
Explanation:
The Avon Barksdale's operation uses 500 cell phones per week. The order quantity is 125 phones which takes 2 weeks to to deliver. To calculate the average inventory for Avon Barksdale we will subtract reorder quantity from the weekly use of cell phones.
500 per week * 2 weeks = 1,000 cell phones
he reorder point is 1,100 phones.
1,100 - 1,000 = 100 cell phones
The lead time is 2 weeks for 125 phones delivery
125 / 2 weeks = 62.5
62.5 + 100 = 162.5 phones
The average cell phone inventory of Avon Barksdale's operation, given a lot size of 125, would be half of the lot size (62.5), assuming there is no safety stock. More information would be needed to account for safety stock.
Explanation:Avon Barksdale's operation, which uses large quantities of prepaid cell phones, requires an understanding of inventory management. Based on the numbers provided (an average of 500 phones used per week with a standard deviation of 45, a lead time of 2 weeks, and a lot size of 125 phones) and a reorder point of 1,100 phones, Mr. Barksdale's average cell phone inventory can be calculated.
The average inventory is half the lot size plus the safety stock. The safety stock is the product of the standard deviation, the lead time and the z-value corresponding to the desired service level (since no service level is specified in the question, we'll ignore this). However, we can't determine the safety stock without more information. Given the lot size of 125 phones, Mr. Barksdale would have half of this - 62.5 phones (though in practice, we can't have half a phone) - in average inventory assuming no safety stock.
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Hartley Electronics, Inc., in Nashville, produces short runs of custom airwave scanners for the defense industry. You have been asked by the owner, Janet Hartley, to reduce inventory by introducing a kanban system. After several hours of analysis, you develop the following data for scanner connectors used in one work cell. How many kanbans do you need for this connector? Daily demand 1 comma 400 connectors Lead time 3 days Safety stock 1.00 day Kanban size 500 connectors Number of kanbans = nothing kanbans (round your response to the nearest whole number).
Answer:
11.2 containers
Explanation:
The computation of the number of kanban connectors needed is given below:
= (Lead time demand + Safety stock) ÷ Container size
where,
Demand during Lead time demand is
= 1,400 units × 3 days
= 4,200 units
Container size = 500 connectors
Safety Stock is
= 1 day × 1,400 units
= 1,400 units
So, the number of kanban connectors needed is
= (4,200 units + 1,400 units) ÷ (500 units)
= 11.2 containers
We simply used the above formula
Number of kanban connectors needed is 11.2 containers
Given that,
Daily demand is 1,400 connectors.Lead time is 3 days.safety stock is 1 day.According to the scenario, computation of the given data are as follows,
Number of kanban connectors needed = (Lead time demand + Safety stock) [tex]\div[/tex] Container size
By putting the value, we get
= [(1,400 [tex]\times[/tex] 3) + (1 [tex]\times[/tex] 1,400)] [tex]\div[/tex] (500)
= (4,200 + 1,400 ) [tex]\div[/tex] (500 )
= 11.2 containers
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Which of the following is not true regarding the use of labor variance information? a.The actual wage rate is almost always different from the standard rate. b.Unexpected overtime can cause variation in the labor rate. c.An average wage rate is chosen as the labor rate standard. d.The actual wage rate is used in determining the labor rate variance. e.The production manager controls the use of labor.
Answer:
Option A is false statement among these.
The actual wage rate is almost always different from the standard rate
Explanation:
The actual wage rate paid and standard rate established can be different causing the labour rate variance.
Direct labour cost variance is the difference between the standard cost for actual production and the actual cost in production. There are two kinds of labour variances. Labour Rate Variance is the difference between the standard cost and the actual cost paid for the actual number of hours.
Alto and Solo are all-equity firms. Alto has 2,400 shares outstanding at a market price of $24 a share. Solo has 4,000 shares outstanding at a price of $17 a share. Solo is acquiring Alto for $63,000 in cash. The incremental value of the acquisition is $5,500. A) What is the net present value of acquiring Alto to Solo
Answer:
$100
Explanation:
Alto's share value = (2,400 × $24) = $57,600
Alto's total value = Share value + Incremental value of acquisition = $57,600 + $5,500 = $63,100
Net present value (NPV) = Alto's total value - Cost of acquisition = $63,100 - $63,000 = $100
Therefore, the net present value of acquiring Alto to Solo is $100.
The net present value (NPV) of Solo acquiring Alto is calculated as the difference between the incremental value of the acquisition and the acquisition cost, resulting in an NPV of -$57,500, which suggests the acquisition would not add value to Solo according to these numbers.
This involves calculating the net present value (NPV) of an acquisition in which one company, Solo, is acquiring another company, Alto, for a specific cash amount with an additional incremental value from the acquisition.
To calculate the NPV, we need to consider the acquisition price and the incremental value. Solo is acquiring Alto for $63,000 and expects to gain an additional $5,500 in value. The NPV is the incremental value minus the acquisition cost:
NPV = Incremental Value - Acquisition Cost
NPV = $5,500 - $63,000
NPV = -$57,500
Therefore, the net present value of acquiring Alto to Solo is a negative $57,500, which means that the acquisition would not add value to Solo based on these figures alone. However, this calculation assumes that the incremental value of $5,500 is the only benefit from the acquisition and does not account for any potential synergies or cost savings that might arise from the merge.
The government of Granita is thinking about imposing a very small tax on one or more of the following goods: anvils, books, and cardigans. Anvils and books are both produced in competitive markets with constant marginal costs, while cardigans are produced by a monopoly with constant marginal costs. The elasticities of demand for the three goods are −3, −1.5, and −1.2, respectively. What good or goods should the government put the very small tax on if it wants to minimize the deadweight burden?
Answer:
The government should tax Anvils and books but not cardigans
Explanation:
A perfect competition is characterised by many buyers and sellers of homogenous goods and services. Market prices are set by the forces of demand and supply.
A monopoly is when there is only one firm operating in an industry. The firm sets the market price for its good and services. The firm earns economic profit in the short and long run.
When the absolute value of elasticity is greater than 1, it means that demand is price elastic.
Elastic demand means a small change in price leads to a greater change in quantity demanded.
Deadweight loss refers to the loss in efficiency as a result of tax.
A competitive market produces as the social optimum, so the effect of tax would be very small but because the monopoly operates below social optimum, the cost of tax would be high.
I hope my answer helps you
Gloria's research team is looking into how effective their new "Community Clean-Up" ad campaign might be. In doing so, they are using Potter's Box to think through the ethics of the campaign and rationalize their decisions. What stage are they in if they are now considering whether the images used in their campaign will effectively deter littering in the inner city neighborhoods of Boston?
a. Quadrant 3
b. Quadrant 4
c. Quadrant 1
d. Quadrant 2
Answer:
A) Quadrant 3
Explanation:
The four quadrants in Potter's box are:
Quadrant 1 ⇒ Definition: you summarize the current situation.Quadrant 2 ⇒ Values: what values make this situation better or worse.Quadrant 3 ⇒ Principles: what ethical or moral principle applies to this situation.Quadrant 4 ⇒ Loyalties: the decision makers (neighbors) are loyal to whom or what.In quadrant 3 you can evaluate if your actions and images actually mean something to the neighbors and can make them change their behavior, i.e. reduce littering. At this stage you are evaluating what ethical or moral principle you should apply and depending on that, you should select your mages and message.
1.Anderson Company transferred $100,000 of accounts receivable to the Eastern Bank. The transfer was made without recourse. Eastern remits 90% of the factored amount to Anderson and retains 10%. When the bank collects the receivables, it will remit to Anderson the retained amount (which Anderson estimates has a fair value of $8,000) less a 3% fee (3% of the total factored amount). What amount of loss on sale of receivables would Anderson record
Answer:
$2,000
Explanation:
Retained amount = $100,000 * 10% = $10,000
Fee = $100,000 * 3% = $3,000
Amount received from Anderson = $10,000 - $3,000 = $7,000
Gain from fair value = $8,000 - $7,000 = $1,000
Loss on sale receivables = $3,000 - $1,000 = $2,000
Therefore, the amount of loss on sale of receivables that Anderson would record is $2,000