Answer:
$55,000
Explanation:
The computation of the change in operating income is shown below:
= Buying cost - making cost
where,
Buying cost = Cost of producing parts × outside supplier per unit
= 60,000 parts × $3
= $180,000
And, the making cost would be
= Variable cost + fixed cost × given percentage
= $110,000 + $50,000 × 30%
= $110,000 + $15,000
= $125,000
So, the operating income would be
= $180,000 - $125,000
= $55,000
A pension plan is obligated to make disbursements of $2.5 million, $3.5 million, and $2.5 million at the end of each of the next three years, respectively. The annual interest rate is 8%. If the plan wants to fully fund and immunize its position, how much of its portfolio should it allocate to one-year zero-coupon bonds and perpetuities, respectively, if these are the only two assets funding the plan? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Final answer:
To allocate a pension plan's funds between one-year zero-coupon bonds and perpetuities, the present value of the plan's future liabilities is calculated using the annual interest rate. The one-year zero-coupon bond allocation is set to cover the first-year obligation's present value, while the rest is allocated to perpetuities to cover subsequent years' obligations.
Explanation:
The student is asking how to allocate funds between one-year zero-coupon bonds and perpetuities to immunize a pension plan against interest rate risk while meeting the plan's obligations. To solve this, we must first calculate the present value of the plan's liabilities given the annual interest rate of 8%. This is done using the present value (PV) formula for each disbursement, discounting them accordingly.
For the first-year disbursement:
PV = $2.5M / (1 + 0.08)^1
For the second-year disbursement:
PV = $3.5M / (1 + 0.08)^2
For the third-year disbursement:
PV = $2.5M / (1 + 0.08)^3
Once the total present value of liabilities is calculated, the portfolio allocation to one-year zero-coupon bonds should match the present value of the first-year obligation, since zero-coupon bonds fully mature in one year. The remainder of the portfolio should be allocated to perpetuities, which are infinite-lived assets, to fund the obligations for the subsequent years.
LowFare is a no-frills airline that provides daily shuttle service in the northeast United States. Passengers are predominantly businesspeople who travel between New York and Boston for the day. Identify one measure in each of the four perspectives of the balanced scorecard that LowFare managers should monitor. Explain your reasoning for each.
Final answer:
LowFare should monitor measures such as Yield per Passenger Mile, On-time Arrival Rate, Aircraft Turnaround Time, and Employee Training Hours from the financial, customer, internal business process, and learning and growth perspectives of the balanced scorecard, respectively.
Explanation:
Key Performance Measures for LowFare Airline
To effectively manage a no-frills airline like LowFare that provides daily shuttle service primarily for businesspeople between New York and Boston, it is important to consider measures from each of the four perspectives of the balanced scorecard.
Financial Perspective:
Yield per Passenger Mile - This measure will help LowFare analyze the revenue obtained per mile from each passenger. It is crucial for understanding profitability, particularly when competing with larger airlines that may have more flexibility in pricing.
Customer Perspective:
On-time Arrival Rate - Business travelers value punctuality, making this a critical measure of customer satisfaction and a key differentiator in a competitive market.
Internal Business Process Perspective:
Aircraft Turnaround Time - Efficient turnaround times can lead to more flights per day and better asset utilization, which is vital for a no-frills carrier operating frequent shuttle services.
Learning and Growth Perspective:
Employee Training Hours - Regular training ensures employees are efficient, safety standards are met, and customer service is maintained at a high level, all of which are essential in a service-oriented industry like airlines.
LowFare should monitor revenue per seat mile for the financial perspective, customer satisfaction scores for the customer perspective, on-time rates for internal processes, and training hours for the learning perspective. These measures align with the airline's strategic goals and operational needs.
LowFare, a no-frills airline, can apply the balanced scorecard to monitor its performance across four perspectives. Here are the measures they should consider:
Financial Perspective: Measure the average revenue per seat mile (RASM). This helps track profitability and financial health by evaluating how much revenue is generated per seat mile.Customer Perspective: Monitor customer satisfaction scores through surveys. Business travelers value reliability and timeliness, so ensuring high customer satisfaction can lead to repeat business.Internal Business Processes Perspective: Track on-time departure and arrival rates. This measure reflects the efficiency of operational processes, crucial for business travelers who depend on punctual flights.Learning and Growth Perspective: Evaluate employee training hours. Continuous training ensures that employees are well-equipped to provide excellent service and manage operations efficiently.These measures help LowFare align its operational efficiency, customer satisfaction, financial performance, and employee development with its strategic goals.
On January 1, 2018, the general ledger of Grand Finale Fireworks includes the following account balances:
Accounts Debit Credit
Cash $ 43,200
Accounts Receivable 45,500
Supplies 8,000
Equipment 69,000
Accumulated Depreciation $ 9,500
Accounts Payable 15,100
Common Stock, $1 par value 15,000
Additional Paid-in Capital 85,000
Retained Earnings 41,100
Totals $ 165,700 $ 165,700
During January 2018, the following transactions occur:
January 2 Issue an additional 2,000 shares of $1 par value common stock for $40,000.
January 9 Provide services to customers on account, $15,600.
January 10 Purchase additional supplies on account, $5,400.
January 12 Repurchase 1,200 shares of treasury stock for $17 per share.
January 15 Pay cash on accounts payable, $17,000.
January 21 Provide services to customers for cash, $49,600.
January 22 Receive cash on accounts receivable, $17,100.
January 29 Declare a cash dividend of $0.30 per share to all shares outstanding on January 29. The dividend is payable on February 15. (Hint: Grand Finale Fireworks had 15,000 shares outstanding on January 1, 2018 and dividends are not paid on treasury stock.)
January 30 Reissue 800 shares of treasury stock for $19 per share.
January 31 Pay cash for salaries during January, $42,500.
1. Record each of the transactions listed above.
a. Unpaid utilities for the month of January are $6,700.
b. Supplies at the end of January total $5,600.
c. Depreciation on the equipment for the month of January is calculated using the straight-line method. At the time the equipment was purchased, the company estimated a service life of three years and a residual value of $10,500.
d. Accrued income taxes at the end of January are $2,500.
2. Record the adjusting entries on January 31, 2018 for the above transactions.
3. Prepare an adjusted trial balance as of January 31, 2018.
4. Prepare a multiple-step income statement for the period ended January 31, 2018.
5. Prepare a classified balance sheet as of January 31, 2018.
On January 1, 2018, the general ledger of Grand Finale Fireworks includes the following account balances: Accounts Debit Credit Cash $ 43,200 Accounts Receivable 45,500 Supplies 8,000 Equipment 69,000 Accumulated Depreciation $ 9,500 Accounts Payable 15,100 Common Stock, $1 par value 15,000 Additional Paid-in Capital 85,000 Retained Earnings 41,100 Totals $ 165,700 $ 165,700
Answer
The answer and procedures of the exercise are attached in the following image.
Explanation
The journal record is attached.
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.
The question requires an understanding of business accounting, transaction recording, creation of adjusting entries, and the preparation of financial statements. The application of double-entry system, accrual concepts, and financial statement structuring play a critical role in effectively answering this question.
Explanation:This question pertains to the analysis of business transactions related to accounts in a ledger, execution of transactions, adjusting entries, preparation of an adjusted trial balance, multiple-step income statement, and a classified balance sheet. Given the initial account balances and the series of transactions and adjustments that took place within the month of January, you are tasked with reflecting these in the company's accounts, preparing the trial balance, income statement, and balance sheet. This involves dealing with a variety of accounting concepts such as accumulated depreciation, accounts payable and receivable, treasury stock, dividends, etc.
The completion of these tasks requires an understanding of the double-entry system, accrual accounting concepts, as well as the proper structuring of financial statements. To give an example, for a transaction like 'Purchase additional supplies on account, $5,400', you would need to debit 'Supplies' and credit 'Accounts Payable', thus increasing both accounts.
On the other hand, for adjusting entries such as 'Unpaid utilities for the month of January are $6,700', you would need to debit 'Utilities Expense' and credit 'Utilities Payable' therefore recognizing the incurred expense and the liability. This entails following the accrual accounting concept where expenses are recognized when they are incurred rather than when they are paid.
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Sommer, Inc., is considering a project that will result in initial aftertax cash savings of $1.9 million at the end of the first year, and these savings will grow at a rate of 1 percent per year indefinitely. The firm has a target debt-equity ratio of .75, a cost of equity of 13 percent, and an aftertax cost of debt of 5.8 percent. The cost-saving proposal is somewhat riskier than the usual project the firm undertakes; management uses the subjective approach and applies an adjustment factor of 2 percent to the cost of capital for such risky projects. What is the maximum initial cost the company would be willing to pay for the project? (Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to the nearest whole dollar amount, e.g., 1,234,567.)
Answer:
Please see attachment .
Explanation:
Please see attachment .
In the Assembly Department of Hannon Company, budgeted and actual manufacturing overhead costs for the month of April 2017 were as follows. Budget ActualIndirect materials $14,200 $13,700Indirect labor 19,100 19,900Utilities 11,400 12,100Supervision 4,600 4,600
All costs are controllable by the department manager.
Prepare a responsibility report for April for the cost center
Final answer:
A responsibility report compares budgeted costs to actual costs, highlighting variances and assisting a manager in decision-making. For the Assembly Department of Hannon Company, the report shows favorable and unfavorable variances in indirect materials, labor, and utilities, with no variance in supervision.
Explanation:
To draft this report, one must compare the budgeted costs against the actual costs incurred. A simple table can be created that lists each cost category, the budgeted amount, the actual amount, and the variance between the two.
Responsibility Report for April 2017
Cost Category Budgeted Actual Variance
Indirect Materials $14,200 $13,700 $500 Favorable
Indirect Labor $19,100 $19,900 $800 Unfavorable
Utilities $11,400 $12,100 $700 Unfavorable
Supervision $4,600 $4,600 $0
The manager of the department can then use this responsibility report to understand where costs were higher or lower than expected and make decisions accordingly.
At December 31, 2019, Sharon Lee Corporation reported current assets of $343,980 and current liabilities of $196,600. The following items may have been recorded incorrectly. 1. Goods purchased costing $20,440 were shipped f.o.b. shipping point by a supplier on December 28. Lee received and recorded the invoice on December 29, 2019, but the goods were not included in Lee's physical count of inventory because they were not received until January 4, 2020. 2. Goods purchased costing $15,950 were shipped f.o.b. destination by a supplier on December 26. Lee received and recorded the invoice on December 31, but the goods were not included in Lee's 2019 physical count of inventory because they were not received until January 2, 2020. 3. Goods held on consignment from Claudia Kishi Company were included in Lee's December 31, 2019, physical count of inventory at $11,890. 4. Freight-in of $3,040 was debited to advertising expense on December 28, 2019.
Recompute the current ratio after corrections are made. (Round ratio to 2 decimal places, e.g. 2.31:1.) The current ratio 1.88 :1
Answer:
1.97 times
Explanation:
The formula to compute the current ratio is shown below:
Current ratio = Total Current assets ÷ total current liabilities
Current ratio before any adjustment is shown below:
So, current ratio = $343,980 ÷ 196,600 = 1.75 times
Current ratio after adjustments are shown below:
Current assets = Before adjustment balance + goods purchased costing - physical count of inventory + freight-in charges
= $343,980 + $20,440 - 11,890 + 3,040
= $355,570
Current liabilities = Before adjustment balance - goods not received
= $196,600 - $15,950
= $180,650
So, the current ratio would be
= $355,570 ÷ $180,650
= 1.97 times
Final answer:
After adjusting for incorrectly recorded items involving inventory and freight-in costs, the corrected current ratio for Sharon Lee Corporation is 1.81:1.
Explanation:
The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year. It is calculated by dividing current assets by current liabilities. Initially, Sharon Lee Corporation’s current ratio is calculated as $343,980 (current assets) divided by $196,600 (current liabilities), which is 1.75:1. However, several items have been recorded incorrectly and this will affect the current ratio after adjustments.
Item 1: Goods in transit purchased f.o.b. shipping point should be included in inventory and thus increase current assets by $20,440.Item 2: Goods in transit purchased f.o.b. destination should not be included until received; therefore, no adjustment is needed as they are not yet included in current assets.Item 3: Goods held on consignment should not be included in inventory as they do not belong to Lee; current assets should decrease by $11,890.Item 4: Freight-in costs should be included in inventory rather than advertising expense, thus increasing current assets by $3,040.After correcting these items, the adjusted current assets would be:
$343,980 - $11,890 (consignment goods) + $20,440 (f.o.b. shipping point goods) + $3,040 (freight-in) = $355,570.
The current liabilities remain unchanged at $196,600. Thus, the corrected current ratio is $355,570 divided by $196,600, which is 1.81:1 when rounded to two decimal places.
As the firm borrows more and debt becomes riskier, both stockholders and bondholders demand higher rates of return. Thus, by reducing the debt ratio we can reduce both the cost of debt and the cost of equity, making everybody better off.a. True b. False
Answer:True
Explanation:
The debt holders been entitled to return before the equity places, the equity holders at the risk of not getting a return when the debt level is high and this will make them to clamour for more returns when profit is made thereby making it more costly to manage the equity capital.
The higher the debt capital the lower the possibility of the firm meeting his debts obligations as regards interest and capital and the likely of defaults with consequent penalties, which makes it more costly to service the debt capital.
Frances had a wonderful product, but her salesforce frequently argued over sales tactics and territories. Conflicts arose over issues unrelated to the business, such as lifestyles and work start times. Which top reason for startup failures was represented in this scenario?a. not the right teamb. lost focusc. poor marketingd. no market need
Answer:
Letter a is correct. Not the right team.
Explanation:
The structuring of a team is a relevant step for a startup to succeed and survive in the market.
Research indicates that one of the main causes of startup failure is to develop teams whose individuals do not have sufficient competence to perform teamwork to establish consensus and experience to observe the current scenario to effectively align the management process with market needs.
At January 1, 2016, Sheffield Corp. has beginning inventory of 3000 surfboards. Sheffield estimates it will sell 11000 units during the first quarter of 2016 with a 12% increase in sales each quarter. Sheffield’s policy is to maintain an ending inventory equal to 25% of the next quarter’s sales. Each surfboard costs $100 and is sold for $150. How much is budgeted sales revenue for the third quarter of 2016?
Answer:
budget sale revenue = $2,069,760
Explanation:
given data
beginning inventory = 3000
sell = 11000 units
sales = 12% increase
ending inventory = 25%
surfboard costs = $100
sold = $150
to find out
How much is budgeted sales revenue for the third quarter of 2016
solution
first we will get here budget sales unit for quarter 3 that is
budget sales unit = ( 11000 × 112% ) 112%
budget sales unit = $13798.4
and
selling price is here $150
so
budget sale revenue for 3rd quarter sale is = budget sales unit × selling price
budget sale revenue = $13798.4 × $150
budget sale revenue = $2,069,760
If Sheffield estimates it will sell 11000 units during the first quarter of 2016 with a 12% increase in sales each quarter. The amount of the budgeted sales revenue for the third quarter of 2016 is $2,069,760
First step is to estimate first quarter sales
Estimated first quarter sales= 11,000 units + (11,000 units x 12%)
Estimated first quarter sales=11,000 units +1,320 units
Estimated second quarter sales in units=12,320 units
Second step is to estimate second quarter sales
Estimated second quarter sales= 12,320 units + (12,320 units x 12%)
Estimated second quarter sales= 12,320 units + 1,478.4 units
Estimated second quarter sales= 13,798.4 units
Third step is to calculate how much is budgeted sales revenue for the third quarter of 2016 using this formula
Budgeted Sales for Third Quarter=Estimated second quarter sales × Selling price per unit
Let plug in the formula
Budgeted Sales for Third Quarter=13,798.4 units × $150
Budgeted Sales for Third Quarter=$2,069,760
Inconclusion if Sheffield estimates it will sell 11000 units during the first quarter of 2016 with a 12% increase in sales each quarter. The amount of the budgeted sales revenue for the third quarter of 2016 is $2,069,760
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b. Suppose that the Fed's FX reserves increase by 40 million zees as a result of the decline in demand. How many millions of dollars worth of bonds will the Fed have to sell in order to sterilize the accompanying increase in the domestic money supply
Selling $8 million worth of bonds by the Fed results in a decrease in bank reserves and money supply, with a maximal possible decrease of $40 million in the money supply if the reserve requirement is 20%.
When the Fed sells bonds, it reduces the amount of reserves that banks hold. If the Fed sells $8 million worth of bonds, the bank reserves decrease by that same amount because banks exchange their reserve balances for the bonds. Consequently, as reserves decrease, the money supply also decreases. This is because banks have less money to loan out, which reduces the total amount of money in circulation.
If the required reserve ratio is 0.2 (or 20%), the maximum possible change in the money supply can be found using the money multiplier formula, which is the reciprocal of the reserve requirement. The maximum change in the money supply is 1/0.2 times the change in reserves, so in this case, it is 5 times $8 million, which equals $40 million.
When the Fed sells bonds, bank reserves and the money supply decrease. The maximum reduction in the money supply can be calculated using the required reserve ratio.
Bank reserves change by the same amount as the bonds sold by the Fed. When the Fed sells $8 million worth of bonds, bank reserves decrease by $8 million.
The money supply will decrease when the Fed sells bonds, as selling bonds reduces the money available in the economy.
The maximum possible change in the money supply, if the required reserve ratio is 0.2, can be calculated by dividing the change in reserves by the reserve ratio. In this case, if the Fed sells $8 million worth of bonds, the maximum reduction in the money supply would be $8 million ÷ 0.2 = $40 million.
Mike has $235,000 he wishes to invest in two rental properties. One yields 10% and the other yields 12%. For safety he wants to split his investment between the two properties instead of investing all of his money in the higher yielding rental property. If his goal is to achieve a total income earned of $25,000 a year from these two properties, how much money should he invest in each property. You must show your work illustrating how you calculated your answer in order to get credit for this problem.
Answer:
Mike spends $160,000 on A and $75,000 on B
Explanation:
Lets call the rental properties as A and B.
A yields 10% anb B yields 12%.
Total investment=$235,000
Expected income=$25,000
Let the amount he invests in A be x.
Then amount spent in B=$(235,000-x)
Income from A=x × 0.1 ----------------(1)
Income from B=(235,000-x)× 0.12 ---------------(2)
Sum of incomes =$25,000
Taking sum of both equations,
x × 0.1 +(235,000-x)× 0.12 =25,000
235,000×0.12 -0.02×x =25,000
28,200 -0.02×x =25,000
0.02×x =3,200
x=[tex]\frac{3,200}{0.02}[/tex]
x =$160,000
Wilson has a 40 percent interest in the assets and income of the CC&W Partnership, and the basis in his partnership interest is $45,000 at the beginning of 2018. During 2018, the partnership's net loss is $60,000 and Wilson's share of the loss is $24,000. Also, Wilson receives a cash distribution from the partnership of $12,000 on June 30, 2018.
a. Indicate the amount of income or loss from the partnership that should be reported by Wilson on his 2018 individual income tax return.
b. Calculate Wilson's basis in his partnership interest at the end of 2018.
Answer:
a. $24,000
b. $9,000
Explanation:
a. The amount of income or loss from the partnership is limited to the share of the loss rather than its partnership interest
In the given case, the partnership interest is $45,000 and the share of his loss is $24,000
So, $24,000 is reported in his individual income tax return
b. The computation of the Wilson's basis in his partnership interest is shown below:
= Basis in his partnership interest - share of the loss - cash distribution received from the partnership
= $45,000 - $24,000 - $12,000
= $9,000
The effectiveness of controls is not generally tested by:A. Inspection of documents and reports.B. Performance of analytical procedures.C. Observation of the application of accounting policies and procedures.D. Inquiries of appropriate client personnel
Answer:
Letter B is correct. Performance of analytical procedures.
Explanation:
The effectiveness of internal control in an organization occurs when the procedures and policies developed by managers are maintained to protect assets through an expected degree of confidence.
Performance of analytical procedures are used as a risk assessment instrument, ie they are used near the end of each audit to assist and direct the auditor in determining conclusions about the financial statements.
Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams at $105 per share. The initial margin requirement was 50%. (The margin account pays no interest.) A year later, the price of Internet Dreams has risen from $105 to $110.00, and the stock has paid a dividend of $17.00 per share.
a. What is the remaining margin in the account?
Remaining margin $
b-1. What is the margin on the short position? (Round your answer to 2 decimal places.)
Short margin %
b-2. If the maintenance margin requirement is 30%, will Old Economy receive a margin call?
Yes
No
c.
What is the rate of return on the investment? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)
Rate of return %
Answer:
a. $30,500
b1. 27.73%
b2. Yes because the 30% margin requirement is higher than 27.73% actual
c. -41.90%
Explanation:
a. Margin requirement at the beginning = 1,000 x 105 x 50% = $52,500
Payoff gained/(lose) from the short-sell position = ( Delivery price in the position - Market price - Dividend per stock ) x 1,000 = ( 105 - 110 - 17) x 1,000 = (22,000)
=> Remaining margin = Initial margin + Payoff from the short-sell position = 52,500 - 22,000 = $30,500
b1. Margin on the short position = Remaining margin / Values of underlying stocks in the position = 30,500 / 110,000 = 27.73%
b2. As the traders is in short position and the actual price is higher than the exercised price in the option, the margin on the short position lower than requirement ( 27.73% < 30%) will trigger a margin call.
c. Return on the investment equals to Pay-off from the position / initial margin requirement = -22,000 / 52,500 = 41.90%
Your neighbor offers you an investment opportunity, which will pay a single lump sum of S2,000 five years from today. The investment requires a single payment of The return on the investment is % A. 4.195 B. 4.729 C. 5.361 D. 5.922 E. 6.961
Answer:
This question has a missing information. I have found the complete version and pasted it down below;
"Your neighbor offers you an investment opportunity, which will pay a single lump sum of S2,000 five years from today. The investment requires a single payment of $1,500 today. The return on the investment is % A. 4.195 B. 4.729 C. 5.361 D. 5.922 E. 6.961 "
Explanation:
This question requires you to find that discount rate given a single future cashflow. $2,000 is expected 5 years from today, hence the future value. $1,500 payment today is the dollar value today, hence the Present value.
Using a financial calculator, you will key in the following inputs;
Total duration; N = 5
Present value; PV = -1,500 (it's a cash outflow hence negative)
Recurring payment; PMT = 0
Future value; FV = 2,000
then find the rate by keying in CPT I/Y = 5.922%
Therefore, the return on the investment is 5.92%
Final answer:
Stocks have the potential for higher average returns over time compared to bonds and savings accounts. The return on the investment is D. 5.922
Explanation:
The question is asking which investment (stocks, bonds, or a savings account) has a higher average return over time. Each investment option has its own level of risk and potential return.
Using a financial calculator, you will key in the following inputs;
Total duration; N = 5
Present value; PV = -1,500 (it's a cash outflow hence negative)
Recurring payment; PMT = 0
Future value; FV = 2,000
then find the rate by keying in CPT I/Y = 5.922%
Therefore, the return on the investment is 5.92%
On August 14, Park Avenue Bank lent $210,000 to City Coffee Shop on a 75 day, 4% note. What is the maturity value of the note? (Use a 365minusday year. Do not round intermediate calculations, and round your final answer to the nearest dollar.)
A. $218,400
B. $211,726
C. $211,750
D. $210,000
Final answer:
To calculate the maturity value of the note, we need to find the amount of interest accrued over the 75-day period. The formula for calculating the interest is: Interest = Principal x Rate x Time. Given the values, we can calculate the maturity value of the note to be approximately $211,095.89.
Explanation:
To calculate the maturity value of a note, we need to find the amount of interest accrued over the 75-day period. The formula for calculating the interest is:
Interest = Principal x Rate x Time
Given that the principal amount is $210,000, the interest rate is 4%, and the time period is 75 days, we can plug in these values into the formula:
Interest = $210,000 x 0.04 x (75/365)
After evaluating the formula, we find that the accrued interest is approximately $1,095.89.
To find the maturity value, we add the principal amount to the accrued interest:
Maturity Value = Principal + Accrued Interest
Maturity Value = $210,000 + $1,095.89
Therefore, the maturity value of the note is approximately $211,095.89. Rounded to the nearest dollar, the answer is C. $211,000.
The maturity value of the note is $211,726. The correct answer is option B. $211,726.
To calculate the maturity value of the note, we need to determine the interest accrued over the 75-day period and add it to the principal amount. The formula for calculating simple interest is:
[tex]\[ \text{Interest} = \text{Principal} \times \text{Rate} \times \text{Time} \][/tex]
Where:
- Principal = $210,000
- Rate = 4% (or 0.04)
- Time = [tex]\(\frac{75 \, \text{days}}{365 \, \text{days/year}}\)[/tex]
Calculation:
1. Calculate the Time Fraction:
[tex]\[ \text{Time} = \frac{75}{365} \approx 0.20548 \, \text{years} \][/tex]
2. Calculate the Interest:
[tex]\[ \text{Interest} = 210,000 \times 0.04 \times 0.20548 \approx 1,726.03 \][/tex]
3. Calculate the Maturity Value:
[tex]\[ \text{Maturity Value} = \text{Principal} + \text{Interest} \][/tex]
[tex]\[ \text{Maturity Value} = 210,000 + 1,726.03 \approx 211,726 \][/tex]
)Investors in international finance are moving funds from Country X to other countries. This depreciation is causing even more disenchantment with Country X's currency. Describe the affects will this have on the supply and demand curves for this currency on the foreign exchange markets.
The movement of funds away from Country X leads to a shift in the supply and demand curves for its currency in the foreign exchange markets, increasing supply and decreasing demand. This shift results in the depreciation of Country X's currency.
When investors in international finance move funds from Country X to other countries, this behavior influences the foreign exchange markets. As there is a depreciation of Country X's currency, a negative sentiment is cultivated among investors, leading to a further decline in demand for the currency. Consequently, the demand curve for Country X's currency will shift to the left (a decrease in demand) on the foreign exchange market graphs.
At the same time, an increase in the supply of Country X's currency will occur because investors are selling it off. This action shifts the supply curve to the right (an increase in supply). Since the supply of the currency is rising while the demand for it is falling, there will be a downward pressure on the currency's value, causing it to depreciate relative to other currencies.
Ein consequence of this depreciation may be that the rate of return on foreign assets decreases. If investors anticipated the depreciation and adjusted their expectations, they might find their investments less attractive, thus further reducing the demand for the depreciating currency. This is a detrimental cycle that can lead to a persistent decline in the currency's value, prompting capital flight and potential economic instability within Country X.
York’s outstanding stock consists of 80,000 shares of cumulative 7.5% preferred stock with a $5 par value and also 200,000 shares of common stock with a $1 par value. During its first four years of operation, the corporation declared and paid the following total cash dividends:
2015 $ 20,000
2016 28,000
2017 200,000
2018 350,000
Determine the amount of dividends paid each year to each of the two classes of stockholders assuming that the preferred stock is cumulative. Also determine the total dividends paid to each class for the four years combined. (Round your "Dividend per Preferred Share" answers to 3 decimal places.)
Dividends paid to each class of stockholders can be calculated by multiplying the dividend rate and number of shares. Preferred stockholders receive a fixed dividend rate, while common stockholders receive the remaining dividends. The total dividends paid to the preferred stockholders over four years is $897,000, and the total dividends paid to the common stockholders is $309,000.
Explanation:The amount of dividends paid each year to each class of stockholders can be calculated by multiplying the dividend rate by the number of shares. For the preferred stock, the dividend rate is 7.5% of the par value of $5, yielding $0.375 per share. The total dividends paid to the preferred stockholders for each year are as follows: 2015 - $30,000, 2016 - $42,000, 2017 - $300,000, and 2018 - $525,000. The total dividends paid to the preferred stockholders for the four years combined is $897,000.
The common stockholders do not receive a fixed dividend rate like the preferred stockholders. Instead, they receive the remaining amount of dividends after the preferred stockholders are paid. To determine the dividends paid to the common stockholders, subtract the amount paid to the preferred stockholders from the total dividends declared each year. The total dividends paid to the common stockholders for each year are as follows: 2015 - $20,000, 2016 - $14,000, 2017 - $100,000, and 2018 - $175,000. The total dividends paid to the common stockholders for the four years combined is $309,000.
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One criteria for deciding whether to have a server active all the time or have it start on demandusing a process server is how frequently the service provided is used. Can you think of any othercriteria for making this decision?
Answer:
The other criteria could be about the expected delay that is acceptable to customer in the processing time of the server.
Explanation:
If the customers are ready to accept a certain delay then it can help making the decision whether to keep the server permanently on, as it consumes high power.
Also if it is not used all the time then keeping it on all the time would be wastage of resources.
Thus, the scheduling of the expected time at which they use, and the acceptable delay would provide a proper criteria for this.
A company has 525 shares of $61 par value preferred stock outstanding. It also has 21,000 shares of common stock outstanding, and the total value of its stockholders' equity is $716,625. The company's book value per common share equals:
Answer:
$32.6
Explanation:
Please see attachment
Conundrum Mining is expected to generate the above free cash flows over the next four years,after which they are expected to grow at a rate of 6% per year. If the weighted average cost ofcapital is 12% and Conundrum has cash of $80 million, debt of $60 million, and 30 millionshares outstanding, what is Conundrumʹs expected terminal enterprise value?A) $413.4 millionB) $459.3 millionC) $505.3 millionD) $528.2 million
Answer:
B. 459.3 million
Explanation:
FCF5 = $26 million * (1 + 0.06) = 27.6 million
and to continue
V4 = $27.6 million / (0.12 - 0.06) = 459.3 million
The terminal enterprise value cannot be accurately calculated with the provided data because the free cash flow in the final projected year is missing, which is critical for calculating the terminal value in the Gordon Growth Model.
Explanation:The student is asking for the expected terminal enterprise value of Conundrum Mining. First, we calculate the present value of the free cash flows using the given discount rate of 12%. Given the free cash flows are $15 million, $20 million, and $25 million for the present, first, and second year respectively, we discount these by the weighted average cost of capital. The present values then become: $15 million, $20 million/(1+0.12) = $17.86 million, and $25 million/(1+0.12)² = $19.88 million. This gives a total present value of $52.74 million.
Next, we calculate the terminal value which is the present value of all future cash flows growing at a constant rate. This can be calculated using the formula: Terminal Value = (Cash Flow in Final Year * (1 + growth rate)) / (discount rate - growth rate). However, an important piece of information, the free cash flow in the last projected year, is missing in the question. Therefore, it's impossible to accurately calculate the terminal enterprise value with the provided data.
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Trendy T's Corporation manufactures t- shirts, which is its only product. The standards for t -shirts are as follows: Standard direct labor cost per hour Standard direct labor hours per t-shirt $19.00 0.4 During the month of January, the company produced 1,400 t- shirts. Related production data for the month follows: Actual direct labor hours Actual direct labor cost incurred 680 $10,880 What is the direct labor eficiency variance for the month? O A. $2,040 unfavorable B. $2,040 favorable O C. $2,280 favorable O D. $2,280 unfavorable
Answer:
Option (D) is correct.
Explanation:
Given that,
Standard direct labor cost per hour, SR = $19 per hour
Standard direct labor hours per t-shirt = 0.4 hours
Actual direct labor hours, AH = 680
Actual output = 1,400 t-shirts
Standard hours for actual output, SH:
= Standard direct labor hours per t-shirt × T-shirts produced
= 0.4 hours × 1,400
= 560
Therefore,
Direct labor efficiency variance for the month:
= (SH - AH) × SR
= (560 - 680) × $19
= $2,280 Unfavorable
You have been hired by the No Hassle Collection Agency to provide economic advice. The owner of the agency tells you that No Hassle's only variable input is the number of collection agents. The hourly wage for collection agents is $40.00. The marginal revenue product curve for collection agents reaches its maximum at five workers with a marginal revenue product of $34.00. What advice would you give this firm?
Answer:
The marginal revenue product has a property known as diminishing marginal return.
The property of diminishing marginal return tells us that theres an amount of input that maximizes revenue, and after this point is reached, additional units of input less addional revenue until diminishing it.
In this example, the Collection Agency is way past the maximum revenue point (located at $34.00 per worker). It needs to lay off employees until it goes from the current $40.00 marginal revenue product, until $34.00 marginal revenue product.
Which of the following are ways that a firm could attempt to demonstrate product differentiation? Select all that apply:
through advertisement about its product's notable features
pricing the product differently for different customers
offering a warranty that is more generous than most competitors
running a sale on its product
Answer:
through advertisement about its product's notable features
offering a warranty that is more generous than most competitors
Explanation:
Product differentiation is basically aimed to make a product that is different from other products.
That the characteristics and features of the product are different from that are already present in the market.
Displaying notable features in the advertisement provides for product differentiation in the consumers.
Also providing extra warranty is a feature which will add to the product differentiation.
Final answer:
A firm can demonstrate product differentiation by advertising its product's notable features, using different pricing strategies, and offering a more generous warranty than competitors. These strategies make the product appear unique and enhance the perception of its value. Running a sale is not a typical method of differentiation, as it does not indicate the product is distinct, but rather offers a temporary price incentive.
Explanation:
The firm can demonstrate product differentiation by advertising the notable features of its product, pricing the product differently for different customers, and offering a more generous warranty than competitors. These approaches are designed to make the firm's product stand out in the marketplace and create a perception of uniqueness among consumers.
Advertising can help shape the intangible aspects of a product and influence consumer preferences by highlighting the unique features and benefits of the product. Offering a generous warranty is also an intangible aspect that not only adds value but also reinforces the product's quality and reliability, distinguishing it from competitors. Different pricing strategies can also signal to different customer segments that the firm's product has special qualities or offers unique value.
Furthermore, running a sale can often attract consumer attention and suggest a good deal, but it is not typically a method of product differentiation as it does not necessarily imply that the product is different; rather, it indicates a temporary price reduction. Therefore, running a sale is not as much about differentiation but more about pricing tactics to boost sales volume.
2017, one article in the Wall Street Journal had the headline: "Federal Reserve Expected to Deliver Rate Increase." Source: David Harrison, "Federal Reserve Expected to Deliver Rate," Wall Street Journal , June 14, 2017. What rate was the headline likely referring to?
(A) Federal funds rate.
(B) Commercial rate.
(C) Discount rate.
(D) Treasury rate.
Answer:
The correct option is A that is federal funds rate
Explanation:
Federal funds rate is the rate of interest which is charged by the banks on other banks in order to lend or give them the money from the balance of reserve on an overnight ground . And in accordance with the law, the banks need to preserve or keep a reserve, that is equal to a particular % (percentage) of the deposits in the account at a Federal Reserve bank.
The headline is likely to address the federal funds rate in the journal.
* Government support programs for sugar products were introduced in the 1930s, yet are still in place long after the original rationale disappeared. What does this tell you about political decisions relating to international trade?
Answer:
It tells us that agriculture is a politically-sensitive sector, and agricultural protectionism is very common not only in the US, but also in the rest of the developed world.
In most trade agreements, countries add protections for specific primary sectors. The rationale is protect farmer's incomes and modes of living, but the economic reality is that these subsidies tend to produce either higher prices for consumers, or overproduction. In the US, for example, many analysts argue that corn subsidies are directly related with the high obesity levels in the country, because so much corn is produced that corn syrup is added to a wide variety of foods.
The following bond investment transactions were completed during 2016 by Starks Company:
Jan. 31 Purchased 75, $1,000 government bonds at 100 plus 30 days’ accrued interest. The bonds pay 6% annual interest on July 1 and January 1.
July 1 Received semiannual interest on bond investment.
Aug. 29 Sold 35, $1,000 bonds at 98 plus $350 accrued interest.
Required:
a. Journalize the entries for these transactions. Refer to the Chart of Accounts for exact wording of account titles. Assume a 360-day year.
b. Provide the December 31, 2016, adjusting journal entry for semiannual interest earned on the bonds.
Answer:
31st Jan 2016
Dr Bond Receivable 75,000
Dr Interest Receivable 375
Cr Cash 75,375
(to record the bond purchase)
* working note: Bond proceed = 75 x 1,000 = 75,000; Interest receivable = 75,000 x 6% x 30/360 = 375)
1st Jul 2016
Dr Cash 2,250
Cr Interest Income 1,875
Cr Interest Receivable 375
(to record interest receipt on bonds holding, in which 5 months of it ( 75,000 x 6% x 5/12 is recorded as Income, the other one is recorded as collection of Income earned by the bond's seller)
29th Aug 2016
Dr Cash 34,650
Dr Loss on bond Investment 700
Cr Interest income 350
Cr Bond Receivable 35,000
( to record the Sold 35, $1,000 bonds at 98% plus $350 accrued interest = 35,000 x 98% + 350 = 34,650)
31st Dec 2016
Dr Interest Receivable 1,200
Cr Interest Income 1,200
( to record the interest earned on 40,000 bonds outstanding)
Explanation:
Brisco Bricks purchases raw material from its foreign supplier, Bolivian Clay, on May 8. Payment of 2,000,000 foreign currency units (FC) is due in 30 days. May 31 is Brisco's fiscal year-end. The pertinent exchange rates were as follows:
May 8 Spot rate: $ 1.25
May 31 Spot rate: $ 1.26
Jun. 7 Spot rate: $ 1.20
For what amount should Brisco's Accounts Payable be credited on May 8?
Answer:
$2,500,000
Explanation:
The computation of the amount which would be credited is shown below:
= Payment of foreign currency units (FC) is due in 30 days × exchange rate i.e spot rate on May 31
= 2,000,000 × $1.25
= $2,500,000
We simply multiply the payment with the spot rate so that the accurate value can come.
All other information which is given is not relevant. Hence, ignored it
GEICO, the number-two auto insurer with $15 billion in revenue last year, spent $0.9 billion on advertising that year and plans to continue spending the same percentage of sales on advertising next year. The average advertising-to-sales ratio for the insurance industry is 0.1 percent of sales. If GEICO projects $20 billion in sales next year, using the percentage-of-sales method of advertising budgeting, how much will the company budget for advertising of basing it on projected sales?
Based on the given percentage-of-sales method, if GEICO continues to allocate 0.1% of its sales to advertising, it should budget $20 million for advertising next year.
Explanation:The question is asking for the projected advertising budget for GEICO if it continues to Base its advertising expenses on its sales, a method known as the percentage-of-sales method. Given that the insurance industry's average advertising-to-sales ratio is 0.1 percent of sales, this is the percentage we'll apply to GEICO's projected sales to estimate its advertising budget.
To find out how much GEICO will spend on advertising next year based on the given percentage, we need to multiply the projected sales by the average advertising-to-sales ratio. So, GEICO's advertising budget will be: $20,000,000,000 × 0.001 = $20,000,000. This means that if GEICO continues to allocate 0.1% of its sales to advertising, it should budget $20 million for advertising next year.
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You currently don't have a car, but rent a car that's parked just outside your house whenever you need one. Your annual expenditure on rental cars is $2,200.
You've now considering purchasing a car that would give you the same level of convenience as your current life style. The car costs $23,000 and can be sold for $5,000 after 10 years. You'd purchase the car with money from your savings account which always earns an interest rate of 6%.
Assume that all cash flows occur at the end of each year (maybe because you drive much more around Thanksgiving and Christmas).
Part 1) What is the present value of the benefits of owning that car, ie., saving on rental expenses and selling the car?
Part 2) Should you buy the car? O No O Yes
To calculate the present value of car ownership benefits, we use the rental savings and future sale value, adjusted for a 6% interest rate. If the total present value is less than the cost of buying the car, it is financially advisable to purchase the car.
Explanation:Part 1: Present Value of Car Ownership Benefits
To calculate the present value (PV) of the benefits of owning the car, we need to consider the savings on rental expenses and the future sale of the car. We have annual rental expenses of $2,200 and a future sale value of $5,000 after 10 years. Using the given interest rate of 6%, the formula for the present value of an annuity can be used to find the present value of the rental savings, and the formula for the present value of a lump sum can be used for the sale price of the car.
The formula for the present value of an annuity is PV = PMT * [(1 - (1 + r)^-n) / r], where PMT is the annual payment, r is the interest rate, and n is the number of periods. In this case, PMT = $2,200, r = 0.06, and n = 10. The present value of the car's resale value is calculated using the formula PV = FV / (1 + r)^n, where FV is the future value.
Part 2: Should You Buy the Car?
To determine if the student should buy the car, we compare the present value of buying and owning the car to the present value of continuing to rent. If the present value of ownership is less than or equal to the present value of renting, then buying the car is a financially sound decision. Based on the calculation from Part 1, if the PV of ownership is less than $23,000, then the main answer would be yes, they should buy the car.