It is January 2nd and senior management of Baldwin meets to determine their investment plan for the year. They decide to fully fund a plant and equipment purchase by issuing $10,000,000 in bonds. Assume the bonds are issued at face value and leverage changes to 2.7. Which of the following statements are true? Check all that apply.
A. Baldwin's long-term debt will rise by $10,000,000
B. Working capital will remain the same at $13,607,943
C. Total Assets will rise to $211,976,070
D. The total investment for Baldwin will be $13,954,930
E. Total liabilities will be $132,001,543
Answers
Answer:
Please see attachment
Explanation:
Please see attachment
Related Questions
The Solomon, Smith, and Samson law firm produces many legal documents that must be word processed for clients and the firm.
Requests average eight pages of documents per hour, and they arrive according to a Poisson distribution.
The secretary can word process 10 pages per hour on average according to an exponential distribution.
a. What is the average utilization rate of the secretary?
b. What is the probability that more than four pages are waiting or being word processed?
c. What is the average number of pages waiting to be word processed?
Answers
Answer
The answer and procedures of the exercise are attached in the following image.
Explanation
Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in a single sheet with the formulas indications.
The secretary has an average utilization rate of 80%. The probability of more than four pages waiting or being processed can't be accurately provided without additional data. Similarly, the average number of pages waiting to be processed can't be determined without additional data.
Explanation:The subject of this question is Business, specifically related to operations management, and appropriate for a College level course. The questions focus on determining the secretary's average utilization rate, the probability of a certain number of pages being processed, and the average number of pages waiting to be processed.
a) The average utilization rate of the secretary can be calculated by dividing the average rate at which the work (requests for document processing) arrives by the rate at which the work is done. In this case, the rate of arrival is 8 pages per hour and the rate of work done is 10 pages per hour. So, the utilization rate is 8/10 or 0.8, which is 80%.
b) The probability that more than four pages are waiting or being word processed is more complex to calculate and generally requires the use of a Poisson distribution formula or tables. As the question doesn't provide enough information, this aspect can't be accurately answered.
c) The average number of pages waiting to be word processed is calculated by the formula (λ^2)/(μ*(μ-λ)), where λ is the arrival rate and μ is the service rate. However, without additional data, a specific number cannot be given.
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Use the following two statements to answer this question:
I. Increasing returns to scale cause economies of scale.
II. Economies of scale cause increasing returns to scale.
(A) Both I and II are false.
(B) Both I and II are true.
(C) I is false, and II is true.
(D) I is true, and II is false.
Answers
Answer:
(D) I is true, and II is false
Explanation:
Increasing returns to scale means that during a production process, as input increases, output increases but by a larger proportion.
Economies of scale refers to the decrease in average cost per unit as a firm increases its output.
The increase in output brought about by increasing returns to scale causes cost per unit to decrease (which is economies of scale).
Therefore increasing returns to scale causes economies of scale.
Suppose that this year's money supply is $500 billion, nominal GDP is $10 trillion, and real GDP is $5 trillion. The price level is , and the velocity of money is . Suppose that velocity is constant and the economy’s output of goods and services rises by 5 percent each year. Use this information to answer the questions that follow. If the Fed keeps the money supply constant, the price level will , and nominal GDP will . If the Fed wants to keep the price level stable instead, it should next year. If the Fed wants an inflation rate of 10 percent instead, it should . (Hint: The quantity equation can be rewritten as the following percentage change formula:
Answers
The Fed can control the price level and nominal GDP by manipulating the money supply, assuming a constant velocity. If the Fed aims for stable price levels, the rise in nominal GDP has to be due to an increased real output. For a 10% inflation, the Fed should increase the money supply by 15%, encompassing both increased output and price levels.
Explanation:This question applies the formula of the Quantity Theory of Money, which is Money Supply × Velocity = Nominal GDP. This formula is also referencing to the concept that nominal GDP equals the Price Level multiplied by Real GDP.
If the Fed keeps the money supply constant and velocity stays the same, but real output increases (i.e. Real GDP increases by 5%), then the nominal GDP would increase as well. For the price level to remain stable, the increase in nominal GDP must be entirely due to the increase in real output (i.e. the 5% increase in Real GDP), hence no change in the price level.
However, if the Fed wants an inflation rate of 10%, it should increase the money supply by 15% (5% for real GDP growth and 10% for inflation). This is because with the assumed constant velocity, an increase in the money supply would lead to an increase in nominal GDP either through inflation (increase in prices) or through an increase in the output of the economy (Real GDP).
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Angela, Inc., holds a 90 percent interest in Corby Company. During 2017, Corby sold inventory costing $77,000 to Angela for $110,000. Of this inventory, $40,000 worth was not sold to outsiders until 2018. During 2018, Corby sold inventory costing $72,000 to Angela for $120,000. A total of $50,000 of this inventory was not sold to outsiders until 2019. In 2018, Angela reported separate net income of $150,000 while Corby's net income was $90,000 after excess amortizations. What is the noncontrolling interest in the 2018 income of the subsidiary?
Answers
Answer
The answer and procedures of the exercise are attached in a microsoft excel document.
Explanation
Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in a single sheet with the formulas indications.
Two years back, the Republic of Terbia, a developed economy, experienced a massive boom in the information technology (IT) industry. The rapid expansion of credit to the firms in this industry resulted in a significant increase in employment and prices in the economy. However, due to overvaluation and speculation in the market, stock prices of these firms fell sharply. IT being one of the most important sectors, this downturn affected the economy adversely, leading to a recession. Alicia White, an industry expert, suggests that expansionary monetary policy by the central bank is necessary to induce greater spending in the economy. However, Jaime Russell, a teacher at a community college, disagrees. According to him, increasing the supply of money would not help. The only possible impact of a fall in the interest rate would be an increase in aggregate supply. This, in turn, will reduce prices and profits further. Instead, the government should use expansionary fiscal policies to boost aggregate demand. Alicia and Jaime are most likely to have a difference of opinion on which of the following?
A. Falling prices in Terbia could indicate a slump in aggregate demand.
B. An expansionary fiscal policy can lead to an increase in prices in Terbia.
C. Expansionary monetary policy is more effective under a flexible exchange rate system.
D. Consumers in Terbia are confident that the economy will turn around in the near future.
E. Cyclical unemployment in Terbia has increased in recent months.
Answers
Answer:
D. Consumers in Terbia are confident that the economy will turn around in the near future.
Explanation:
Please consider the information provided by you in the exercise. If you have any question please write me back. Please take a look to the image attached.
Cindy is a baker and runs a large cupcake shop.
She has already hired 11 employees and is thinking of hiring a 12th.
Cindy estimates that a 12th worker would cost her $100 per day in wages and benefits while increasing her total revenue from $2,600 per day to $$2,750 per day.
Should Cindy hire a 12th worker? LO14.2
A. Yes
B. No
C. You need more information to figure this out
Answers
Answer:
The answer is A. Yes, Cindy should hire 12th worker.
Explanation:
Please see the below for detailed calculations and explanations:
By increasing one employees, Cindy's cupcakes shop marginal cost per day will increase by the amount equals to the salary and benefit of the 12th in one day which is: $100;
The benefits brought back to Cindy's shop is the increase in marginal revenue of $150 ( calculated as $2,750 - $2,600).
As marginal revenue is higher than marginal cost in case the 12th employees is hired, Cindy should hire one more employees as it will increase her total profit at the end of the day by $50 ( i.e Marginal revenue - Marginal cost = 150 - 100 =$50).
Sandpiper Company has 10,000 shares of cumulative preferred 2% stock, $100 par and 50,000 shares of $30 par common stock. The following amounts were distributed as dividends: Year 1 $40,000 Year 2 10,000 Year 3 60,000 Determine the dividends per share for preferred and common stock for each year. Round all answers to two decimal places. If an answer is zero, enter '0'.
Answers
Answer:
Year 1
$ 40.000 - Total Dividends
$ 20.000 - Preferred Stockholers
$ 20.000 - Common Stockholers
Year 2
$ 10.000 - Total Dividends
$ 10.000 - Preferred Stockholers
$ 0 - Common Stockholers
Year 3
$ 60.000 - Total Dividends
$ 30.000 - Preferred Stockholers
$ 30.000 - Common Stockholers
Total
$ 60.000 Preffered Stockholers
$ 50.000 Common Stockholers
Explanation:
First it's necessary to said that the preferred stockholders have a higher claim to dividends than common stock, it means that each time that the company paid dividends, the one corresponding to Preffered Stockholers must be paid first and if one year there are not enough dividends to pay then they must be paid the next year along with the dividends of next year, it's a kind of guaranteed dividend.
Total Dividends to Preferred Stockholders
10.000 Shares
2% percent of par value
$100 Par Value
Total Dividends: 10,000 * 2% * $100 = $ 20.000 of Dividend each year.
Preferred dividends for preferred stock.
$ 20.000
Total Dividends to be paid by the company each year
Year 1 Year 2 Year 3
$ 40.000 $ 10.000 $ 60.000
$ 20.000 $ 10.000 $ 30.000 Preffered Stockholers
$ 20.000 $ 30.000 Common Stockholers
Answer:
Year 1:
Dividend per common share: $0.4
Dividend per preferred share: $2
Year 2:
Dividend per common share: $0
Dividend per preferred share: $1
Year 1:
Dividend per common share: $0.6
Dividend per preferred share: $3
Explanation:
Year 1:
Dividend has to be paid to preferred stocks = 2% x 100 x 10,000 = $20,000 => Dividend per one preferred stock = 20,000/10,000 = $2
Dividend left to be paid to common share = (40,000-20,000) = $20,000 => Dividend per one common share = 20,000/50,000 = $0.4
Year 2:
Dividend has to be paid to preferred stocks = 2% x 100 x 10,000 = $20,000; Dividend actual paid-out = $10,000 => Dividend per one preferred stock = 10,000/10,000 = $1 & the other $1 per share will be paid later.
Dividend left to be paid to common share = 0
Year 3:
Dividend has to be paid to preferred stocks = 2% x 100 x 10,000 = $20,000 => Dividend per one preferred stock = 20,000/10,000 = $2. This plus $1 dividend per share payable from Y2 making the Dividend per one preferred stock paid out in Y3 = $3 => Total dividend paid to preferred stock = 3 x 10,000 =$30,000
Dividend left to be paid to common share = (60,000-30,000) = $30,000 => Dividend per one common share = 30,000/50,000 = $0.6
Assume that Jones deposits $500 in currency into her checkable deposit account in First National Bank. A half‑hour later Smith obtains a loan for $750 at this bank. By how much and in what direction has the money supply changed? Explain.
Answers
Answer:
money supply increase here $750
Explanation:
given data
deposits = $500
loan = $750
time = half hour
to find out
how much and in what direction has the money supply changed
solution
we know that Currency and check able deposits both are the part of money supply
so that Jones deposit money not impact the money supply
and we know when we go for loan , bank open check able deposit account
so we can say new loan made is = $750
Check able deposit is also part of money supply
so money supply increase here $750
Depositing $500 does not change the money supply, but when Smith obtains a $750 loan, the money supply increases by $750 due to the creation of new demand deposits.
Explanation:When Jones deposits $500 in currency into her checking account in First National Bank, the bank's reserves increase by that amount, but the money supply does not change because the currency was already part of the money supply in the form of physical cash. However, when Smith obtains a loan for $750, the money supply increases by that amount. This is because the bank has created new money through lending that did not exist in the form of physical cash or demand deposits before the loan was made. This expansion of money supply is a result of the money multiplier effect in fractional reserve banking, where banks hold only a fraction of their deposits in reserve and loan out the rest, therefore increasing the total amount of checkable deposits within the economy.
The shares of preferred stock issued by Saturn Corporation can be exchanged for common stock. However, any dividends in arrears are lost. Which of the following features are present in the preferred stock issued by Saturn?Select all answers that apply to this question.ConvertibleRedeemableCumulativeNoncumulative
Answers
Convertible and Noncumulative features are present in the preferred stock issued by Saturn.
Explanation:
It requires the owners of these preferred shares to be traded for common stocks so as to have the possibility of exchanging their preferential stock to common equity within a predisposed time.
Since it states that "the arrears payments have been lost," though, this means that the preferred stock does not collect.
You have no right to receive past dividends as the holders of this form of share if the Company starts to question again expectations for dividends. If the distributing company is making losses during that year, it can opt to miss dividends on such non-cumulative, convertible redeemable preferred stock.
Optimizing economic agents use the real interest rate when thinking about the economic costs and returns of a loan. Suppose the average rate paid by banks on savings accounts is 0.65% at a time when inflation is around 1.45%.
For the average saver, the real rate of interest on his or her savings is -0 80 %. If banks expect that the rate of inflation in the coming year will be 445% and they want a real return of 6% on a certain category of loans, then the nominal rate they should charge borrowers on those loans is ______ %
Answers
Answer:
10.45 %
Explanation:
Please see attachment
Michelle is an active participant in the rental condominium property she owns. During the year, the property generates a ($23,500) loss; however, Michelle has sufficient tax basis and at-risk amounts to absorb the loss. If Michelle has $132,000 of salary, $11,700 of long-term capital gains, $4,700 of dividends, and no additional sources of income or deductions, how much loss can Michelle deduct?
Answers
Rental loss: ($23,500). Income: $148,400. Loss < Income, so Michelle can deduct entire $23,500 loss against her taxable income. Consult tax professional for specifics.
Michelle can deduct the entire rental property loss of $23,500 against her income. Here's the breakdown:
1. Total income:
Salary: $132,000Long-term capital gains: $11,700Dividends: $4,700Total income: $132,000 + $11,700 + $4,700 = $148,4002. Deductible rental loss:
Since the rental loss ($23,500) is less than Michelle's total income ($148,400), she can deduct the entire loss amount against her taxable income.Therefore, Michelle can deduct $23,500 of the rental property loss. This will reduce her taxable income and potentially lower her tax liability.
Remember, this is a simplified scenario and other factors like state taxes or specific tax deductions might influence the actual amount Michelle can deduct. It's always recommended to consult with a tax professional for personalized advice.
3 main sections of the blance sheet
Answers
3 main sections of the balance sheet are:
Answer:
1. ownership equity
2. liabilities
3. assets
Answer:
Asset, liability and equity
Explanation:
There are 3 main sections in balance sheets;
1. Assets - have value because a business can use or exchange them to produce the services or products of the business. Assets mainly categorize into current and non-current.
2. Liabilities - are the debts owed by a business, often incurred to fund its operation, it results to a possible outflow in the future. Liabiities also divided into current and non-current portion, that depends on its maturity period.
3. Equity - represents retained earnings and funds contributed by its shareholders
Freshmart, Inc., began operations this year. The company produced 1,000 units and sold 1,000 units at a selling price of $100 per unit. Fixed overhead costs totaled $30,000 and fixed selling and administrative expenses were $15,000. Variable production costs were $25.00 per unit while variable selling and administrative expenses were $10.00 per unit. Contribution margin was:
A. $20,000.
B. $45,000.
C. $65,000.
D. $55,000.
Answers
Answer:
C. $65,000
Explanation:
Units produced (U) = 1,000
Selling price (P) = $100 per unit
Fixed overhead costs = $30,000
Fixed selling and administrative expenses = $15,000
Variable production costs (Vp) = $25.00 per unit
Variable selling and administrative expenses (Vs) = $10.00 per unit
Contribution margin (CM) is defined as Sales revenue (R) minus variable costs (V). Thus, fixed costs should not be considered. Sales revenue is given by:
[tex]R= U*P = 1,000*\$100\\R = \$100,000[/tex]
Variable costs are given by:
[tex]V= U*(V_{p}+V_{s}) = 1,000*(\$25.00 +\$10.00)\\V = \$35,000[/tex]
Therefore, the contribution margin is:
[tex]CM = R- V = \$100,000-\$35,000\\CM = \$65,000[/tex]
Using a large value for order k in the moving averages method is effective in
a. smoothing out random fluctuations.
b. eliminating the effect of seasonal variations in the time series.
c. tracking changes in a time series more quickly.
d. providing a forecast when only the most recent time series are relevant.
Answers
Using a large value for order k in moving averages smooths out random fluctuations by averaging multiple data points, which highlights longer-term trends and reduces noise.
Explanation:The use of a large value for order k in the moving averages method is most effective in smoothing out random fluctuations. When time series data is plotted on a graph, using a simple moving average with a larger order k means that each point on the moving average line is the average of the preceding k data points. This process averages out much of the short-term variability and noise, and it highlights longer-term trends or cycles. This is especially useful when the aim is to identify or forecast underlying trends without the distraction of the random fluctuations that can occur in the short term.
For instance, in the context of unemployment rates, using a five-year average smooths the graph compared to using monthly averages. Monthly figures tend to fluctuate more due to various factors influencing the labor market in the short term. In contrast, a five-year average can more clearly indicate the overall direction in which unemployment rates are moving, by smoothing out these short-term fluctuations.
Charles is a single person, age 35, with no dependents. In 2019, Charles has gross income of $75,000 from his sole proprietorship. Charles also incurs $80,000 of deductible business expenses in connection with his proprietorship. He has interest and dividend income of $22,000. Charles has $7,000 of itemized deductions. Charles's taxable income is
A) $6, 650.
B) $17,000.
C) $12, 950.
D) $10, 700.
Answers
Answer:
A)
Explanation:
Bruce owns a cooperative project with two other members. Any member that chooses to put in a full day of work faces a cost of £50 but produces a total income of £120, which is shared amongst the three. So, for example, if Bruce and one other member do a full day of work, then the income per member is (£120 x 2)/3 = £80, leaving Bruce with a net income of £80 - £50 = £30. Assume that a member must either put in a full day of work or none at all. Based on this information, we can conclude that:
Answers
Answer:
If all are in work, income of each member is ($120 × 3 ÷ 3 =) $120 and the net income of each member is ($120 - $50 =) $70. This is the highest total net income of each member and this could be achieved if all work.
Explanation:
If all are in work, income of each member is ($120 × 3 ÷ 3 =) $120 and the net income of each member is ($120 - $50 =) $70. This is the highest total net income of each member and this could be achieved if all work.
Marisol was granted 100 NQSOs five years ago. At the time of the option grant, the value of the underlying stock was $100 and the exercise price was equal to $100. If Marisol exercises the options on August 22 of this year when the stock is valued at $145, what are the tax consequences (per share) to Marisol from exercising the options?
A. $45 of W-2 income, $100 of short -term capital gain.
B. $100 of W-2 income, $45 of short-term capital gain.
C. $145 of W-2 income.
D. $45 of W-2 income.
Answers
Answer:
D. $45 of W-2 income.
Explanation:
Please see attachment.
A gum manufacturer wants to determine whether blue packaging or red packaging is preferred. The company performs a sales test by introducing red packages into a random sample of ten stores and blue packages are introduced in an independent, random sample of ten stores. The technique most appropriate for analyzing the data is:a. paired sample t-test for means.b. Spearman rank-order correlation analysis.c. regression analysis.d. independent samples t-test for means.e. correlation analysis.
Answers
Answer:
d. independent samples t-test for means.
Explanation:
The technique independent sample t-test for means is an statistical tool used for calculating a difference between two mean values calculated.
As in the given instance there are two types of sample population which represents different samples.
Thus, they shall be compared effectively with this tool so that the more favorable option shall be chosen properly.
The independent t-test sample mean is helpful in this instance.
The financial statements of Carrier Office Furniture Company include the following items: 2019 2018 Cash $42,500 $42,000 Shortminusterm Investments 28,000 19,000 Net Accounts Receivable 102,000 98,000 Merchandise Inventory 166,000 148,000 Total Assets 527,000 547,000 Total Current Liabilities 273,000 285,000 Long-term Note Payable 64,000 60,000
What is working capital for 2019?
Answers
Answer:
$65,500
Explanation:
Data provided in the question:
2019 2018
Cash $42,500 $42,000
Short-term Investments 28,000 19,000
Net Accounts Receivable 102,000 98,000
Merchandise Inventory 166,000 148,000
Total Assets 527,000 547,000
Total Current Liabilities 273,000 285,000
Long-term Note Payable 64,000 60,000
Now,
Working capital = Current assets - Current liabilities
Also,
Current assets (i.e for the year 2019 )
= Cash + Short-term Investments + Net Accounts Receivable + Merchandise Inventory
= $42,500 + $28,000 + $102,000 + $166,000
= $338,500
and,
Current liabilities = $273,000
Therefore,
Working capital for 2019 = $338,500 - $273,000
= $65,500
Sheridan Company’s standard labor cost per unit of output is $33.00 (3.00 hours x $11.00 per hour). During August, the company incurs 2,970 hours of direct labor at an hourly cost of $12.10 per hour in making 1,100 units of finished product.
Answers
Answer:
Instructions are listed below.
Explanation:
Giving the following information:
Sheridan Company’s standard labor cost per unit of output is $33.00 (3.00 hours x $11.00 per hour). During August, the company incurs 2,970 hours of direct labor at an hourly cost of $12.10 per hour in making 1,100 units of finished product.
Direct labor efficiency variance= (SQ - AQ)*standard rate
Direct labor efficiency variance= (3,300hs - 2,970hs)*11= $3,630 favorable
Direct labor rate variance= (Standard Rate - Actual Rate)*Actual Quantity
Direct labor rate variance= (11 - 12.1)*2,970= $3,267 unfavorable
Delaware Coatings Company uses the indirect method to prepare its statement of cash flows. Refer to the following information for the year 2019: Net cash provided by operating activities: $45,000 Net cash used for investing activities: ($29,000) Net cash provided by financing activities: $2,000 What is the net change in cash during the year?
Answers
Answer:
The net change in cash during the period is $18,000
Explanation:
The net change in cash during the period is computed as:
Net change in cash during the period = Net Cash provided by the operating activities - Net Cash used by the investing activities + Net Cash provided by the financing activities
where
Net Cash provided by the operating activities is $45,000
Net Cash used by the investing activities is ($29,000)
Net Cash provided by the financing activities is $2,000
Putting the values above:
= $45,000 - $29,000 + $2,000
= $16,000 + $2,000
= $18,000
The net change in cash for Delaware Coatings Company in the year 2019 is calculated by summing the cash flows from operating, investing, and financing activities, resulting in a net increase of $18,000.
Explanation:The student is asking about calculating the net change in cash during the year for the Delaware Coatings Company when using the indirect method for the statement of cash flows. To find the net change in cash, you add up the net cash provided by (or used in) operating activities, investing activities, and financing activities for the period.
In this case, you have the following:
Net cash provided by operating activities: $45,000
Net cash used for investing activities: ($29,000)
Net cash provided by financing activities: $2,000
By adding these figures together ($45,000 - $29,000 + $2,000), the net change in cash during the year 2019 for the company is $18,000.
Preferred stock which confers rights to prior periods' unpaid dividends even if they were not declared is called:
A. Noncumulative preferred stock.
B. Participating preferred stock.
C. Callable preferred stock.
D. Cumulative preferred stock.
Answers
Answer:
D. Cumulative preference stock.
Explanation:
A. Non cumulative Pref stock: if preference dividend is not paid in the current year, it is forfeited.
B. Participating Pref Stocks: Holders can participate in profit sharing after receipt of fixed interest.
C. Callable Pref Stock: This are stocks that the company can redeem in between. Hence the company can redeem it at a premium.
D. Cumulative Pref Stock: The dividend are accumulated and paid anytime before payment to common stock holders.
When Bruno's basis in his LLC interest is $150,000, he receives cash of $55,000, a proportionate share of inventory, and land in a distribution that liquidates both the LLC and his entire LLC interest. The inventory has a basis to the LLC of $45,000 and a fair market value of $48,000. The land's basis is $70,000, and the fair market value is $60,000. How much gain or loss does Bruno recognize, and what is his basis in the inventory and land received in the distribution?
Answers
Answer:
Please see attachment
Explanation:
Please see attachment .
Please note that B= Bruno
Which of the following is NOT one of the activities carried on in a distribution center?A. Coordinating inbound transportationB. Receiving, checking, storing, and cross-dockingC. Distributing paychecks and paystubs for retail employeesD. Getting merchandise floor readyE. Coordinating outbound transportation
Answers
Answer:
C. Distributing paychecks and pay stubs for retail employees
Explanation:
Distribution centers are basically the alternative for warehouses in case of emergency, that is for temporary purposes. It helps in meeting the need in case of emergency that might occur in case of any storage facility not available.
It provides for basic management of inventory and stock at the time of procuring it, storing it, and then deploying it as and when needed.
It nowhere involves any step where the distribution center is responsible for any kind of payments through paychecks to any vendor supplying the goods, or that providing transportation of goods.
The excess return is the difference between the average return on a security and the average
return for ________.
A) Treasury bonds
B) a portfolio of securities with similar risk
C) a broad-based market portfolio like the S&P 500 index
D) Treasury bills
Answers
Answer:
(d) Treasury bills
Explanation:
Treasury bills :
Treasury Bills is also called T-bills. It is the momentary currency advertise instrument, given by the national bank in the interest of the administration to control brief liquidity shortages.
These do not yield any interest, but issued at a discount, at its redemption price, and repaid at par when it gets matured.
Blue Company estimates that unit sales will be 10,500 in quarter 1, 12,400 in quarter 2, 14,100 in quarter 3, and 18,800 in quarter 4. Using a sales price of $85 per unit. Prepare the sales budget by quarters for the year ending December 31, 2017.
Answers
Answer:
Explanation:
The preparation of the sales budget for 4 quarters are shown below:
Particulars Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total
Estimated
Unit sales 10,500 12,400 14,100 18,800 55,800
Unit sales
price $85 $85 $85 $85 $85
Total sales $892,500 $1,054,000 1,198,500 1,598,00 $4,743,000
Steinberg Corporation and Dietrich Corporation are identical companies except that Dietrich is more levered. Both companies will remain in business for one more year. The companies' economists agree that the probability of the continuation of the current expansion is 80 percent for the next year, and the probability of a recession is 20 percent. If the expansion continues, each company will generate earnings before interest and taxes (EBIT) of $3.7 million. If a recession occurs, each company will generate earnings before interest and taxes (EBIT) of $1.1 million. Steinberg's debt obligation requires the company to pay $910,000 at the end of the year. Dietrich's debt obligation requires the company to pay $1.2 million at the end of the year. Neither company pays taxes. Assume a discount rate of 12 percent.
a-1.
What is the value today of Steinberg's debt and equity? (Enter your answers in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.)
Steinberg's
Equity value $
Debt value $
a-2.
What is the value today of Dietrich's debt and equity? (Enter your answers in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.)
Dietrich's
Equity value $
Debt value $
b. Steinberg’s CEO recently stated that Steinberg’s value should be higher than Dietrich’s because the company has less debt and therefore less bankruptcy risk. Do you agree or disagree with this statement?
Disagree
Agree
Answers
Answer:
a-1.
Steinberg's debt:
Steinberg's equity:
a-2.
Dietrich's debt:
Dietrich's equity:
b. Disagree as the values of the two companies are the same ( please see below Explanation for further clarification)
Explanation:
It is clear to determine that the value of debt and equity of the two firms is the present value of cash flow received in 1 year, discounted at 12%.
a-1.
In one year:
- Debt holder of Steinberg will receive $910,000 regardless of its EBIT. -=> Thus, Steinberg's debt present value = 910,000 / 1.12 = $812,500
- Given the probability of expansion and recession, Steinberg's shareholder will receive the amount equal EBIT - amount paid to its debt holders: 0.8 x (3,700,000 - 910,000) + 0.2 x (1,100,000-910,000) = $2,270,000.
=> Thus, Steinberg's equity present value = $2,270,000/ 1.12 = $2,026,786
=> Value of Steinberg = D+E = 812,500 + 2,026,786 = $2,839,286 ( note: no tax applied)
a-2.
In one year:
- Debt holder of Dietrich will receive $1,200,000 when the business expands while only $1,100,000 when the business goes into recession (i.e business loss is 100,000): 0.8 x 1,200,000 + 0.2 x 1,100,000 = $1,180,000
=> Thus, Dietrich's debt present value = 1,180,000 / 1.12 = $1,053,571
- Given the probability of expansion and recession, Dietrich's shareholder will receive the amount equal EBIT - amount paid to its debt holders: 0.8 x (3,700,000 - 1,200,000) + 0.2 x (1,100,000-1,100,000) = $2,000,000.
=> Thus, Dietrich's equity present value = 2,000,000 / 1.12 = $1,785,714
=> Value of Steinberg = D+E =$1,053,571+$1,785,714 = $2,839,286( note: no tax applied)
a-3.
From the calculation, it is clear that the values of the two companies are the same.
Gangland Water Guns, Inc. is expected to pay a dividend of $2.10 one year from today. If the firm's growth in dividends is expected to remain at a flat 3 percent forever, what is the cost of equity capital for Gangland if the price of its common shares is currently $17.50.
Answers
Answer:
15%
Explanation:
Use Dividend discount model to find the required return of equity or cost of equity capital;
Return r formula;
[tex]=\frac{D1}{P0} +g[/tex]
whereby; D1 = Next year's dividend = $2.10
P0 = Current price = $17.50
Growth rate; g = 3% or 0.03 as a decimal
Next, plug in the numbers to the formula above to calculate the cost of equity;
r [tex]=\frac{2.10}{17.50} +0.03\\ \\ =0.12+ 0.03[/tex]
r = 0.15 or 15%
Therefore, cost of equity is 15%
The cost of equity capital for Gangland Water Guns, Inc. is 15%, calculated using the Gordon Growth Model (GGM) with a dividend of $2.10, a growth rate of 3%, and a current stock price of $17.50.
The cost of equity capital for Gangland Water Guns, Inc. can be calculated using the Gordon Growth Model (GGM), which determines the present value of an infinite series of dividends that grow at a constant rate. The formula for the GGM is P = D1 / (k - g), where P is the current stock price, D1 is the dividend in one year, k is the cost of equity, and g is the growth rate of dividends. In this scenario, we have a dividend (D1) of $2.10, a growth rate (g) of 3 percent, and a current stock price (P) of $17.50. To find the cost of equity (k), we rearrange the formula to k = (D1 / P) + g. Plugging in the values, k = ($2.10 / $17.50) + 0.03. This yields a cost of equity capital of 15%.
Duo Company manufactures two products, Uno and Dos. Contribution margin data follow.
Uno Dos
Unit sales $ 13.00 $ 31.00
Less variable cost:
Direct material $ 7.00 $ 5.00
Direct labor 1.00 6.00
Variable overhead 1.25 7.50
Variable selling and administrative cost 0.75 0.50
Total variable cost $ 10.00 $ 19.00
Unit contribution margin $ 3.00 $ 12.00
Duo company’s production process uses highly skilled labor, which is in short supply. The same employees work on both products and earn the same wage rate.
Required:
1. Calculate the contribution margin per scarce resource for each of the products assuming an arbitrary time period for which direct laborers earn $1.00 per unit.
2. Which of Duo Company’s products is most profitable?
Answers
Answer:
1. Uno = $3
Dos = $2
2. Uno
Explanation:
1. The computation of the contribution margin per scarce resource for each of the products is shown below:
= Unit contribution margin ÷ direct laborers per unit
For Uno, it would be
= $3 ÷ $1 = $3
For Dos, it would be
= $12 ÷ $6 = $2
2. As we compare the contribution margin , the Uno has more unit of contribution margin than the Dos. So, Uno is most profitable
Final answer:
The scarce resource's contribution margin for Uno is $3.00 per labor dollar and for Dos, it's $2.00 per labor dollar. The Dos product is more profitable with a unit contribution margin of $12.00 compared to Uno's $3.00.
Explanation:
The contribution margin per scarce resource, in this case, direct labor, can be calculated by dividing the unit contribution margin by the direct labor cost. So for the Uno product, it's $3.00/$1.00 = $3.00 per labor dollar. For the Dos product, it's $12.00/$6.00 = $2.00 per labor dollar.
To determine which of Duo Company's products is most profitable, we should consider the unit contribution margin. Here, the Dos product, with a unit contribution margin of $12.00, is more profitable per unit than the Uno product which has a unit contribution margin of $3.00.
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Fenton Manufacturing Company at June 30: Cash in bank account $ 6,455 Inventory of postage stamps $ 74 Money market fund balance $ 12,400 Petty cash balance $ 350 NSF checks from customers returned by bank $ 867 Postdated checks received from customers $ 391 Money orders $ 257 A nine-month certificate of deposit maturing on December 31 of current year $ 8,000 Based on this information, Fenton Manufacturing Company should report Cash and Cash Equivalents on June 30 of:
Answers
The Cash and Cash Equivalents of Fenton Manufacturing Company on June 30 should be reported as $26,855. This is derived from the sum of cash in the bank account, money market fund balance, and a 9-month certificate of deposit maturing by the year's end.
Explanation:The Fenton Manufacturing Company should report its Cash and Cash Equivalents by calculating the total of its cash, money market fund balance, and the nine-month certificate of deposit. The total would then be calculated as follows: $6,455 (Cash in bank account) + $12,400 (Money market fund balance) + $8,000 (A 9-month certificate maturing in December). Therefore, the total Cash and Cash Equivalents reported on June 30 would be $26,855.
It's important to note that some items are not included in this calculation.
Inventory of postage stamps: This is not cash and thus is not included.Petty cash: This can be included under cash.Not sufficient funds (NSF) checks: These are not considered good cash until they have cleared the bank.Postdated checks: These cannot be included because they aren’t yet available.Money orders: These are included within Cash and Cash Equivalents because they can be converted easily into cash.Learn more about Cash Equivalents here:https://brainly.com/question/34319867
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Final answer:
Fenton Manufacturing Company should report $19,462 as Cash and Cash Equivalents on June 30, including cash in the bank, the money market fund balance, the petty cash, and money orders.
Explanation:
To determine the Cash and Cash Equivalents that Fenton Manufacturing Company should report on June 30, we must identify items that are considered cash or equivalent to cash. According to accounting standards, cash and cash equivalents include currency on hand, demand deposits, and investments with original maturities of three months or less.
Cash in bank account: $6,455
Money market fund balance: $12,400
Petty cash balance: $350
Money orders: $257
Items such as inventory of postage stamps, NSF (non-sufficient funds) checks, postdated checks received, and long-term certificates of deposit are not considered cash equivalents. Thus, the Cash and Cash Equivalents for Fenton Manufacturing Company on June 30 would be the sum of the amounts listed above.
Adding these amounts gives us $6,455 (Cash in bank) + $12,400 (Money market) + $350 (Petty cash) + $257 (Money orders) = $19,462 as the total Cash and Cash Equivalents that should be reported.