Answer:
real rate = 0.214051525
Your friends are right
Explanation:
We have to calculate the rate at the present value of an annuity of 30 monthly payment of 1,300 which equals 30,000
[tex]C * \frac{1-(1+r)^{-time} }{rate} = PV\\[/tex]
[tex]1300 * \frac{1-(1+r)^{-30} }{rate} = 30,000\\[/tex]
we use excel, iteractive process or a financial calculator to solve for rate
0.0178376
this rate will be the monthly rate, we need to multiply by 12
0.0178376
x 12
0.214051525
Barton Industries has operating income for the year of $3,700,000 and a 25% tax rate. Its total invested capital is $18,000,000 and its after-tax percentage cost of capital is 5%. What is the firm's EVA? Round your answer to the nearest dollar, if necessary.
Answer:
1,875,000 Economic Value Added
Explanation:
Net Operating Profit After Taxes - Invested Capital x Weighted Average Cost of Capital = Economic Value added
This represent the return on the shareholders after their investment return is paid. It is the value generated from the investent resources.
3,700,000 x ( 1- 0.25 ) = 2,775,000 Operating Income after taxes
18,000,000 x 5% = (900,000) Required Return
1,875,000 Economic Value Added
Andrew Industries purchased $165,000 of raw materials on account during the month of March. The beginning Raw Materials Inventory balance was $22,000, and the materials used to complete jobs during the month were $141,000 of direct materials and $13,000 of indirect materials. What journal entry should Andrew use to account for direct materials used in March:
Answer:
WIP DEBIT 141,000
factory overhead DEBIT 13,000
Raw Materials Inventory CREDIT 154,000
Explanation:
It will increase the work in process for the amount used into production of units.
It will debit factory overhead to later determinate the overapplied or underapplied overhead.
It will decrease raw materials inventory for the amount consumed during the period. This is the sum of both concepts, the direct and indirect.
The purchases, beginning inventory are not relevant information for this question.
Portfolio A has a beta of 1.0 and an expected return of 22%. Portfolio B has a beta of 2.0 and an expected return of 17%. The risk-free rate of return is 2%. Is there an opportunity for arbitrage: (Please explain your answer)
Answer:
Yes, there is an opportunity.
Explanation:
Beta is an indicator of the risk of any portfolio. The higher beta, the greater the risk. Therefore, the expected return of that portfolio should be higher.
Portfolio B has a higher Beta than portfolio A, but a lower expected return, so we say that the portfolio B is more expensive than it's value. So, there is an opportunity for arbitrage. You should sell the protfolio B and buy the portfolio A, and win the difference between both operations, with no risk.
On the average, how much would you expect to win by playing the following game? A 50% chance to win $2000, a 30% chance to lose $1000, and a 20% chance to lose $2000.
Answer:
Average expected chance of winning = $300
Explanation:
Average expectation to win shall be computed as follows
Chance to win = 50% of $2,000 = $1,000
Less: Chance of losing = 30% of $1,000 = -$300
Chance of losing = 20% of $2,000 = -$400
This is basically computed with the help of probability distribution provided, and adding the entire products.
Average expected chance of winning = $1,000 -$300 - $400 = $300
The expected value of the defined game is -$0.62. Therefore, on average, one would lose around 62 cents per game.
Explanation:The question is asking for the expected value of a particular game. In probability, the expected value of a game is calculated by multiplying each possible outcome by their respective probabilities and adding them together. So in this case, the following calculation is performed:
50% or 0.5 probability to win $200030% or 0.3 probability to lose $100020% or 0.2 probability to lose $2000Therefore, the expected value calculation would be (0.5 * $2000) - (0.3 * $1000) - (0.2 * $2000) = -$0.62. Thus, if you were to play this game over and over, you would expect on average to lose 62 cents per game.
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The return of merchandise to the supplier for credit using the perpetual inventory system would include a: A. debit to Accounts Payable and a credit to Merchandise Inventory. B. debit to Accounts Receivable and a credit to Accounts Payable. C. debit to Sales Returns and Allowances and a credit to Merchandise Inventory. D. debit to Accounts Payable and a credit to Purchases Returns and Allowances
Answer:
The return of merchandise to the supplier for credit using the perpetual inventory system would include a : debit to Accounts Payable and a credit to Merchandise Inventory - A.
The perpetual inventory system is a method of updating merchandise inventory on a regular basis.
The merchandise inventory account will be updated quickly if there is a loss or rise in merchandise inventory.
Option A is correct as, The account payable will be debited and merchandise inventory will be credited.
The other Options are incorrect as:
Option B is incorrect as, The account receivable won’t be debited accounts payable will be debited.
Option C is incorrect as, sales return and allowances will not be debited.
Option D is incorrect as, merchandise inventory will be credited not purchase return and allowance.
Thus Option A is the correct statement for this transaction,
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Ben and Sam Jenkins formed a partnership. Ben contributed $8,000 cash and a used truck that originally cost $35,000 and had accumulated depreciation of $15,000. The truck’s fair value was $16,000. Sam, a builder, contributed a new storage garage. His cost of construction was $40,000. The garage has a fair value of $55,000. What is the combined total capital that would be recorded on the partnership books for the two partners?
Final answer:
Ben and Sam Jenkins' combined total capital in the partnership would be recorded as $79,000, determined by the fair value of the assets they each contributed: $24,000 from Ben and $55,000 from Sam.
Explanation:
The combined total capital that would be recorded on the partnership books for Ben and Sam Jenkins would be calculated based on the fair value of the assets they contributed. Ben contributed $8,000 in cash and a used truck. The cost of the truck is not relevant; what is considered is the fair value which is $16,000. Therefore, Ben's contribution totals to $24,000. Sam contributed a storage garage with a fair value of $55,000, which is what would be recorded for his contribution. Therefore, the combined total capital for the two partners is $24,000 (Ben) + $55,000 (Sam) = $79,000.
Sell or Process Further Portland Lumber Company incurs a cost of $452 per hundred board feet (hbf) in processing certain "rough-cut" lumber, which it sells for $611 per hbf. An alternative is to produce a "finished cut" at a total processing cost of $559 per hbf, which can be sold for $748 per hbf. Prepare a differential analysis dated June 14, on whether to sell rough-cut lumber (Alternative 1) or process further into finished-cut lumber (Alternative 2).
Answer:
To compare each alternative, we have t compare the contribution margin ratio.
Aternative "rought-out" = 26.02%
For every 100 dollars of sales the company will keep $26.02 to pay the fixed cost and make a gain.
Alternative "finished cut" = 25.27%
For every 100 dollars of sales the company will keep $25.27 to pay the fixed cost and make a gain.
It is a better option to sell rought-out lumber
Explanation:
Aternative "rought-out"
611 sales
452 variable cost
[tex]Sales \: Revenue - Variable \: Cost = Contribution \: Margin[/tex]
[tex]\frac{Contribution Margin}{Sales Revenue} = $Contribution Margin Ratio[/tex]
611 - 452 = 159
159/611 = 26.0229132%
Alternative "finished cut"
748 sales
559 variable cost
[tex]Sales \: Revenue - Variable \: Cost = Contribution \: Margin[/tex]
[tex]\frac{Contribution Margin}{Sales Revenue} = $Contribution Margin Ratio[/tex]
748 - 559 = 189
189/748= 25.2673796%
The Club Auto Parts Company has just recently been organized. It is expected to experience no growth for the next 2 years as it identifies its market and acquires its inventory. However, Club will grow at an annual rate of 5% in the third year and, beginning with the fourth year, should attain a 10% growth rate that it will sustain thereafter. The first dividend (D1) to be paid at the end of the first year is expected to be $0.50 per share. Investors require a 15% rate of return on Club's stock. What will Club's stock price be at the end of the first year ()?
Answer:
P1=$8.43
Explanation:
[tex]D1= 0.5\\D2=0.5\\D3=D2(1+g3) = 0.5(1.05)=0.525\\D4=D3(1+g4) = 0.5(1.05)(1.1) =0.5775\\[/tex]
The value of the stock is equal to the present value of all cash-flows expected from holding the stock. At the end of year 1, the value of the stock is found by calculating the present value of the remaining dividends i.e D2, D3, D4, D5 etc till infinity.
Therefore price equals[tex]P1=\frac{D2}{1+ke} + \frac{D3}{(1+ke)^{2} } +\frac{D4}{(ke-g)(1+ke)^{3} }[/tex]
given the values of Dividends calculated above and ke= 15% :
[tex]P1=\frac{0.5}{1.15^{1} } +\frac{0.525}{1.15^{2}} +\frac{0.5775}{(0.15-0.1)(1.15^{3} } = $8.43[/tex]
Final answer:
The stock price of Club Auto Parts Company at the end of the first year can be estimated using the dividend growth model, considering a dividend of $0.50 with no growth for the first two years. Assuming the growth rate for the first to second year is 0%, the price at the end of the first year, with a required rate of return of 15%, would be approximately $3.33.
Explanation:
The student has asked about determining the stock price of Club Auto Parts Company at the end of the first year, considering a set of growth and dividend conditions. To calculate this, we first project the future dividends the stock will pay, which requires an understanding of the dividend growth model. For Club Auto Parts, we're given that the first dividend (D1) is $0.50, there will be no growth for the first two years, a 5% growth rate in the third year, and a 10% growth rate starting from the fourth year onwards. Since investors require a 15% rate of return, we apply the Gordon Growth Model to estimate the price at the end of the first year.
However, the problem is incomplete as we need the dividend of the second year to calculate the price at the end of the first year. Assuming the second year dividend remains the same as the first year (due to no growth), the second year dividend (D2) would still be $0.50. Applying this into the model for a no-growth scenario, we would calculate the stock price as:
Stock Price = D2 / (required rate of return - growth rate)
Therefore:
Price at the end of the first year = $0.50 / (0.15 - 0.00) = $3.33
It is essential to note that this calculation assumes that the second dividend will not grow, which aligns with the company's expected zero growth over the first two years.
At the beginning of a recent year, JetBlue's assets were $6,549 million and its equity was $1,546 million. During the year, assets increased by $44 million and liabilities decreased by $64 million. What was JetBlue's equity at the end of the year
Answer:
Thus, the JetBlue's equity at the end of the year is $1,654 million
Explanation:
In this case, the accounting equation is used.
Accounting equation means the equation which shows double accounting entry system. Double accounting means debit side and credit side. In this accounting equation, the total assets is equal to total liabilities + total equity.
Total Assets = Total Liabilities + Total Equity
$6549 = Total Liabilities + $1,546
Total Liabilities = $5,003 million
In the question the assets is increased by $44 million whereas liabilities is decreased by $64 million.
So,
Updated asset value = $6,549+$44
= $6,593 million
Updated liabilities value = $5,003 - $64
= $4,939 million
So, the ending equity value will be
= Ending assets - Ending liabilities
= $6,593 million - $4,939 million
= $1,654 million
Thus, the JetBlue's equity at the end of the year is $1,654 million
Final answer:
JetBlue's equity at the end of the year can be calculated using the basic accounting equation. After accounting for the increase in assets and the decrease in liabilities, JetBlue's equity at the end of the year was found to be $1,654 million.
Explanation:
To calculate JetBlue's equity at the end of the year, we would use the accounting equation which is:
Assets = Liabilities + Equity
We are told that at the beginning of the year, JetBlue's assets were $6,549 million and its equity was $1,546 million. During the year, assets increased by $44 million and liabilities decreased by $64 million.
To find the new asset value at the end of the year, we add the increase to the initial asset value:
New Assets = Old Assets + Increase in Assets
New Assets = $6,549 million + $44 million = $6,593 million
Next, we need to adjust the liabilities. Since JetBlue's liabilities decreased, we subtract this decrease from the initial assets to find the initial liabilities using the rearranged accounting equation:
Initial Liabilities = Initial Assets - Initial Equity
Initial Liabilities = $6,549 million - $1,546 million = $5,003 million
Now, we find the new liabilities value:
New Liabilities = Initial Liabilities - Decrease in Liabilities
New Liabilities = $5,003 million - $64 million = $4,939 million
We use the accounting equation one last time to find the equity at the end of the year:
Equity at End of Year = Assets at End of Year - Liabilities at End of Year
Equity at End of Year = $6,593 million - $4,939 million = $1,654 million
Therefore, JetBlue's equity at the end of the year was $1,654 million.
For many years Futura Company has purchased the starters that it installs in its standard line of farm tractors. Due to a reduction in output, the company has idle capacity that could be used to produce the starters. The chief engineer has recommended against this move, however, pointing out that the cost to produce the starters would be greater than the current $10.80 per unit purchase price: Per Unit Total Direct materials $ 6.00 Direct labor 2.20 Supervision 1.50 $ 97,500 Depreciation 1.10 $ 71,500 Variable manufacturing overhead 0.80 Rent 0.30 $ 19,500 Total product cost $ 11.90 A supervisor would have to be hired to oversee production of the starters. However, the company has sufficient idle tools and machinery so that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $83,000 per period. Depreciation is due to obsolescence rather than wear and tear. Required: 1. Determine the total relevant cost per unit if starters are made inside the company.
Answer:
$10.50
Explanation:
The computation of the relevant cost per unit is shown below:
= Direct material per unit + Direct labor per unit + supervision per unit + variable manufacturing overhead per unit
= $6 + $2.20 + $1.50 + $0.80
= $10.50
The relevant cost per unit only considered the direct material per unit, direct labor per unit, supervision per unit, and the variable manufacturing overhead per unit only
All other cost that is mentioned is not relevant. Hence, ignored it
A company has three product lines, one of which reflects the following results: Sales $ 215,000 Variable expenses 125,000 Contribution margin 90,000 Fixed expenses 140,000 Net loss $ (50,000 ) If this product line is eliminated, 60% of the fixed expenses are traceable fixed expenses, which can be eliminated and the other 40% are common fixed expenses that cannot be avoided. If management decides to eliminate this product line, the company's net income will ________. increase by $50,000 decrease by $90,000 decrease by $6,000 increase by $6,000
Answer: option C
Explanation: THIS CAN BE REPRESENTED AS FOLLOWS :-
If we eliminate the product there would be no sales, no variable expenses and therefore, no contribution.
sales = nil
-variable expenses= nil
contribution = nil
- fixed expenses = 56,000
NET LOSS = (56000)
.
NOTE :-
Fixed expense = (140,000)*(40%)= 56,000
.
.
Thus increase in loss would be 56000- 50,000=6000
Final answer:
The net income of the company will decrease by $6,000 if the product line is eliminated, considering the loss of the contribution margin and the savings from traceable fixed expenses.
Explanation:
To calculate the impact on the company's net income if the product line is eliminated, we need to consider the savings on the traceable fixed expenses and the loss of the contribution margin. If 60% of the fixed expenses are traceable, these can be eliminated when the product line is discontinued. The traceable fixed expenses that can be eliminated amount to 60% of $140,000, which is $84,000. However, by eliminating the product line, the company will also lose the contribution margin of $90,000 that this product line was generating.
Therefore, the net impact on the company's income is the loss of contribution margin ($90,000) minus the savings on traceable fixed expenses ($84,000), resulting in a net loss of $6,000. So, the company's net income will decrease by $6,000 if the product line is eliminated.
From the communities of interest and the CPMT, the executive leadership of the organization should begin building the team responsible for all subsequent IR planning and development activities. This team, the ____________________ team should consist of individuals from all relevant constituent groups that will be affected by the actions of the frontline response teams.
Answer:
This team would be the incident response planning team or the IRP team.
Explanation:
Incident response can be defined as the approach of an organization to address or manage the repercussions of a security breach or cyber attack.
The incident response team follows the incident response plan to ensure damage is limited and recovery cost and time is minimized.
The incident response plan is formulated by a team which does not include staffs only from IT department but from other aspects of organization. The goal is to make a flight plan before it is necessary by taking quick decisions with reliable information.
The question is referring to the formation of a tactical team within an organization. Tactical teams execute pre-planned actions and include members from all relevant groups affected by the actions of this team. These are instrumental in efficient execution of organizational missions, particularly in high-pressure or critical scenarios.
Explanation:The question is discussing the formation of a specific type of team within an organization. From the context provided, it seems the referred team is a tactical team. Tactical teams are utilized to execute a well-defined plan or objective. These teams consist of individuals from all relevant constituent groups that will be affected by the actions of the frontline response teams. Their primary purpose is to take pre-planned actions in response to specific situations, like the SWAT teams in a police or FBI setup.
As part of executive leadership roles within an organization the team creation for subsequent Incident Response planning and development activities forms a core component. Using inputs from communities of interest and the CPMT (Cybersecurity Program Management Team). The members should represent the all relevant groups affected by the actions of this tactical team.
Despite being less common than problem resolution teams and creative teams, tactical teams play an important role in the efficient execution of organizational plans and procedures, particularly in high-pressure or critical situations.
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A general environmental analysis can be expected to produce all of the following EXCEPTa. objective answers.b. recognition of environmental trends.c. identification of organizational opportunities.d. identification of organizational threats.
Answer:
The correct option is a) objective answers
Explanation:
When an general environmental analysis is done by a company , they expect to identify what elements ( whether it be external or internal ), can have an impact on the performance of the company. The purpose of this strategy tool is to see what opportunities are present in the market which a company can use for its advantage( for increasing sales or expansion) and also to identify what level of threats are present in the market that can affect their profitability and market share.
By doing environmental analysis they can see what products or services are trending in the market, what is the general peoples tastes and preferences, so we can say that the options b,c,d are all correct, therefore the option a is incorrect.
A general environmental analysis typically recognizes environmental trends, identifies organizational opportunities and threats, but it does not provide objective answers due to the interpretive nature of the analysis.
A general environmental analysis can be expected to produce a variety of results that inform strategic planning, but it does not typically provide objective answers. This is because environmental analyses involve interpreting data, predicting trends, and making assessments that are influenced by various factors, including human judgement and subjectivity. An environmental analysis usually includes recognizing current and future environmental trends, identifying potential organizational opportunities that align with these trends, and pinpointing potential organizational threats posed by environmental changes. However, the nature of such analysis means that while it may guide decision-making with valuable insights, it is not expected to produce unequivocally objective answers due to the inherent complexities and uncertainties in environmental factors.
Which of the following is NOT a proposition of the Heckscher-Ohlin model? Countries will completely specialize in the product in which they have a comparative advantage if free trade is allowed to occur. If the United States is a skilled labor abundant country, then the United States has a comparative advantage in the production of goods that use skilled labor more intensively. The effect of international trade is to tend to equalize factor prices between the trading nations. A country has a comparative advantage in the production of that commodity which uses more intensively the country's more abundant resource.
Answer:
Countries will completely specialize in the product in which they have a comparative advantage if free trade is allowed to occur. ( first choice)
Answer:
First option: Countries will completely specialize in the product in which they have a comparative advantage if free trade is allowed to occur.
Explanation:
Countries produce a surplus of the product in which they specialize and trade it for a different surplus good of another country. The traders decide on whether they should export or import goods depending on comparative advantages. Imagine that there are two countries and both countries produce only two products.
11. Brooke Company desires net income of $720,000 when it has $2,000,000 of fixed costs and variable costs of 60% of sales. Contribution margin equals a. $6,800,000. b. $2,720,000. c. $1,280,000. d. $1,200,000.
Answer:
b. $2,720,000
Explanation:
The contribution margin is what is left after subtracting the variable cost from the sales.
From there, the company pays their fixed cost and the rest is net income.
In this case you have a company desiring to get 720,000 net income after paying their 2,000,000 fixed cost
So we come up with with formula:
[tex]Contribution Margin - Fixed Cost = Net Income[/tex]
Replacing the know values, we get the unknow value. Like it was a solve for X question:
[tex]X - 2,000,000 = 720,000\\X = 2,000,000 + 720,000\\X = 2,720,000[/tex]
Finch Company began its operations on March 31 of the current year. Finch Co. has the following projected costs: April May June Manufacturing costs(1) $156,800 $195,200 $217,600 Insurance expense (2) $1,000 $1,000 $1,000 Depreciation expense $2,000 $2,000 $2,000 Property tax expense(3) $500 $500 $500 (1) 3/4 of the manufacturing costs are paid for in the month they are incurred. 1/4 is paid in the following month. (2) Insurance expense is $1,000 a month, however, the insurance is paid four times yearly in the first month of the quarter, i.e. January, April, July, and October. (3) Property tax is paid once a year in November. The cash payments for Finch Company in the month of June are:
Answer:
The cash payments for Finch Company in the month of June is $185,600.
Explanation:
Cash payment : Cash payment is that payment which is deals only in cash or the payment is only paid in cash.
So,
To compute the cash payment for June month, the following things is need to be considered.
1. Manufacturing cost of April and May
All other cost like - insurance cost, property tax is not need to be considered because it is not related to may month.
So,
= 3÷4 of May month + 1÷4 of April month
= 3÷4 × $195,200 + 1÷4 × $156,800
= $146,400 + $39,200
= $185,600
Hence, The cash payments for Finch Company in the month of June is $185,600.
A _______ is legally separate from its owner, and it pays its own taxes.
A. small business B. partnership. C. sole proprietorship. D. corporation.. 14
A corporation is legally separate from its owner, and it pays its own taxes.
Answer : corporation- D.
Mansfield Corporation estimates its manufacturing overhead costs to be $160,000 and its direct labor costs to be $320,000 for 2012. The actual manufacturing labor costs were $80,000 for job 1, $120,000 for job 2 and $160,000 for job 3 during 2012. Manufacturing overhead is applied to jobs on the basis of direct labor costs using a predetermined overhead rate. The actual manufacturing overhead cost for the year was $172,000. The amount of overhead assigned to Job 3 during 2012 was: $71,110. $80,000. $160,000. $320,000.
Answer:
The answer is $80,000
Explanation:
160,000 MO
320,000 DL$
Rate MO/DL$ = 160,000/320,000 = 0.5
80000 DL --> x 0.5 = 40,000 MO
120000 DL --> x 0.5 = 60,000 MO
160000 DL --> x0.5 = 80,000 MO
Total MO 180,000
Actual 172,000
Overapplied MO for 8,000
The amount of overhead assigned to Job 3 during 2012 was: $80,000. Thus, option (b) is correct.
What is Job?
The term job refers to employed on a particular company. The company pay amount on employee is also known as job. The job is created opportunity for built the career. A job is support to the financial earn and built the experience. There are producers, builders, thinkers, and Improvers.
According to the amount of overhead assigned to Job 3 during 2012 was are:
The given amount is:
manufacturing overhead costs = $160,000
direct labor costs to be $320,000
manufacturing labor costs were $80,000 for job 1
$120,000 for job 2
$160,000 for job 3
The overhead cost for the year was $172,000.
Rate = manufacturing overhead / direct labor
Rate = $160,000 / $320,000
Rate = 0.5
job 1 = 80000 × 0.5
job 1 = 40,000
job 2 = 120000 × 0.5
job 2 = 60,000
job 3 = 160000 × 0.5
job 3 = 80,000
As a result, the amount of overhead assigned to Job 3 during 2012 was: $80,000. Therefore, option (b) is correct.
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The Dart Company is financed entirely with equity. The company is considering a loan of $1.83 million. The loan will be repaid in equal principal installments over the next two years, and it has an interest rate of 8 percent. The company’s tax rate is 35 percent. According to MM Proposition I with taxes, what would be the increase in the value of the company after the loan? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Answer:
PV of tax shield 52276.75
Δ52276.75 in the company's value
Explanation:
Modigliani Miller proposition1 with taxes:
[tex]V_u + PV_{taxshield} = V_l[/tex]
We have to calculate the interest expense for the loan, then apply the tax shield and calculate the present value
beginning Principal payment Interest ending
1,830,000 228,750 36,600 1,601,250
1,601,250 228,750 32,025 1,372,500
1,372,500 228,750 27,450 1,143,750
1,143,750 228,750 22,875 915,000
915,000 228,750 18,300 686,250
686,250 228,750 13,725 457,500
457,500 228,750 9,150 228,750
228,750 228,750 4,575 -
164,700
Next we calculate the tax shields:
Interest tax shield
36600 12810
32025 11208.75
27450 9607.5
22875 8006.25
18300 6405
13725 4803.75
9150 3202.5
4575 1601.25
Next the present value of the tax shield
the first for are for the first year
and the next for, for the second year.
year 1 year 2
Q1 12810 6405
Q2 11208.75 4803.75
Q3 9607.5 3202.5
Q4 8006.25 1601.25
Total 41632.5 16012.5
Finally we calculate the present value of the tax shield
[tex]\frac{Principal}{(1 + rate)^{time} } = PV[/tex]
[tex]\frac{41632.5}{(1 + 0.08)} = PV[/tex]
[tex]\frac{16012.5}{(1 + 0.08)^{2} } = PV[/tex]
Y1 38549.61
Y2 13728.14
PV of tax shield 52276.75
The increase in the value of the Dart Company after considering the loan according to MM Proposition I with taxes would be $102,200. The calculation considers the tax shield generated from the interest of the loan.
Explanation:According to the MM Proposition I with taxes or Modigliani-Miller theorem, the value of the company after the loan can be determined by calculating the tax shield provided by the interest deduction. This is accomplished by multiplying the loan amount by the interest rate and then by the tax rate. So, in the Dart Company's case, the increase in value would be the tax shield generated from the interest of the loan because the firm can deduct the interest payments from its corporate income tax.
The calculation would be as follows: $1,830,000 (loan amount) * 0.08 (interest rate) * 2 (years) * 0.35 (tax rate) = $102,200. Therefore, the increase in the value of the company after considering the loan and according to the MM Proposition I with taxes would be $102,200.
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American Health Systems currently has 6,400,000 shares of stock outstanding and will report earnings of $10 million in the current year. The company is considering the issuance of 1,700,000 additional shares that will net $30 per share to to corporation.
A. What is the immediate dilution potential for this new stock issue?
B. Assume that the American Health Systems can earn 9% on the proceeds of the stock issue in time to include them in the current years results. Calcualte earnings per share. Should the new issue be undertaken based on earnings per share?
Answer:
(A) 0.32794 EPS
(B) 1.80 EPS
Explanation:
10,000,000 earning / 6,400,000 shares= 1.5625 EPS
10,000,000 earning / (6,400,000 + 1,700,000) = 1.23456 EPS diluted
Immmediate dilution potencial 1.5625 - 1.23456 = 0.32794
each shares losses $0.32794 of earning
(B)
9% of the proceeds is gain
1,700,000 x 30 x 0.09 = 4,590,000
(10,000,000 + 4,590,000) / (6,400,000+1,700,000) = 1.80123456
Rock Corporation acquires all of the assets of Stone Corporation using only its voting stock. Stone Corporation distributes the Rock stock to its shareholders pursuant to its liquidation. After the acquisition, Stone Corporation's shareholders own 20% of the Rock stock (by voting power and value). The transaction is classified as a:
Answer: the correct answer is Type C reorganization.
Explanation:
In a type “C” reorganization, substantially all of the target corporation's assets are exchanged for voting stock in the acquiring corporation.
A stock swap involves exchanging the shares of one company for shares of another company. In this scenario, Rock Corporation acquires all assets of Stone Corporation by offering its voting stock to the shareholders of Stone Corporation. The option (C) is correct.
After the acquisition, Stone Corporation's shareholders receive Rock Corporation's stock in exchange for their shares in Stone Corporation.
Since the transaction involves the exchange of stock and results in Stone Corporation's shareholders owning 20% of Rock Corporation's stock by both voting power and value, it qualifies as a stock swap. This type of transaction allows both companies to combine their resources and operations without the need for cash, potentially providing tax advantages and allowing for a smoother transition of ownership.
This question is not complete, Here I am attaching the complete question:
Rock Corporation acquires all of the assets of Stone Corporation using only its voting stock. Stone Corporation distributes the Rock stock to its shareholders under its liquidation. After the acquisition, Stone Corporation's shareholders own 20% of the Rock stock (by voting power and value). The transaction is classified as a:
A) Merger
B) Acquisition
C) Stock swap
D) Consolidation
Suppose that the government enacts a tax on retail sales of road salt, which homeowners and businesses put on walkways and driveways. Assume that the supply of salt is perfectly elastic, due to the ease with which suppliers can stockpile the product. Before the tax, 800 fifty-pound bags of road salt are sold at an equilibrium price of $5.5 per bag. After the tax, 775 bags are sold at $8 per bag. How much revenue does the tax generate for the government? $
The tax generates $62.50 in revenue for the government.
Revenue is the total income generated by a business or government through its sales, services, or other activities, reflecting its financial inflow and economic performance. It serves as a vital gauge of financial health and sustainability.
Given Information:
Before the tax = 800 fifty-pound bags of road salt sold at an equilibrium price of $5.5 per bag.After the tax = 775 bags sold at $8 per bag.Calculating the revenue generated by the tax is as follows:
The quantity reduction due to the tax = Initial quantity - New quantity
Quantity reduction = 800 bags - 775 bags
= 25 bags
The tax revenue = Quantity reduction × Tax rate
Tax revenue = 25 bags × ($8 - $5.5)
= 25 bags × $2.5
= $62.50
Therefore, the tax generates $62.50 in revenue for the government.
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An injection molding machine can be purchased and installed for $90,000. It is in the seven-year GDS recovery period and is expected to be kept in service for eight years. It is believed that $10,000 can be obtained when the machine is disposed of at the end of year eight. The net annual value added (i.e., revenues less expenses) that can be attributed to this machine is constant over eight years and amounts to $15,000. An effective income tax rate of 40% is used by the company and the after-tax MARR equals 15% per year.
What is the approximate value of the company's before-tax MARR?
Answer:
Before tax minimun accepted rate of return = 25%
Explanation:
tax rate 40%
after.tax MARR 15%
We need to covnert the after tax rate into before tax.
Everything else is irrelevant for the calculation.
[tex]after-tax = before-tax \: (1-tax\:rate)[/tex]
0.15 = before-tax X (1 - 0.40)
0.15/0.60 = .25
A blue-ocean strategy: A). is an offensive strike employed by a market leader that is directed at pilfering customers away from unsuspecting rivals to boost profitability.B). involves an unexpected (out-of- the-blue) preemptive strike to secure an advantageous position in a fast-growing market segment.C). works best when a company is the industry's low-cost leader.D). involves abandoning efforts to beat out competitors in existing markets and instead invent a new industry or new market segment that renders existing competitors largely irrelevant and allows a company to create and capture altogether new demand.E). involves the use of highly creative, never-used-before strategic moves to attack the competitive weaknesses of rivals.
Answer: The correct answer is D).
Explanation: A blue ocean strategy is used to gain a broad and durable competitive advantage by abandoning existing markets and inventing a new market segment in which competitors are minimal and allow the company to meet a new demand.
A blue-ocean strategy, correctly identified as choice D, focuses on creating a new market space that makes existing competition irrelevant, diverging from traditional competitive methods of cost leadership or product differentiation.
Explanation:The question asks to identify which statement correctly defines a blue-ocean strategy. Among the provided options, choice D is accurate. A blue-ocean strategy involves creating a new industry or market segment that makes the competition irrelevant by inventing and capturing entirely new demand. This strategy is distinct from conventional competitive strategies that aim to outperform rivals within existing markets. By developing uncharted market spaces (blue oceans), companies avoid the fierce competition in overcrowded industries (red oceans) and open up avenues for growth and profitability that are not based on competing within the confines of existing industry boundaries.
Michael Porter's framework advises firms to either pursue cost leadership or product differentiation but cautions against trying to achieve both, as it may lead to being 'stuck in the middle'. This contrasts with a blue-ocean strategy, which essentially bypasses the need to compete directly with others by creating a new market space.
Tim Dye, the CFO of Blackwell Automotive, Inc., is putting together this year's financial statements. He has gathered the following balance sheet information: The firm had a cash balance of $23,015, accounts payable of $163,257, common stock of $311,300, retained earnings of $512,159, inventory of $213,000, goodwill and other assets equal to $78,656, net plant and equipment of $714,100, and short-term notes payable of $21,115. It also had accounts receivable of $141,258 and other current assets of $11,223. How much long-term debt does Blackwell Automotive have?
Answer:
210,421 Long-Term Liabilities
Explanation:
We are going to use the accounting equation to solve for long term liabilities
[tex]Assets = Equity + Liabilities\\Liablities = short\: term + long\: term[/tex]
Total Assets
cash 23,015
Account Receivables 141,258
Inventory 213,000
other current assets 11,223
PPE 714,100
goodwill and other assets 78,656
Total Assets 1,181,252
common stock 311,300
retained earnings 512,159
Total equity 823,459
We use he accounting equation to get total liabilities:
1,181,252 - 823,459 = 357,793 Total Liabilities
Now we calcualte the short-term debt
126,257 Account Payable
21,115 short-term Note Payable
Total Current Liabilities 147,372
And with this, the diference between short-term adn total liabilities is the long-term liabilities
357,793 - 147,372 = 210,421 Long-Term Liabilities
Blackwell Automotive's long-term debt is calculated by determining total liabilities using the accounting equation and subtracting short-term liabilities from this amount. After performing the calculations, the long-term debt is found to be $173,421.
Explanation:To determine the amount of long-term debt that Blackwell Automotive has, we need to calculate the liabilities that are not enumerated in the balance sheet information provided and subtract the sum of short-term liabilities from the total liabilities. Total liabilities can be derived by adding together the company's equity and liabilities, and subtracting its assets, since the basic accounting equation states that Assets = Liabilities + Equity. Here, the equity components are common stock and retained earnings.
The sum of the equity is the common stock of $311,300 plus retained earnings of $512,159, equating to $823,459. Summing up the given liabilities, we have accounts payable of $163,257 and short-term notes payable of $21,115, which totals to $184,372. Now, we compile the assets which include cash of $23,015, inventory of $213,000, goodwill and other assets of $78,656, net plant and equipment of $714,100, accounts receivable of $141,258, and other current assets of $11,223, leading to a sum of $1,181,252.
Using the accounting equation to find total liabilities: $1,181,252 (assets) = Total Liabilities + $823,459 (equity), we discover that Total Liabilities are $357,793. Subtracting the total short-term liabilities from this amount, we are left with long-term debt: $357,793 (Total Liabilities) - $184,372 (Short-term liabilities) = $173,421. Therefore, Blackwell Automotive's long-term debt is $173,421.
Montegut Manufacturing produces a product for which the annual demand is 12,500 units. Production averages 80 units per day, while demand is 50 units per day. Holding costs are $5.00 per unit per year, and setup cost is $150.00. (a) If the firm wishes to produce this product in economic batches, what size batch should be used? (b) What is the maximum inventory level? (c) How many order cycles are there per year? (d) What are the total annual holding and setup costs?
The student should produce in batches of 1,000 units, the maximum inventory level is 1,000 units, there are 12.5 order cycles per year, and the total annual holding and setup costs are $4,375.
Explanation:To solve the student's question, we can use the Economic Order Quantity (EOQ) model, which is a method used in business to determine the ideal order quantity a company should purchase to minimize its inventory costs. It’s a formula that allows you to calculate the ideal quantity of inventory to order for a given product.
(a) The size of the batch can be determined using the EOQ formula: EOQ = sqrt((2DS)/H), where D is demand, S is setup cost, and H is holding cost. Thus: EOQ = sqrt((2*12500*150)/5) = 1,000 units.
(b) The maximum inventory level is simply the EOQ, so 1,000 units.
(c) The number of cycles per year is equal to the annual demand divided by the EOQ: 12500/1000 = 12.5 order cycles per year.
(d) The total annual holding and setup costs can be calculated as follows: Total cost = D* (S/EOQ) + (EOQ/2)*H = 12500*(150/1000) + (1000/2)*5 = 1875 + 2500 = $4,375.
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Final answer:
The optimal batch size for Montegut Manufacturing's economic production is approximately 866 units. The company's maximum inventory level and number of order cycles per year are 866 units and approximately 14.43, respectively. The total annual holding and setup costs amount to approximately $4,329.64.
Explanation:
The question involves calculating the economic order quantity (EOQ), maximum inventory level, number of order cycles per year, and total annual holding and setup costs for Montegut Manufacturing. To solve this, we will use the EOQ formula: EOQ = √((2DS)/H), where D is demand, S is setup cost, and H is holding cost.
(a) Using the provided data: D = 12,500 units/year, S = $150, and H = $5/unit/year, EOQ = √((2*12500*150)/5) = √(3750000/5) = √750000 ≈ 866 units.
(b) The maximum inventory level is the EOQ because that is the point right after production and before any demand has reduced the inventory, so it is 866 units.
(c) To find the number of order cycles per year, divide the total demand by EOQ: 12,500 units / 866 units/order ≈ 14.43 cycles/year.
(d) The total annual holding cost is (EOQ/2) * H, and the annual setup cost is (D/EOQ) * S. Therefore, total holding cost = (866/2) * 5 = $2,165, and total setup cost = (12500/866) * 150 ≈ $2,164.64. Adding them gives the total annual cost of $4,329.64 approximately.
A company borrowed cash from the bank by signing a 5-year, 8% installment note. The present value of an annuity factor at 8% for 5 years is 3.9927. The present value of a single sum at 8% for 5 years is .6806. Each annual payment equals $75,000. The present value of the note is:
Answer:
Present Value of he note 937,525
Explanation:
We do factor times annuity to get the PV of the annuity
3.9927 x 75,000 = 299,452.5
Then, we do payment over rate to know which principal generates this amount of interest
75,000/0.08 = principal = 937,500
And then we calcualte the PV of paying the principal in the future
937,500 x .6806 =638,062.5
Last step, we add both values together.
Principal present value 638,062.5 + Annuity Present value 299,452.5
Present Value of he note 937,525
The present value of note is $299,452.50 at the time of making series of payment, that is, at the present value annuity factor.
What is meant by a note?A note is an document where the drawer of the note agrees to make the reimbursement of the due amount to the payer in a defined period of time.
Given values:
Annual payment: $75,000
PV of annuity factor: 3.9927
Interest rate:8%
Time: 5 years
Computation of present value of the note:
[tex]\rm\ Present \rm\ Value \rm\ of \rm\ Note=\rm\ Annual \rm\ Payment \times \rm\ PV\rm\ Annuity \rm\ factor\\\rm\ Present \rm\ Value \rm\ of \rm\ Note=\$75,000\times\ 3.9927\\\rm\ Present \rm\ Value \rm\ of \rm\ Note=\$299,452.50[/tex]
Therefore, when the annual payment of$75,000 has been made with present value of annuity factor of 3.9927 then the present value comes out to be $299,452.50.
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Suppose that the nominal interest rate in Japan is only 5.0 percent, while the comparable rate in the United States is 7.0 percent. Japan's rate of inflation is 2.0 percent while the U.S inflation rate is 6.0 percent. Which economy has the higher real interest rate?
Answer: Japan has the higher real interest rate.
Explanation:
Japan:
Nominal interest rate = 5%
Inflation rate = 2%
Real interest rate = Nominal interest rate - Inflation rate
= 5 - 2
= 3%
United States:
Nominal interest rate = 7%
Inflation rate = 6%
Real interest rate = Nominal interest rate - Inflation rate
= 7 - 6
= 1%
∴ Japan has the higher real interest rate.
Candace just purchased a certificate of deposit at her local bank with a stated rate of 5.3%. Candace has had BA3500 so she knows that the real rate the CD is paying is 3.1%. What are the approximate and exact rates of inflation that Candace is using? Take your answer out four decimal places.
Answer:
The approximate rate of inflation is 2.2000% and the exact rate of inflation is 2.1339%
Explanation:
First of all it is important to understand what does inflation means, Inflation is a situation in the economy where the prices of all the goods and services in the country rises. At this situation in the economy, the central banks tries to reduce the flow of money supply in the economy and usually increases the interest rates so that the consumption is less in the economy.
Formula for calculating the approximate inflation rate is =
Nominal rate of interest - real rate of interest
we have been given value of both interest rates in the question,
Approximate inflation rate = 5.3% - 3.1%
= 2.2%
therefore the approximate inflation rate is 2.2%
Formula for calculating the exact inflation rate , we will use
= (1 + nominal rate / 1 + real rate ) - 1
= (1 + 5.3% / 1 + 3.1%) - 1
= (1 + .053 / 1 + .031) - 1
= (1.053 / 1.031 ) - 1
= 1.0213 - 1
= .0213
now multiplying it by 100 to make it in to percentage
= .021339 x 100
= 2.1339%
therefore the exact inflation rate is 2.1339%
Assume that at the end of 2018, Clampett, Inc. (an S corporation) distributes long-term capital gain property (fair market value of $40,000, basis of $25,000) to each of its four equal shareholders (aggregate distribution of $160,000). At the time of the distribution, Clampett, Inc. has no corporate E&P and J. D. has a basis of $15,000 in his Clampett, Inc. stock. How much income does J. D. recognize as a result of the distribution?'
Answer: Income J. D. recognize as a result of the distribution: $45000
Explanation:
First we'll compute the share of gain on distribution,
Share of the gain on the distribution = $40,000 - $25,000
i.e. $15,000
Now , we'll add the increase in basis from gain from property distribution,
i.e. ($15,000 original basis + $15,000 increase in basis from gain from property distribution)
So income to be recognized :3000+15000 = $ 45000
Answer:
JD will recognize $25,000 as income from the distribution.
Explanation:
In this question , first of all to calculate J.D. income from the distribution, we will take out how much of the gain will J.D. get on the distribution of the long term capital gain asset, where property is divided among 4 equal shareholder as the given market value is $40,000 and the basis given is $25,000, which means that J.D. will gain $15,000 ( $40,000 - $25,000) when the distribution takes place.
The next step would be to see if the distribution of $40,000 per shareholder exceeds the J.D. basis. So here we will calculate J.D. basis as,
J.D. basis = J.D. original basis in Clampett stock + increase in basis from
gain from the distribution
of long term property.
J.D. basis = $15,000 + $15,000
= $30,000
So here we can see that the distribution of $40,000 exceeds the J.D. basis
by $10,000, so we will add it in to $15,000 which will give us the total income recognized by the J.D. as a result of the distribution.
INCOME OF J.D. = $15,000 + $10,000
= $25,000