The Question is incomplete.
The complete question is as follows:
It announces that it plans to pay dividends of $1 per share exactly three years from now and $2 per share exactly four years from now. From year 5 onwards, dividends are expected to grow at a constant rate of 10% per year. The company pays no dividends in years one and two. The risk-free rate is 5%, the company's beta is 1.5 and the expected return on the market is 11%. Calculate the price of this stock today
Answer:
Price of stock = $34.42
Explanation:
The Dividend Valuation Model is a technique used to value the worth of an asset. According to this model, the worth of an asset is the sum of the present values of its future cash flows discounted at the required rate of return.
Required rate of return
Using the CAPM , the rate of return on equity can be determined as follows:
E(r)= Rf +β(Rm-Rf)
E(r) =? , Rf- 5%, Rm- 11%, β- 1.5
Ke = 5% + 1.5× (11-5)%
= 14%
Present value of Dividends(PV)
Year PV
3 $1.00, × (1.14^(-3) = 0.6749
4 $2.00× 1.14^(-4) = 1.18416
5 and beyond
This will be done in two (2) steps as follows:
PV in year 4 = (2 × 1.10) /(0.14-0.1) = 55
PV in year 0 = 55× 1.14^(-4) = 32.56
Price of stock
= 0.6749 + 1.18416 + 32.56
= $34.423
Georgia Meadows Company uses the high-low method to analyze production costs. The following information relates to the production data for the first six months of the year. Month Cost(Y) Hours(H) January $ 8,542 6,530 February $ 7,750 5,950 March $ 9,700 7,500 April $ 7,435 5,700 May $ 7,200 5,500 June $ 9,263 6,750 What is the estimated total cost at an operating level of 8,000 hours?
Answer:
Total cost= $10,325
Explanation:
Giving the following information:
Month Cost(Y) Hours(H)
January: $8,542 - 6,530
February: $7,750 - 5,950
March: $9,700 - 7,500
April: $7,435 - 5,700
May: $7,200 - 5,500
June: $9,263 - 6,750
To calculate the total cost under the high-low method, we need to use the following formulas:
Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)
Variable cost per unit= (9,700 - 7,200) / (7,500 - 5,500)
Variable cost per unit= $1.25 per hour
Fixed costs= Highest activity cost - (Variable cost per unit * HAU)
Fixed costs= 9,700 - (1.25*7,500)= $325
Fixed costs= LAC - (Variable cost per unit* LAU)
Fixed costs= 7,200 - (1.25*5,500)= $325
Now, for 8,000 hours:
Total cost= 325 + 1.25*8,000= $10,325
Ann M. Martin Company makes the following errors during the current year. (Evaluate each case independently and assume ending inventory in the following year is correctly stated.) 1. Ending inventory is overstated, but purchases and related accounts payable are recorded correctly. 2. Both ending inventory and purchases and related accounts payable are understated. (Assume this purchase was recorded and paid for in the following year.) 3. Ending inventory is correct, but a purchase on account was not recorded. (Assume this purchase was recorded and paid for in the following year.) Indicate the effect of each of these errors on working capital, current ratio (assume that the current ratio is greater than 1), retained earnings, and net income for the current year and the subsequent year.
Answer:
Please find the detailed answer in the explanation section.
Explanation:
CURRENT YEAR SUBSEQUENT YEAR
1. Working Capital Overstated No effect
Current Ratio Overstated No effect
Retained Earnings Overstated No effect
Net Income Overstated Understated
2. Working Capital No effect No effect
Current Ratio Overstated No effect
Retained Earnings No effect No effect
Net Income No effect No effect
3. Working Capital Overstated No effect
Current Ratio Overstated No effect
Retained Earnings Overstated No effect
Net Income Overstated Understated
Shelby Corporation was organized in January to operate an air-conditioning sales and service business The charter issued by the state authorized the following capital stock: Common stock, $1 par value, 200,000 shares. Preferred stock, $10 par value, 6 percent, 50,000 shares During January and February, the following stock transactions were completed: a. Collected $841,000 cash and issued 29,000 shares of common stock b. Issued 19,500 shares of preferred stock at $39 per share; collected in cash Net income for the year was $59,000; cash dividends declared and paid at year-end were $10,000 Required Prepare the stockholders' equity section of the balance sheet at December 31 SHELBY CORPORATION Balance Sheet (Partial) At December 31 Stockholders' Equity Contributed Capital: Total Contributed Capital 0 Total Stockholders' Equity
Answer: Please refer to Explanation
Explanation:
This is how the stockholders' equity section of the balance sheet at December 31 should look like,
STOCKHOLDERS'S EQUITY
Contributed Capital
Common Stock (29000 shares x $ 1 par) $29,000
Preferred Stock (19500 shares x $ 10 par) $195,000
Paid in Capital in excess of Common Stock at par ($841000 - $29000) $812,000
Paid in Capital in excess of Preferred Stock at par (19500 shares x ($39 - $10)) $565,500
Total Contributed Capital (sum of all of the above) $1,601,500
Retained Earnings ( $59,000 - $10,000) $49,000
Total Stockholder's Equity (Retained Earnings to contributed cap) $1,650,500
If you need any clarification do comment.
The total stockholder's equity will be $1650500.
The total stockholder's equity will be calculated thus:
Contributed Capital
Common Stock = 29000 x $1 = $29,000
Preferred Stock = 19500 x $10 par = $195,000
Paid in Capital in excess of Common Stock at par = $841000 - $29000 = $812,000
Paid in Capital in excess of Preferred Stock at par = $19500 shares x ($39 - $10) = $565,500
Total Contributed Capital = $1,601,500
Retained Earnings = $59,000 - $10,000 = $49,000
Therefore, the total stockholder's equity will be:
= $1,601,500 + $49,000
= $1,650,500
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Employees earn vacation pay at the rate of one day per month. During the month of June, 10 employees qualify for one vacation day each. Their average daily wage is $150 per day. Which of the following is the necessary adjusting journal entry to record the June vacation benefits?
A. Debit Vacation Benefits Expense $1,500; credit Prepaid Vacation Benefits $1,500.B. Debit Vacation Benefits Expense $1,500; credit Vacation Benefits Payable $1,500.C. Debit Payroll Tax Expense $1,500; credit Payroll Taxes Payable $1,500.D. Debit Prepaid Vacation Benefits $1,500; credit Vacation Benefits Payable $1,500.E. Debit Vacation Benefits Payable; credit Vacation Benefits Expense $1,500.
Answer:
B. Debit Vacation Benefits Expense $1,500; credit Vacation Benefits Payable $1,500
Explanation:
Lets consider all the other options to eliminate them from our choice
Option A: The entry provided debits the vacation benefits expenses and credits the prepaid vacation benefits. The liability for the vacation credit earned by the employees during the month needs to be recorded so this is not an adjustment of an advance vacation benefit.
Option C: The required entry has nothing to do with taxes so not relevant.
Option D: The entry is to record the liability for vacations earned by the employees so an expenses has to be recorded.
Option E: The option reduces the liability and reduces the expenses which is against the requirement of the question
Wildcat Co. purchased, on open account, 4,000 pounds of direct materials at a total cost of $20,200. The standard cost of these materials, at $5.00 per pound, was $20,000. The company records any price variance for direct materials at point of purchase. During the current month 1,000 units of output were produced. Each unit of output, at standard, requires 2 pounds of direct materials, at $5.00 per pound. A total of 1,950 pounds of material was consumed in production during the month. The direct labor payroll for the period was $25,000 and has yet to be paid. The standard direct labor hours to produce each unit is 2 and the standard wage rate per hour is $11. The actual wage rate per hour was $10. The standard direct manufacturing cost for each unit is $32. During the month, 1,000 units were produced. During the month, 900 units were sold, at a price of $50 per unit. Record the journal entries for each of the events and transactions.
Answer:
Explanation:
The pictures attached shows the full explanation
Beta Company expects to incur overhead costs of $20,000 per month and direct production costs of $125 per unit. The estimated production activity for the upcoming year is 1,000 units. If the company desires to earn a gross profit of $50 per unit, the sales price per unit would be which of the following amounts
A) $379
B) $187
C) $136
D) $195
Answer:
$415
Explanation:
For computing the sales per unit first we have to determine the total sales value which is shown below:
Direct Production costs (1,000 units × $125) $125,000
Fixed Overhead costs for the year = $20,000 × 12 months = $240,000
Total Costs for the year $365,000
Gross Profit desired (1,000 units × $50) $50,000
Total Sales Value desired = Costs + Profit $415,000
Now
Sales price per unit is
= $415,000 ÷ 1,000 units
= $415
This is the answer but the same is not provided
The sales price per unit needed for Beta Company to achieve a gross profit of $50 per unit is $195, calculated by adding the per-unit production and overhead costs to the desired profit margin.
Explanation:To calculate the sales price per unit that Beta Company needs in order to achieve a gross profit of $50 per unit, we need to consider the given costs and desired profit margin. The company expects overhead costs of $20,000 per month. With an estimated production activity of 1,000 units, these fixed costs become $20 per unit (overhead costs / estimated production). The direct production cost is $125 per unit. Adding these costs together we get the total cost per unit, which is $125 (direct costs) + $20 (overhead per unit) = $145 per unit. To achieve a gross profit of $50, we add this desired profit to the total cost per unit, resulting in a sales price per unit of $195 ($145 + $50).
Cash Budget Pasadena Candle Inc. pays 40% of its purchases on account in the month of the purchase and 60% in the month following the purchase. If purchases are budgeted to be $40,000 for August and $36,000 for September. Prepare a simple cash budget for Pasadena Candle Inc. Pasadena Candle Inc. Schedule of Cash Payments for Purchases For the Month Ending September $ Total payments for purchases on account $
Answer:
Total payments for purchases on account $38,400
Explanation:
September Payments for Purchases include
40% of September Sales60% of August SalesSchedule of Cash Payments for Purchases For the Month Ending September
September Sales ($36,000×40%) = $14,400
August Sales ($40,000×60%) = $24,000
Total = $38,400
Answer:
Th e cash payments in the month of September is $38,400
Explanation:
August September
Cash payment $16,000 $14,400
balance of August purchases $24,000
September total payments $38,400
In August 40% of $40,000 would be paid since $40,000 was the worth of the purchases in August i,e $40000*40%=$16,000
In September the remaining 60% of $40,000 is due for payment i.e $40,000*60%=$24,000
In September 40% of the month purchases is due for payment,that is $36,000*40%=$14,400
The balance of 60% of $36,000 would be paid in October.
Valuing Trading Securities at Fair Value On January 1, Valuation Allowance for Trading Investments had a zero balance. On December 31, the cost of the trading securities portfolio was $41,500, and the fair value was $46,300. Prepare the December 31 adjusting journal entry to record the unrealized gain or loss on trading investments.
Answer:
Dr. Trading securities $4,800
Cr. Unrealized gain on trading securities $4,800
Explanation:
Trading securities are recorded reported on the fair market value. The gain or loss arise from the increase or decrease in the value of trading securities. There is a gain if the price of trading security increases and loss when the price of the trading security decreases. Unrealized gains are reported in the separate section of stockholders equity.
Gain on Trading securities = Fair value of security portfolio - Cost of security portfolio = $46,300 - $41,500 = $4,800
Blue Split sells ice cream cones in a variety of flavours. The following are data for a recent week: Revenue (1,000 cones at $1.85 each) $1,850 Cost of ingredients $660 Rent 540 Store attendant 640 1,840 Pretax income $10 The manager estimates that if she were to increase the price of cones from $1.85 to $2.02 each, weekly volume would be cut to 850 cones due to competition from other nearby ice cream shops. Estimate the profit-maximizing price per cone.
Answer:
$1.40
Explanation:
Per cent change in price = ($2.02– $1.85)/$1.85 = +9%
Per cent change in demand = (1000 – 850)/1000 = –15%
The elasticity is = ln(1 + per cent change in quantity sold)/ln(1 + per cent change in price)
= ln(1 – 0.15)/ln(1 + 0.09)
= –0.16252/0.08618
= –1.886
Variable cost = $660/1000
Profit-maximising price = [–1.886/(–1.886+1)]*$0.66 = $1.40
An economy is operating with output $300 billion above its natural level, and fiscal policymakers want to close this expansionary gap. The central bank agrees to adjust the money supply to hold the interest rate constant, so there is no crowding out. The marginal propensity to consume is 3/5, and the price level is completely fixed in the short run.
Required:
1. To close the expansionary gap, the government would need ____________.
Answer:
$120 billion
Explanation:
Economy operating at $300 billion above its natural level of output.
Marginal propensity to consume, MPC = 3/5 = 0.6
For closing this expansionary gap, the government have to decrease its spending by the amount calculated as follows:
Spending multiplier:
= 1/ (1 - MPC)
= 1/ (1 - 0.6)
= 1/ 0.4
= 2.5
Hence, the government spending reduces by
= Expansionary gap ÷ Spending multiplier
= $300 ÷ 2.5
= $120 billion
Capital budgeting is: the process of finding the cost to start a new project. the process of deciding which project to do to increase the firm’s value. the process of budgeting companies monthly revenue and cost. the process of estimating how long the life of a new project. None of the above.
Answer:
the process of deciding which project to do to increase the firm’s value.
Explanation:
Some of the Capital budgeting methods include:
1. internal rate of return- internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested.
2. Cash pay back period- it is the period it takes to recover the amount invested in a project from its cummulative cash flows.
3. Net present value: net present value is the present value of after tax cash flows from an investment less the amount invested.
I hope my answer helps you
Capital budgeting is the process by which firms decide which long-term investments will maximize their value, involving the analysis of potential earnings and the source of capital required for these investments.
Capital budgeting is the process of deciding which project to do to increase the firm’s value. It involves evaluating the long-term profitability and financial impact of potential investments and projects. Firms raise financial capital to fund these projects, which can come from early-stage investors, reinvesting profits, borrowing, or selling stock.
Capital budgets differ from operating budgets in that they are used for long-term investments in assets like buildings and machinery, and are part of a capital improvement plan identifying long-term spending needs.
Unlike operating budgeting, which includes recurring spending items for day-to-day operations such as salaries and utilities, capital budgeting focuses on investments that will benefit the firm in the future, like purchasing new equipment or building new facilities. These decisions are crucial because they can impact a firm's earnings for years to come. Therefore, capital budgeting often involves cost analysis, comparison with potential revenues, and consideration of the cost of various sources of capital.
Ollie Company experienced the following events during its first-year operations: 1. Acquired $72,000 cash from the issue of common stock. 2. Borrowed $26,000 from the First City Bank. 3. Earned $59,000 of cash revenue. 4. Incurred $43,000 of cash expenses. 5. Paid a $7,000 cash dividend. 6. Paid $43,000 to purchase land. Required: Prepare a statement of changes in stockholders' equity.
Answer and Explanation:
The preparation of the statement of changes in stockholders' equity is presented below:
Ollie Company
Statement of changes in stockholders' equity
Beginning common stock $0
Add: Common stock issuance $72,000
Ending common stock $72,000
Beginning retained earning $0
Add: Net income $16,000 ($59,000 - $43,000)
Less: cash Dividend paid -$7,000
Ending retained earning $9,000
Total stockholder equity $81,000 ($72,000 + $9,000)
The ending total stockholders' equity for Ollie Company in its first-year operations would be $81,000. This is after considering the money gained from issuing common stock, net income, and cash dividend paid.
Explanation:The statement of changes in stockholders' equity for Ollie Company for its first-year operations would include the following:
The company acquired $72,000 cash from the issue of common stock. The common stock amount should increase by $72,000.The company did not issue any additional stock nor did it repurchase any stock, hence other factors affecting the common stock remain the same.The company borrowed $26,000. This transaction affects liabilities, not the stockholder's equity. Thus, this event won't be reflected on the statement of changes in stockholders' equity.The company earned $59,000 of cash revenue and incurred $43,000 of cash expenses. The difference becomes net income of $16,000. This amount is added to beginning retained earnings.The company paid a $7,000 cash dividend, which reduces retained earnings by $7,000.So the ending total stockholders' equity for Ollie Company would be the sum total of $72,000 (from issuing common stock), $16,000 (net income), and -$7,000 (cash dividend), which sums to a total of $81,000.
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Lyons Company deducts insurance expense of $210,000 for tax purposes in 2018, but the expense is not yet recognized for accounting purposes. In 2019, 2020, and 2021, no insurance expense will be deducted for tax purposes, but $70,000 of insurance expense will be reported for accounting purposes in each of these years. Lyons Company has a tax rate of 40% and income taxes payable of $180,000 at the end of 2018. There were no deferred taxes at the beginning of 2018. What is the amount of the deferred tax liability at the end of 2018?
Answer:
$84,000
Explanation:
Deferred tax liability at the end of 2018 = Amount of insurance expense × Tax rate = $210,000 × $40% = $84,000
Therefore, the amount of the deferred tax liability at the end of 2018 is $84,000.
Listed below are various transactions that a company incurred during the current year. Select the impact on total stockholders’ equity for each scenario. Specifically state whether stockholders’ equity would increase (I), decrease (D), or have no effect (NE) as a result of each transaction listed below. Consider each transaction independently.
1. No par common stock is issued.
2. Treasury stock is sold at cost for cash (assume the cost method).
3. Treasury shares of preferred stock are purchased (assume the cost method).
4. A payment date occurs for a cash dividend.
Answer: Please refer to Explanation
Explanation:
1. No par common stock is issued. NO EFFECT (NE)
There is no effect because this neither increases nor does it reduce Equity.
2. Treasury stock is sold at cost for cash (assume the cost method). INCREASE (I).
This transaction increases equity as Treasury stock is being put into the market. Treasury stock is equity in the company that the company had repurchased.
3. Treasury shares of preferred stock are purchased (assume the cost method). DECREASE (I)
Buying Treasury whether Preferred or Ordinary reduces equity in the company as the company is essentially taking back ownership from owners.
4. A payment date occurs for a cash dividend. DECREASE (D)
Paying out dividends to shareholders has the effect of reducing equity.
Answer:
1.No par issue of common stock -stockholders' equity increases(I)
2.Sale of treasury stock at cost-stockholders' equity increases(I)
3.Purchase of preferred shares-reduces stockholders' equity(D)
4.Payment of cash dividend-no impact on stockholders' equity(NE)
Explanation:
Considering the first transaction of no par common stock issuance,this would increase the value of common stock ,hence stockholders' equity would increase.
Treasury stock sale would increase the stockholders' equity since the company has to receive cash consideration from the affected investors and also reduce treasury stock and concurrently increase total paid-in capital.
Purchase of treasury stock implies reduction in cash and also increase in treasury stock of prefered stock which is negative adjustment to total paid-in capital and retained earnings.
A payment of cash dividend dividend does any affect shareholders' equity since the retained earnings would have been debited at declaration date and dividend payable credited.
Skysong Company purchased an electric wax melter on April 30, 2020, by trading in its old gas model and paying the balance in cash. The following data relate to the purchase. List price of new melter $17,380 Cash paid 11,000 Cost of old melter (5-year life, $770 salvage value) 12,320 Accumulated Depreciation-old melter (straight-line) 6,930 Secondhand fair value of old melter 5,720 Prepare the journal entries necessary to record this exchange, assuming that the exchange (a) has commercial substance, and (b) lacks commercial substance. Skysong’s fiscal year ends on December 31, and depreciation has been recorded through December 31, 2019. (C
Answer:
(a) has commercial substance
J1
Electric wax melter 5,720 (debit)
Accumulated depreciation :old gas model 6,930 (debit)
Old gas model : cost 12,320 (credit)
Profit on exchange of old gas model 320 (credit)
J2
Electric wax melter 11,000 (debit)
Cash 11,000 (debit)
(b) lacks commercial substance
J1
Electric wax melter 5,390 (debit)
Accumulated depreciation :old gas model 6,930 (debit)
Old gas model : cost 12,320 (credit)
J2
Electric wax melter 11,000 (debit)
Cash 11,000 (debit)
Explanation:
In terms of IAS 16, if an exchange of non-monetary item has commercial substance the Asset Acquired is measured at the Fair Value of Asset Given up or Fair Value of Asset Acquired.
However if an exchange of non-monetary item lacks commercial substance the Asset Acquired is measured at Carrying Amount of Asset Given up and there would no be any gain or loss on the exhange of asset given up.
(a) has commercial substance
J1
Electric wax melter 5,720 (debit)
Accumulated depreciation :old gas model 6,930 (debit)
Old gas model : cost 12,320 (credit)
Profit on exchange of old gas model 320 (credit)
J2
Electric wax melter 11,000 (debit)
Cash 11,000 (debit)
(b) lacks commercial substance
J1
Electric wax melter 5,390 (debit)
Accumulated depreciation :old gas model 6,930 (debit)
Old gas model : cost 12,320 (credit)
J2
Electric wax melter 11,000 (debit)
Cash 11,000 (debit)
The accounting for asset exchanges depends on whether the exchange has commercial substance or not. With commercial substance, the entry involves recording the new asset at its full value, and recognizing gains or losses. Without commercial substance, the entry usually involves recording the new asset at the book value of the old asset plus any cash paid.
Explanation:The question involves journal entries associated with the exchange of assets in accounting, specifically related to Skysong Company's purchase of a new electric wax melter.
First, let's look at the situation when the exchange has commercial substance:Debit Equipment ($17,380: list price of new melter) Credit Accumulated Depreciation ($6,930: accumulated depreciation of old melter) Credit Equipment ($12,320: cost of old melter) Credit Cash ($11,000: cash paid) Now, for the situation where the exchange lacks commercial substance: The calculations might become complex and may require additional data. Usually, the entry would involve recording the new asset at the book value of the old asset (cost - accumulated depreciation), plus cash paid. The gain or loss would then be deferred or recognized depending on the specific circumstances.This type of transactions are guided by Accounting Standards Codification (ASC) 845, which relates to nonmonetary transactions.
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Job A3B was ordered by a customer on September 25. During the month of September, Jaycee Corporation requisitioned $3,300 of direct materials and used $4,800 of direct labor. The job was not finished by the end of September, but needed an additional $3,800 of direct materials and additional direct labor of $7,300 to finish the job in October. The company applies overhead at the end of each month at a rate of 100% of the direct labor cost incurred. What is the total cost of the job when it is completed in October?
Answer:
$35,300
Explanation:
At the end of September total cost =
Material=$3,300
Labour=4800
Overheads(100% ×4800)=4800
Total=12,900
At the end of October total cost=
Material=3800
Labour=9300
Overheads(100% of 9300)=9300
Total=$22400
Total cost of the job at the end of October when it is completed
=$22,400$+$12,900
=$35,300
Therefore the total cost of the job when it is completed in October is $35,300
Final answer:
The total cost of Job A3B is calculated by summing the direct materials, direct labor, and applied overhead for both September and October, resulting in a total cost of $31,300.
Explanation:
The total cost of Job A3B when it is completed in October is calculated by adding the cost of direct materials, direct labor, and applied overhead for both months.
Direct materials: $3,300 (September) + $3,800 (October) = $7,100
Direct labor: $4,800 (September) + $7,300 (October) = $12,100
Applied overhead: Since overhead is applied at a rate of 100% of direct labor cost, it will be equal to the total direct labor cost. Therefore, applied overhead = $12,100.
Now, add up all the costs to find the total production cost:
Total cost = Direct materials + Direct labor + Applied overhead
Total cost = $7,100 + $12,100 + $12,100 = $31,300
Therefore, the total cost of Job A3B is $31,300.
Returns and Actions Kunal Nayyar from London, had $60,000 in investments in the USA at the beginning of the year that consisted of a diversified portfolio of stocks (40 percent), bonds (40 percent), and cash equivalents (20 percent). His returns over the past 12 months were 14 percent on stocks, 5 percent on bonds, and 1 percent on cash equivalents. What is Kunal's average return for the year? Round your answer to one decimal place. % If Kunal wanted to rebalance his portfolio to its original position, what specific actions should he take?
Answer:
Average rate of return is 7.8% , and total amount is $4,680
If Kunal wanted to rebalance his portfolio to its original position, he needs to transfer $672 (= $25,872 - $25,200) from stock account to bond account and $816 ( = $12,936 - $12,120) from stock account to cash.
Explanation:
Total return for year = 14% * (40% of $60,000) + 5% * (40% of $60,000+ 1% *(20% of $60,000) = $4,680
Average rate of return = $4,680/ $60,000 = 7.8%
At beginning, the amount in per diversified portfolio is as below:
Amount invested in stock = 40% * $60,000 = $24,000 Amount invested in bond = 40% * $60,000 = $24,000 Amount in cash = 20% *$60,000 = $12,000
After receiving return, the amount in per diversified portfolio is as below:
Amount invested in stock = $24,000 *(1+14%) = $27,360
Amount invested in bond = $24,000 *(1+5%) = $25,200 Amount in cash = $12,000 * (1 + 1%) = $12,120
And amount in Kunal’s investment fund = $27,360 + $25,200 + $12,120 = $64,680
If Kunal wanted to rebalance his portfolio to its original position, the amount in per diversified portfolio is as below:
Amount invested in stock = 40% * $64,680 = $25,872
Amount invested in bond = 40% * $64,680 = $25,872 Amount in cash = 20% * $64,680 = $12,936
⇒ Kunal needs to transfer $672 (= $25,872 - $25,200) from stock account to bond account and $816 ( = $12,936 - $12,120) from stock account to cash.
Linda is the director of HR at Colette Value Inc., a large tax-preparation firm. The firm faces a dearth of tax preparers every year when the tax season approaches. Every December, Linda outsources a bulk of the recruiting process to an employment agency to recruit temporary employees before the tax season begins. However, she wants to do so without excessively limiting her final hiring decisions. Which of the following processes of recruitment should Linda carry out first hand?
A) Advertising for recruitment over the Internet
B) Preliminary screening of résumés
C) Designing the employment advertisements
D) Face-to-face interviews with finalists
Answer:
The correct answer is letter "D": Face-to-face interviews with finalists.
Explanation:
As Linda does not want to limit her hiring decision, she should let the employment agency to be in charge of the recruiting process but intervene in the face-to-face interviews with the finalists. In such a way, she will make sure that the agency is screening the correct applicants, and Linda, eventually, will have the final decision in the selection process.
What are corrective actions, how does the project manager know that corrective action is needed, how are the root causes of corrective actions determined, how is the effectiveness of a corrective action measured, and what happens if the necessary corrective action is not performed in a timely fashion
Answer:
1. Corrective actions are actions executed to prevent occurrences of an identified hazard or to prevent the recurrence of an issue. Corrective actions may also question and seek proper handling of a weakness identified in a safety management system.
2. Project managers employ corrective actions when a specific task or project may have lost focus or somehow deviated form the pre-specified direction it was intended to take.
3. The root causes of corrective actions are determined by confirming the identified root cause causes. Basically, a corrective action should correspond to the root cause identified earlier in order to eliminate the real root cause and prevent recurrence of the problem.
4. Verifying the effectiveness of corrective and preventive actions (CAPAs) closes the gap between identifying a problem and completing the actions to solve it. It is reasonable to assume that if a problem is worth solving, it's also worth verifying that the solution worked.
5. It could result to total loss in product or a ruin in the normal sequence of an existing system
A textbook publisher produces a textbook for $25 per book and sells a lot of 160 to the Campus Bookstore for $50 per unit. The bookstore sells the textbook new for $75 and used for $60. This edition of the book is used for 2 years (4 semesters). The bookstore sells all textbooks that it has at the beginning each semester, and it repurchases 50% of those at the end of each semester for $30. What is the net profit for the publisher (sales - costs) over the life of this 160-unit lot of textbooks
Answer:
$4,000
Explanation:
The net profit of the publisher over the useful life of the 160-unit lot of textbooks is the difference between his selling price to the bookstore and the cost incurred multiplied by the number of unit.
Hence the net profit of the publisher
= 160( $50 - $25)
= 160 * $25
= $4,000
Final answer:
The net profit for the publisher is $4,000.
Explanation:
To calculate the net profit for the publisher over the life of a 160-unit lot of textbooks, we first determine the revenue generated from selling these books to the Campus Bookstore and then subtract the costs incurred in producing them. The publisher sells each textbook for $50 and incurs a production cost of $25 per textbook.
The total revenue from selling 160 textbooks to the Campus Bookstore is 160 books × $50/book = $8,000.
The total cost of producing these textbooks is 160 books × $25/book = $4,000.
Therefore, the net profit for the publisher over the life of this 160-unit lot of textbooks is $8,000 - $4,000 = $4,000.
The regular selling price per chaise lounge is $290. The company is analyzing the opportunity to accept a special sales order for 1200 chaise lounge at a price of $210 per unit. Fixed costs would remain unchanged. The company has the capacity to produce 55,000 chaise lounges per year, but is currently producing and selling 9000 chaise lounges per year. The 1200 units would not require any variable marketing and administrative expenses. Regular sales will not be affected by the special order. If the company were to accept this special order, how would operating income be affected
Answer:
$84,000
Explanation:
The calculation of operating income is shown below:-
Sales $252,000
(1,200 × $210)
Variable Manufacturing cost $127,200
(1,200 × $106)
Variable marketing and
administrative cost $40,800
(1,200 × $34)
Incremental profit $84,000
So, the incremental profit is $84,000
A used car can be kept for two more years and then sold for an estimated $3000, or it could be sold now for $7500. The average annual maintenance cost over the past 7 years has been $500 per year. However, if the car is kept for two more years this cost is expected to be $1800 the first year and $2000 the second year. As an alternative a new car can be purchased for $22,000 and be used for 4 years, after which it can be sold for $8000. The new car will be under warranty for the first 4 years, and not extra maintenance cost will be incurred during those years. If the MARR is 15% per year what is the better option and why?
a. Keep car, do not buy new one because EUAC Defender is $5111 and EUAC of Challenger is $6104
b. Buy new car because EUAC of challenger is $4904 and EUAC and defender is $5111
c. Buy new car because EUAC of Challenger is -$9308 and EUAC of defender is $498
Final answer:
To determine whether to keep an old car or buy a new one, you calculate and compare the Equivalent Uniform Annual Cost (EUAC) for each, taking into account all costs and the time value of money as per the Minimum Attractive Rate of Return (MARR). The option with the lower EUAC is usually preferred, signaling better economic value over time. Due to discrepancies in the information provided, a precise recommendation cannot be made without accurate data.
Explanation:
Evaluating the Economic Merits of Keeping vs. Buying a Car
To decide between keeping a used car or buying a new one, we need to calculate and compare the Equivalent Uniform Annual Cost (EUAC) for each option. A challenge in this business decision lies in accounting for all associated costs including purchase, maintenance, and sale price, and the time value of money represented by the Minimum Attractive Rate of Return (MARR) over a given period.
For the used car (Defender), we have:
- Future sale price in two years: $3000
- Maintenance costs for the next two years: $1800 and $2000 respectively
- Selling now price: $7500
Calculating the EUAC for the used car incorporates these costs and the MARR of 15%.
The new car (Challenger) would require:
- Initial purchase price: $22,000
- Sale price after 4 years: $8000
- Maintenance costs: $0 (due to warranty)
Again, calculating the EUAC for the new car incorporates the purchase and future sale price and considers the MARR of 15%.
To make an informed decision, we would perform a detailed calculation for each option's EUAC, compare the results, and choose the option with the lower EUAC, indicating a more economical choice over time. However, the information provided appears to contain a discrepancy, and without correct data or further clarification, we cannot provide an exact answer. The concept of EUAC is essential for understanding how to evaluate such financial decisions effectively.
Ziegler Corporation reports net income of $380,000 and a weighted-average of 200,000 shares of common stock outstanding for the year. Compute the earnings per share of common stock
Answer:
$1.90 per share
Explanation:
The computation of the earning per share is shown below:
Earning per share = (Net income - preference dividend) ÷ (weighted-average of shares of common stock)
= ($380,000 - $0) ÷ (200,000 shares)
= $1.90 per share
By dividing the net income with the weighted average number of shares of common stock we can get the earning per share
Final answer:
To calculate the earnings per share for Ziegler Corporation, divide the net income of $380,000 by the 200,000 shares outstanding, giving an EPS of $1.90 per share. This figure aids investors in evaluating the company's per-share profitability and contributes to the P/E Ratio's determination.
Explanation:
To compute the earnings per share (EPS) for Ziegler Corporation, you divide the company's net income by the weighted-average number of common stock shares outstanding. According to the information provided, Ziegler Corporation reports a net income of $380,000 and there are 200,000 shares of common stock outstanding. Therefore, the EPS calculation is as follows:
Earnings Per Share = Net Income / Weighted-Average Shares Outstanding:
$380,000 / 200,000 shares$1.90 per shareThis EPS figure is a significant indicator used by investors to assess the company's profitability on a per-share basis and is often factored into the Price to Earnings (P/E) Ratio, which helps determine the value and investment potential of a stock.
Consider a portfolio consisting of the following three stocks: LOADING.... The volatility of the market portfolio is 10 % and it has an expected return of 8 %. The risk-free rate is 3 %. a. Compute the beta and expected return of each stock. b. Using your answer from part (a), calculate the expected return of the portfolio. c. What is the beta of the portfolio? d. Using your answer from part (c), calculate the expected return of the portfolio and verify that it matches your answer to part (b). a. Compute the beta and expected return of each stock. (Round to two decimal places.) Portfolio Weight (A) Volatility (B) Correlation (C) Beta (D) Expected Return (E) HEC Corp 0.28 10 % 0.48 nothing nothing% Green Widget 0.34 30 % 0.58 nothing nothing% Alive And Well 0.38 11 % 0.59 nothing nothing%
Answer:
Explanation:
Portfolio Weight Volatility Correlation and Market Portfolio
HEC Corp 0.28 10% 0.48
Green Widget 0.34 30% 0.58
Alive And Well 0.38 11% 0.59
a. (i) Calculation of Beta
Coefficient of correlation = Covariance / (SD security*SD market)
HEC Corp: 0.28 = Covariance / (0.10*0.10)
Covariance = 0.0028
Beta of HEC Corp = Covariance / Market variance
= 0.0028 / 0.12² = 0.1944
Beta of HEC Corp = 0.19
Green Widget: 0.34 = Covariance / (0.30*0.10)
Covariance = 0.0102
Beta of Green Widget = Covariance / Market variance
= 0.0102 / 0.30² = 0.113
Beta of Green Widget= 0.11
Alive And Well: 0.38 = Covariance / (0.11*0.10)
Covariance = 0.00418
Beta of Alive And Well = Covariance / Market variance
= 0.00418 / 0.11² = 0.345
Beta of Alive And Well = 0.35
(ii) Calculation of expected return
Expected return = Risk free rate + Beta(Expected return of market - Risk free rate)
HEC Corp = 3 + 0.19 (8-3) = 3.95%
Green Widget = 3 + 0.11 (8-3) = 4=3.55%
Alive And Well = 3 + 0.35 (8-3) = 4.75%
b. Expected return of Portfolio = (3.95 x 0.28) + (3.55 x 0.34) + (4.75 x 0.38) = 4.118%
Expected return of Portfolio = 4.12
c. Beta of portfolio = (0.19 x 0.28) + (0.11 x 0.34) + (0.35 x 0.38) = 0.2236
Beta of portfolio = 0.2236
d. Expected return of portfolio = Risk free rate + Portfolio Beta(Expected return of market - Risk free rate)
= 3 + 0.2236 (8-3) = 4.118%
Expected return of portfolio = 4.12%
Norbury Corporation's net income last year was $27,000. The company did not sell or retire any property, plant, and equipment last year. Changes in selected balance sheet accounts for the year appear below: Increases (Decreases) Asset and Contra-Asset Accounts: Accounts receivable$14,500 Inventory$(3,800) Prepaid expenses$10,000 Accumulated depreciation$26,000 Liability Accounts: Accounts payable$14,000 Accrued liabilities$(8,300) Income taxes payable$2,900 Based solely on this information, the net cash provided by (used in) operating activities under the indirect method on the statement of cash flows would be:
Final answer:
The net cash provided by (used in) operating activities under the indirect method on the statement of cash flows would be $60,900
Explanation:
The student has asked how to calculate the net cash provided by (used in) operating activities under the indirect method on the statement of cash flows for Norbury Corporation based on the provided changes in balance sheet accounts. Starting with Norbury Corporation's net income of $27,000, we make adjustments for changes in asset and liability accounts as follows:
Add back non-cash expenses such as accumulated depreciation ($26,000)Subtract increases in accounts receivable ($14,500) since this represents income that did not result in cashAdd decreases in inventory ($3,800) which may represent inventory sold and converted into cashSubtract increases in prepaid expenses ($10,000) since this reflects cash paid in advance for future expensesAdd increases in accounts payable ($14,000) which suggest that expenses have been incurred but not yet paid in cashSubtract decreases in accrued liabilities ($8,300) since this might represent cash payments made to settle those liabilitiesAdd increases in income taxes payable ($2,900) as taxes have been recognized but not yet paid in cashThus,
Cash flows from operating activities = Net Income + Non-Cash Expenses + Non-Operating Losses − Non-Operating Gains + Decrease in Current Assets − Increase in Current Assets + Increase in Current Liabilities − Decrease in Current Liabilities
= $27,000 + $26,000 + $10,000 + $3,800 - $14,500 + $14,000 + $2,900 - $8,300
= $60,900
Question 3: Sam’s Retails has the following data available as of 30 June 2019. Required: From the data, establish an income statement and a balance sheet
Sam’s Retails Data as of 30 June 2019
Sales
Administration expense Shop Lease
Cash at Bank
Costs of Good Sold Wages and salaries Accounts payables Miscellaneous Expense Land and buildings
542,000 1,500 24,000 175,000 274,000 38,500 15,050 2,500 127,000
Supplies expenses
Prepaid by a client for the company service Prepaid Insurance
Vehicles
Mortgage
Supplies
Account receivables
600 15,000 3,000 34,000 320,000 45,000 102,000
Note: Company income tax 30%, during the accounting period. The company has paid 2.5% of interest on the mortgage. Profit is retained for further investment
Answer:
Please refer explanation and attachment
Explanation:
The income statement has been provided in attachment 1 and balance sheet in attachment 2. Unfortunately, due to lack of information such as depreciation, lease details and mortgage payments, the balance could not be tallied. However, all information provided has been used to derive the results shown.
Suppose you are a manager of a firm that operates in a duopoly. Recently, the state attorney general fined you and your competitor for price fixing. In your market, firms only set prices, not total quantities to sell. From previous experience, you know your competitor has a marginal cost of $ 2.42 . Further, your marginal costs are $ 2.40 . The previous cartel price was $10.00, when you and your competitor were price fixing. What price level do you now choose to maximize profits
Answer:
$2.41
Explanation:
Anytime there is price fixing between two competitors,
if one competitor chooses to fix price it should not exceed competitors marginal cost (price) and should be above his marginal cost (price).
Since, the price fixing of $10 will be fined (previous cartel price). Then, the ideal price to maximize the profit would be below the competitor's price ($2.42) and above his marginal cost ($2.40).
Thus, the ideal price to maximize profits would be $2.41, which is above his marginal cost and below competitor price
A DI has two assets: 50 percent in one-month T-bills and 50 percent in real estate loans. If the DI must liquidate its T-bills today, it receives $98 per $100 of face value; if it can wait to liquidate them on maturity (in one month's time), it will receive $100 per $100 of face value. If the DI has to liquidate its real estate loans today, it receives $90 per $100 of face value. However, liquidation of real estate loans at the end of one month will produce $92 per $100 of face value. The one-month liquidity index value for this DI's asset portfolio is:
Answer:
Explanation:
The one-month liquidity index value for this DI's asset portfolio
= weight of T-bills * (value of T-bill today / value of T-bills after one month) + weight of real estate loan * (value of real estate loan today / value of real estate loan after one month)
= 50% * ($97 / $ 100) + 50% ($93/ $94)
= 0.5 * 0.97 + 0.5 *0.9894 = 0.9797
Therefore one-month liquidity index value for this DI's asset portfolio is 0.98.
Final answer:
The one-month liquidity index value of a depository institution's asset portfolio with 50% in T-bills and 50% in real estate loans is 0.97915.
Explanation:
The question asks about computing the one-month liquidity index value of a depository institution's (DI) asset portfolio, which comprises 50 percent in one-month T-bills and 50 percent in real estate loans. The liquidity index is a measure of how much less the DI would obtain if it had to liquidate assets today compared to their value at maturity in one month. To calculate this, we must compare the liquidation values (immediate cash received) for each asset type against their face value if held to maturity.
For the T-bills:
Immediate liquidation: $98 per $100 of face value
Value at maturity: $100 per $100 of face value
For the real estate loans:
Immediate liquidation: $90 per $100 of face value
Value at maturity: $92 per $100 of face value
The liquidity index for each asset type is calculated by dividing the immediate liquidation value by the value at maturity:
T-bills liquidity index = $98 / $100 = 0.98
Real estate loans liquidity index = $90 / $92 = 0.9783
As the portfolio is evenly split between the two assets, the overall liquidity index value of the asset portfolio is the average of the two individual indices:
Overall liquidity index = (0.98 + 0.9783) / 2 = 0.97915
Suppose a bank enters a repurchase agreement in which it agrees to buy Treasury securities from a correspondent bank at a price of $33,950,000, with the promise to buy them back at a price of $34,000,000. a. Calculate the yield on the repo if it has a 5-day maturity. b. Calculate the yield on the repo if it has a 15-day maturity.
Answer:
a. 10.60%
b. 3.53%
Explanation:
a. Calculate the yield on the repo if it has a 5-day maturity.
Profit = $34,000,000 − $33,950,000 = $50,000
Using 360 days a year, we have:
Yield on the repo = ($50,000/$33,950,000)*(360/5) = 0.1060, or 10.60%
b. Calculate the yield on the repo if it has a 15-day maturity.
Using 360 days a year also, we have:
Yield on the repo = ($50,000/$33,950,000)*(360/15) = 0.0353, or 3.53%
If businesses are confident about an increase in demand for their products, they will Select the correct answer below: expand production and reduce investment spending expand production and investment spending reduce production and investment spending reduce production and expand investment spending
Answer:
expand production and investment spending
Explanation:
If there is high likelihood of surge in demand, then supply should be such that it should be able to meet those demands. Hence, to increase supply production should be increased .
Second production cost is sum of fixed cost and variable cost. While fixed cost (cost which remains constant such as rent, labor charges and other cost which does not change with unit of production) remains same but variable cost will increase as variable cost is dependent on number of units of goods produced. So, when production increases variable cost will increase and hence investment will increase.
Thus, correct answer will increase production and investment spending.