Answer:
a. 16.50%
Explanation:
Find the beta as of last year using CAPM;
CAPM ; r = risk free + beta(Market risk premium)
0.125 = 0.03 + beta(0.0475)
Subtract 0.03 from both sides;
0.125-0.03 = 0.0475beta
0.095 = 0.0475beta
Divide both sides by 0.0475;
0.095/0.0475 = beta
beta = 2
Next, use CAPM again to find the new required return with a market risk premium is 4.75%+ 2% = 6.75%
r = 0.03 + 2(0.0675)
r = 0.03 + 0.135
r = 0.165 or 16.5%
Therefore, the new required return is 16.5%
Bartran Company assembles ink cartridges. Each finished cartridge has three child items: a plastic case, a label and several ounces of ink. Lead time on assembling a finished cartridge is 2 days, while the lead time for procuring new plastic cases is 1 day, although the lead time is 5 days for procuring new labels and 2 days for procuring more ink. Assuming that all the assumptions of an MRP bill of materials is true, how long would it take Bartran to create at least one finished ink cartridge if it started with nothing in stock?
It would take Bartran Company a minimum of 5 days to create at least one finished ink cartridge if they started with nothing in stock.
Explanation:Using the information given, we can determine the lead times for each component and calculate the total lead time to create a finished ink cartridge. The longest lead time comes from procuring new labels, which is 5 days. Therefore, it would take Bartran Company a minimum of 5 days to create at least one finished ink cartridge if they started with nothing in stock.
Total Lead Time Calculation: Since the longest lead time is 5 days (procuring new labels), it sets the minimum total lead time for creating a finished ink cartridge. This is because all other steps can occur in parallel or have lead times shorter than or equal to 5 days.
Therefore, if Bartran Company started with nothing in stock and initiated the process of creating an ink cartridge, it would take a minimum of 5 days to complete at least one finished ink cartridge.
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Two economists estimate the government expenditure multiplier and come up with different results. One estimates the multiplier at 0.75, while the other comes up with an estimate of 1.25. Explain why these estimates are different in terms of the assumptions that each economist is making.
A. Compared to the first economist, the second economist is assuming a longer time frame for the effects of the increased expenditure to be observed.
B. Compared to the first economist, the second economist must be assuming either a smaller induced increase in consumption, a larger crowding out effect, or both.
C.Compared to the first economist, the second economist must be assuming either a larger induced increase in consumption, a smaller crowding out
D. Unlike the first economist, the second economist miust be assuming that the government expenditure is devoted to useful projects.
If the current value of GDP is $14.42 trillion and the government is planning to increase spending by $900 billion (all in one year), the percentage increase in GDP using the multiplier estimate of the first economist is 4.68 percent. (Round your response to two decimal places) Using the multiplier estimate of the second economist and the same current value of GDP, the percentage increase in GDP is percent. (Round your response effect, or both. to two decimal places.)
Answer: (B)
Compared to the first economist, the second economist must be assuming either a smaller induced increase in consumption, a larger crowding out effect, or both.
Explanation:
First of all, I'll like to explain some terms:
- Government Expenditure Multiplier is an index or figure showing the percentage by which Gross domestic product (GDP) will increase, when Government Expenditure increases; all other kinds of expenditure held constant
- the GDP equation is
GDP= C + I + G + (X-M)
Where C = consumption expenditure (by individuals)
I = investment expenditure (by firms)
G = government expenditure
(X-M) = international trade (export-import) expenditure
- If we hold other independent variables constant and measure the government expenditure multiplier, we will derive the index that shows the amount by which an increase in G will increase GDP.
Now to the question;
Crowding out effect means an act by the government to purchase so much more domestic goods and services than they previously purchased.
This is done deliberately by the government for various reasons: to boost the economy, to provide social welfare goods, and to kick-start national projects.
It is called "crowding out" because these huge government purchases limit private sector purchases.
If the 2nd economist assumes a larger crowding out effect, that means greater government expenditure, then this rhymes with the higher GM (government expenditure multiplier) that his estimate produces. GM of 1.25 means that a percent increase in G will increase GDP by 25%.
On the other hand, Economist 1's estimate of 0.75 implies a 25% decrease in GDP (coming from a decrease in G), which explains his part of option B. He (economist 1) is assuming a lesser crowding out effect.
If we add the assumption of Economist 2 that there'll be smaller induced increase in consumption, it follows that C will have a less positive impact on GDP.
If we combine both changes in C and G, we also have G producing more increase in GDP.
You are welcome.
Answer:
the correct answer is B
"Compared to the first economist, the second economist must be assuming either a smaller induced increase in consumption, a larger crowding out effect, or both".
Explanation:
Government use multiplier used to show increment in level of GDP when government use increment other than consistent of other consumption.
Gross domestic product = c+I+g + ( x-m)
In the event that we steady all use or free factors expected g which is meant government consumption at that point to compute government multiplier the expansion in g consequently increment in GDP.
Swarming impact:- under this administration buy all the more increasingly residential merchandise and ventures which limits private division buy and this circumstance is gotten swarming out.
So if financial specialist second have bigger swarming exertion implies government use increment and this lead higher government multiplier . Gm of 1.25 implies that percent expansion in g lead GDP increment by 25% .
Financial specialist second gauge 0.75 methods 25% abatement in GDP .
The presence of _____________________ in transactions involving goods can easily cause a ______________________ if the result is only a relatively small number of buyer and sellers communicating enough information so that they can agree on a price.
A. imperfect information; thin marketB. adverse information; decline in prices or quantities of products soldC. adverse selection; decline in prices or quality of purchased goodsD. imperfect selection; thick market
Answer:
The answer is letter A.
Explanation:
The presence of ___imperfect information__________________ in transactions involving goods can easily cause a _____thin market_________________ if the result is only a relatively small number of buyer and sellers communicating enough information so that they can agree on a price.
Final answer:
The correct answer to the fill-in-the-blank question is 'imperfect information' and 'thin market'. These terms describe a market situation where few buyers and sellers are active due to uncertainties about product quality, resulting in difficulty determining prices and lower market participation.
Explanation:
The presence of imperfect information in transactions involving goods can easily cause a thin market if the result is only a relatively small number of buyers and sellers communicating enough information so that they can agree on a price. Economists describe a market with few participants as a thin market, which often occurs when imperfect information is present and makes it difficult for consumers to assess the quality of the goods, leading to lower participation from buyers and sellers. This scenario is representative of how market thickness and information quality can influence economic transactions.
Rise Against Corporation is comparing two different capital structures: an all equity plan (Plan A) and a levered plan (Plan B). Under Plan A, the company would have 210,000 shares of stock outstanding. Under Plan B, there would be 150,000 shares of stock outstanding and $2.28 million in debt outstanding. The interest rate on the debt is 8%, and there are no taxes.a. If EBIT is S500,OOO, which plan will result in the higher EPS? b. If EBIT is $750,000, which plan will result in the higher EPS? c. What is the break-even EBIT?
Answer:
a. Plan A
b. Plan B
c. $638,400
Explanation:
The formula to compute the earning per share is shown below:
Earning per share = (Net income - interest) ÷ (Number of shares)
a. For Plan A
EPS = ($500,000) ÷ (210,000 shares) = $2.38
For Plan B
EPS = ($500,000 - $182,400) ÷ (150,000 shares) = $2.12
The interest is computed below:
= $2.28 million × 8%
= $182,400)
Plan A has higher EPS
b. For Plan A
EPS = ($750,000) ÷ (210,000 shares) = $3.57
For Plan B
EPS = ($750,000 - $182,400) ÷ (150,000 shares) = $3.78
The interest is computed below:
= $2.28 million × 8%
= $182,400)
Plan B has higher EPS
c. Break-even EBIT
(EBIT) ÷ (Number of shares) = (EBIT - Interest) ÷ Number of shares
(EBIT) ÷ (210,000) = (EBIT - $182,400) ÷$150,000
After solving this,
The EBIT would be $638,400
Required information The Foundational 15 [LO9-1, LO9-2, LO9-4, LO9-5, LO9-6] [The following information applies to the questions displayed below.] Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labor-hours and its standard cost card per unit is as follows: Direct material: 5 pounds at $8.00 per pound $ 40.00 Direct labor: 2 hours at $14 per hour 28.00 Variable overhead: 2 hours at $5 per hour 10.00 Total standard variable cost per unit $ 78.00 The company also established the following cost formulas for its selling expenses: Fixed Cost per Month Variable Cost per Unit Sold Advertising $ 200,000 Sales salaries and commissions $ 100,000 $ 12.00 Shipping expenses $ 3.00 The planning budget for March was based on producing and selling 25,000 units. However, during March the company actually produced and sold 30,000 units and incurred the following costs: Purchased 160,000 pounds of raw materials at a cost of $7.50 per pound. All of this material was used in production. Direct-laborers worked 55,000 hours at a rate of $15.00 per hour. Total variable manufacturing overhead for the month was $280,500. Total advertising, sales salaries and commissions, and shipping expenses were $210,000, $455,000, and $115,000, respectively. Foundational 9-12 12. What amounts of advertising, sales salaries and commissions, and shipping expenses would be included in the company’s flexible budget for March?
Answer:
Consider the following calculations
Explanation:
The amounts of advertising, sales salaries and commissions, and shipping expenses would be included in the company’s flexible budget for March are calculated below.
Flexible budgetAdvertising = 200.000
Sales salaries and commissions [100.000 + (12.00 * 30.000 )] = 460.000
Shipping expenses [(3.00 * 30.000)]= 90.000
The flexible budget for March for Preble Company would account for $200,000 in advertising, $360,000 in sales salaries and commissions and $90,000 in shipping expenses.
Explanation:The flexible budget adjusts with the level of activity and in this case, it's based on the number of units being produced and sold.
In Preble Company, the advertising expense is fixed at $200,000, so in calculating the flexible budget for March, the advertising cost will still be $200,000.
The variable costs such as sales salaries, commissions and shipping expenses change with the level of activity. Since these costs are $12 per unit sold, the sales salaries and commissions for March will amount to $12 * 30,000 units = $360,000. The shipping expenses are $3 per unit sold, which will amount to $3 * 30,000 = $90,000.
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Both assets A and B plot on the SML. Asset A has an expected return of 15% and a beta of 1.7, and asset B has an expected return of 12% and a beta of 1.1. What is the risk-free rate of return?
a. 5.0%
b. 6.5%
c. 11.5%
d. It cannot be determined from this information
Final answer:
By setting up two equations based on the CAPM formula and the provided expected returns and betas for assets A and B, we solve for the risk-free rate of return, which is found to be 5.0%. The correct answer is option (A)
Explanation:
The Security Market Line (SML) depicts the relationship between an asset's expected return and its beta with respect to the market. It is based on the Capital Asset Pricing Model (CAPM), which is defined as:
Expected Return = Risk-Free Rate + Beta x (Market Return - Risk-Free Rate)
Based on the information given for assets A and B, we can set up two equations using their expected returns and betas:
1. 0.15 = Risk-Free Rate + 1.7 x (Market Return - Risk-Free Rate) for Asset A
2. 0.12 = Risk-Free Rate + 1.1 x (Market Return - Risk-Free Rate) for Asset B
To find the Risk-Free Rate, we have a system of two equations with two unknowns (Risk-Free Rate and Market Return). Solving this system algebraically:
Isolate the Risk-Free Rate terms on one side and simplify the equations.Find the value of Market Return by solving any of the equations.Substitute the value of Market Return back into either equation to find the Risk-Free Rate.After solving, we find that the risk-free rate of return is 5.0% (Option a).
Dividends Paid and Dividends in Arrears The Glendora Company has 200,000 shares of cumulative, five percent, $100 par value preferred stock outstanding. Last year the company failed to pay its regular dividend, but the board of directors would like to resume paying its regular dividend this year. Calculate the dividends in arrears and the total dividend that must be paid this year. Dividend in arrears $Answer Total dividend $Answer
Answer:
Dividend in arrears $ 1,000,000
Total Dividend $ 2,000,000
Explanation:
The dividend at 5% of $100 par value is $5 per unit of shares. Recall, each unit of the preference shares has a par value of $100
Dividend calculation = $5 multiplied by the total unit of shares
previous year shares dividend is 5 x 200, 000 unit of shares = $ 1,000,000
This year total dividend payout will be current year of $1,000,000 plus previous year of $1,000,000 = $2,000,000
Answer:
Dividend in arrears $1,000,000
Total dividend $2,000,000
Explanation:
Where there is a cumulative preferred stock, any unpaid dividend on such stock must be accrued for and paid when management determined to pay them as such divided is more of a liability than equity.
In the case of Glendora Company, as the management did not pay the cumulative preferred dividend last year, such amount must be provided for and paid together with current year dividend. The amount of dividend payable on the preferred stock each year is (200,000 units x $100 each x 5%) = $1,000,000 per annum.
The amount will double the following year thereby making the divided payable to $2,000,000 as follows:
Accrued dividend $1,000,000
Current year dividend $1,000,000
Total amount due $2,000,000
Matthew's Fish Fry has a monthly target operating income of $6,600. Variable expenses are 80% of sales and monthly fixed expenses are $840. What is the monthly margin of safety in dollars if the business achieves its operating income goal?
A. $29,760
B. $41,400
C. $33,000
D. $37,200
Answer:
The correct answer is C
Explanation:
Break even Sales is computed as:
Contribution margin ratio = Fixed Cost / Break even Sales
where
Contribution margin ratio = 1 - Variable expense of 80%
= 20%
Fixed Cost is $840
30% = $840 / Break even Sales
Break even Sales = $840 / 20%
= $4,200
The actual sales is computed as:
Actual Sales = (Fixed Cost + Desired Profit) / Contribution margin ratio
= ($840 + $6,600) / 20%
= $7,440 / 0.2
= $37,200
The margin of safety is computed as:
Margin of Safety = Actual Sales - Break even sales
= $37,200 - $4,200
= $33,000
Consider the following statement: "The Fed has an easy job. Say it wants to increase real GDP by $200 billion. All it has to do is increase the money supply by that amount." The statement is ▼ correct incorrect because an increase in the money supply ▼ does does not affect real GDP directly.
Answer:
The statement is incorrect
Explanation:
As the statement correctly describes, the money supply does not directly affect real GDP, what it affects directly is the interest rate, and the inflation rate, which are monetary variables, while GDP is a variable that measures output.
When the Fed increases the money supply, it may be doing so with the hope of stimulating economic activity, and thus, increasing GDP, but the Fed knows that any effect will be indirect. What will happen under this expansionary monetary policy is that the interest rate will fall, and as it falls, the supply of loans will grow, investment will become cheaper, and more investment means more factors of production, or more productivity, which in turn, increase the real GDP, but as it can be seen, the effect is indirect.
In fact, if the FED goes overboard with increasing the money supply, it may cause high inflation or even hyperinflation, and these events actually lead to less investment, less saving, and less economic activity, resulting in a probable stagnation or contraction of GDP.
At December 31, 2012 and 2013, Plank Corp. had outstanding 3,000 shares of $100 par value 8% cumulative preferred stock and 15,000 shares of $10 par value common stock. At December 31, 2012, dividends in arrears on the preferred stock were $12,000. Cash dividends declared in 2013 totaled $45,000. What amounts were payable on each class of stock?Preferred Stock Common Stock
Answer:
Preference shareholders = $36,000
Equity shareholders = $9,000
Explanation:
As provided the outstanding preference dividend at end of 2012 = $12,000
Total cash dividends declared = $45,000 in the year 2013
Regular preference dividends = $100 [tex]\times[/tex] 3,000 [tex]\times[/tex] 8% = $24,000
Thus, when dividends will be paid in 2013 then firstly they will be used for payment to preference shareholders.
Thus, the company shall pay:
$12,000 + $24,000 = $36,000 to preference shareholders.
Further the balance will be paid to equity shareholders.
= $45,000 - $36,000 = $9,000
Moreno Company publishes a monthly sports magazine, Fishing Preview. Subscriptions to the magazine cost $20 per year. During November 2019, Moreno sells 15,000 subscriptions beginning with the December issue. Moreno prepares financial statements quarterly and recognizes subscription revenue at the end of the quarter. The company uses the accounts Unearned Subscription Revenue and Subscription Revenue.
(a) Prepare the entry in November for the receipt of the subscriptions
(b) Prepare the adjusting entry at December 31, 2019, to record sales revenue recognized in December 2019.
Answer:
Explanation:
The journal entries are shown below:
a. Cash A/c Dr $300,000 (15,000 × $20)
To Unearned Service revenue A/c $300,000
(Being unearned service revenue recorded)
b. Unearned Service revenue A/c Dr $25,000 (300,000 ÷ 12 month)
To Service revenue A/c $25,000
(Being the adjusting entry for December month is recorded)
On January 1, 2016, Woodstock, Inc. purchased a machine costing $40,000. Woodstock also paid $1,000 for transportation and installation. The expected useful life of the machine is 6 years and the residual value is $5,000.How much is the annual depreciation expense assuming use of the straight-line depreciation method?A. $6,100.B. $6,000.C. $5,950.D. $5,750.
Answer:
B. $6,000
Explanation:
The computation of the annual depreciation expense under the straight-line method is shown below:
= (Original cost - residual value) ÷ (useful life)
= ($41,000 - $5,000) ÷ (6 years)
= ($36,000) ÷ (6 years)
= $6,000
The original cost is computed below:
= Purchase value + transportation and installation cost
= $40,000 + $1,000
= $41,000
Bryant Company sells a wide range of inventories, which are initially purchased on account. Occasionally, a short-term note payable is used to obtain cash for current use. The following transactions were selected from those occurring during the year. a. On January 10, purchased merchandise on credit for $25,500. The company uses a perpetual inventory system. b. On March 1, borrowed $55,000 cash from City Bank and signed a promissory note with a face amount of $55,000, due at the end of six months, accruing interest at an annual rate of 6.50 percent, payable at maturity. Required: 1. For each of the transactions, indicate the accounts, amounts, and effects on the accounting equation. (Enter any decreases to account balances with a minus sign.) 2. What amount of cash is paid on the maturity date of the note? 3. Indicate the impact of each transaction (increase, decrease, and NE for no effect) on the debt-to-assets ratio. Assume Bryant Company had $450,000 in total liabilities and $650,000 in total assets, yielding a debt-to-assets ratio of 0.69, prior to each transaction. (Round your answer to 2 decimal places.)
Answer:
1. January 10:
Inventory account increases by $25,500
Account payable increases by $25,500;
Total asset will increase by $25,500 and total liabilities will increases by $25,500. Equity remains the same.
March 1:
Cash account increases by $55,000.
Promissory note payable increases $55,000
Total asset will increase by $55,000 and total liabilities will increases by $55,000. Equity remains the same.
2.
The amount of cash will be paid at maturity date (Sep 1) of the note is $56,787.5
3.
Jan 10: debt-to-assets ratio = 0.70, thus increase in Debt to asset ratio comparing to the ratio 0.69 at the beginning
March 1: debt-to-assets ratio = 0.72, thus increase in Debt to asset ratio comparing to the ratio 0.69 at the beginning
Explanation:
- Working note for 2: Repayment will include Face value + Interest rate expenses incurred = 55,000 + 55,000 * 6.5% *6/12 = $56,787.5
- Working note for 3:
Jan 10: Debt-to-asset ratio = (450,000 + 25,500) / (650,000 + 25,500) = 0.70
Mar 1: Debt-to-asset ratio =(450,000 + 55,000) / (650,000 + 55,000) = 0.72
According to above equation, the total debt-to-asset ratio of January 10 is 0.70 and in March 1 is 0.72.
What is the term debt-to-asset ratio about?
Debt-to-asset ratio provides the percentage of the total assets financed by liabilities, creditors, and debt. It is calculated by dividing the total liabilities by the total assets.
Solution:-
1. January 10:-
Inventory account increases by $25,500
Account payable increases by $25,500
Total asset will increase by $25,500 and total liabilities will increases by $25,500. Equity remains the same.
March 1:
Cash account increases by $55,000.
Promissory note payable increases $55,000
Total asset will increase by $55,000 and total liabilities will increases by $55,000. Equity remains the same.
2. The amount of cash will be paid at maturity date (Sep 1) of the note is $56,787.5
3. Jan 10:- debt-to-assets ratio = 0.70, thus increase in Debt to asset ratio comparing to the ratio 0.69 at the beginning
March 1:- debt-to-assets ratio = 0.72, thus increase in Debt to asset ratio comparing to the ratio 0.69 at the beginning
Working note for 2:- Repayment will include Face value + Interest rate expenses incurred = 55,000 + 55,000 * 6.5% *6/12 = $56,787.5
Working note for 3:-
Jan 10:- Debt-to-asset ratio = (450,000 + 25,500) / (650,000 + 25,500) = 0.70
Mar 1:- Debt-to-asset ratio =(450,000 + 55,000) / (650,000 + 55,000) = 0.72
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Sherry, a sales representative, is placed in a group with an engineer from operations, a human resource specialist, and a financial manager to develop new uses for one of the company's existing products in order to increase sales. This group is aA. standing committee.B. task force.C. special project team.D. cross-functional team.E. multifaceted work group.
Answer:
Letter D is correct. Cross-functional team.
Explanation:
A multifunctional team is made up of employees from different functional areas with the objective of enhancing organizational results.
Problem solving and search for innovation are relevant characteristics when choosing to form a multifunctional team in a company, it is believed that each sector has ideas and solutions that together will increase the possibility of effectiveness in activities and processes, besides providing greater integration, collaborative sense of team and resolution of common goals, which consequently drives the results and the organizational revenue.
Oxnard Industries produces a product that requires 2.6 pounds of materials per unit. The allowance for waste and spoilage per unit is .3 pounds and .1 pounds, respectively. The purchase price is $3 per pound, but a 2% discount is usually taken. Freight costs are $.15 per pound, and receiving and handling costs are $.10 per pound. The hourly wage rate is $10.00 per hour, but a raise which will average $.25 will go into effect soon. Payroll taxes are $1.00 per hour, and fringe benefits average $2.00 per hour. Standard production time is 1 hour per unit, and the allowance for rest periods and setup is .2 hours and .1 hours, respectively. The standard direct materials quantity per unit is a. 2.6 pounds. b. 2.7 pounds. c. 2.9 pounds. d. 3.0 pounds. 4. The standard direct labor hours per unit is
a. 1 hour.
b. 1.1 hours.
c. 1.2 hours.
d. 1.3 hours.
Answer:
standard direct materials quantity per unit = 3.00 Pounds
so correct option is d. 3.0 pounds
Direct Labor is = 1.3 hours
correct option is d. 1.3 hours.
Explanation:
given data
materials = 2.6 pounds
waste = 0.3 pounds
spoilage = 0.1 pounds
discount = 2 %
Freight costs = $.15 per pound
handling costs = $.10 per pound
wage rate = $10.00 per hour
Payroll taxes = $1.00 per hour
fringe benefits average = $2.00 per hour
Standard production time = 1 hour per unit
to find out
standard direct materials quantity per unit and The standard direct labor hours per unit
solution
standard direct materials quantity per unit = Net Raw Material Required + waste + Spoilage ............1
standard direct materials quantity per unit = 2.6 + 0.3 + 0.10
standard direct materials quantity per unit = 3.00 Pounds
so correct option is d. 3.0 pounds
and
Direct Labor is = Net Hrs Required + Allowance + Rest
Direct Labor is = 1 + 0.2+ 0.1
Direct Labor is = 1.3 hours
correct option is d. 1.3 hours.
The standard direct labor hours per unit is 1.3 hours. Thus, option D is correct.
What is production?"Production can be defined as the way investor goods have been produced that can be made to the work of getting or with respect to the need and the demand. It also new various types of resources to make a product there can be similar or multiple product ranges."
Resources = 2.6 pounds.
0.3 pounds of trash
loss = 0.1 pounds of food.
10% off = 2%
The cost of shipping is $.15 per pound.
The costs of handling are $.10 per pound.
Hourly salary is $10.00.
Taxes on wages equal $1.00 per hour.
Average perks and benefits: $2.00 per hour
1 hour is the average production time for each unit.
The standard direct labor hour per unit and the standard direct materials quantity per unit
Direct Labor is = Net Hrs Required + Allowance + Rest
Direct Labor is = 1 + 0.2+ 0.1
1.3 hours of direct labor.
Therefore, option D is the correct option.
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2. You have just completed an analysis of Rodriguez Manufacturing. You used the Capital Asset Pricing Model to determine that the required rate of return is 13%. The last dividend paid was $1.80, and the current price is $25. Based on new manufacturing processes that the company recently adopted and the company’s history of consistently paying dividends, you believe the company’s dividends will grow at a constant growth rate of 6%.
Answer:
You didn´t post the question complete. So I found the expected rate of return. Hope be useful.
Explanation:
Required rate of return on stock = 13%
Expected rate of return is calcualted below Using DDM model:
Expected rate of return = [$1.80 × (1 + 6%) / ($25)] + 6%
= ($1.908 / $25) + 6%
= 7.632% + 6%
= 13.632%
Expected rate of return is 13.632%.
Connors Corporation acquired manufacturing equipment for use in its assembly line. Below are four independent situations relating to the acquisition of the equipment.
"A. The equipment was purchased on account for $40,000. Credit terms were 2/10, n/30. Payment was made within the discount period and the company records the purchases of equipment net of discounts.
B. Connors gave the seller a noninterest-bearing note. The note required payment of $42,000 one year from date of purchase. The fair value of the equipment is not determinable. An interest rate of 12% properly reflects the time value of money in this situation.
C. Connors traded in old equipment that had a book value of $13,500 (original cost of $29,000 and accumulated depreciation of $15,500) and paid cash of $37,000. The old equipment had a fair value of $8,500 on the date of the exchange. The exchange has commercial substance.
D. Connors issued 2,500 shares of its no-par common stock in exchange for the equipment. The market value of the common stock was not determinable. The equipment could have been purchased for $40,000 in cash."
Answer:
A: we reocrd at cost, which is the discounted price:
40,000 x (1 - 2%) = 39,200
Equipment 39,200 debit
Cash 39,200 credit
B: we discount the note implicit interest:
42,000 / 1.12 = 37,500
Equipment 37,500 debit
Note payables 37,500 credit
C: Because; there is commercial substance we recognize the loss on the old equipment as the book value is 13,500 while it is being traded at 8,500
We write off, post the cash used and the loss. The new equipment enter the accounting for the difference to blaance the entry:
equipment 45,500 debit
acc depreciation 15,500 debit
loss at disposal 5,000 debit
cash 37,000 credit
equipment 29,000 credit
D: we evaluate the equipment at fair value
Equipment 40,000 debit
common stock 2,500 credit
additional paid-in 37,500 credit
We now it is no-par therefore there is an additional paid in.
As we aren't provide with the face value we assume is 1 dollar.
Explanation:
A.
Journal entry 40,000/(1-.02) = 39,200
Debit: Equipment - new 39,200
Credit: Accounts Payable 39,200
B. 42,000/(1+.12)=37,500 then 42,000-37,500 = 4,500
Debit: Equipment - new 37,500
Debit: Discount on Notes Payable 4,500
Credit: Notes Payable 42,000
C.
Debit: Equipment - new 45,500 (37,000+8,500)
Debit: Accumulated Depreciation 15,500
Debit: Loss on Exchange of assets 5,000 (13,500-8,500)
Credit: Cash 37,000
Credit: Equipment - old 29,000
D.
Debit: Equipment 40,000
Credit: Common Stock 40,000
Crane Corporation is projecting a cash balance of $33,900 in its December 31, 2019, balance sheet. Crane’s schedule of expected collections from customers for the first quarter of 2020 shows total collections of $209,050. The schedule of expected payments for direct materials for the first quarter of 2020 shows total payments of $48,590. Other information gathered for the first quarter of 2020 is: sale of equipment $3,390; direct labor $79,100, manufacturing overhead $39,550, selling and administrative expenses $50,850; and purchase of securities $15,820. Crane wants to maintain a balance of at least $28,250 cash at the end of each quarter. Prepare a cash budget for the first quarter.
Answer:
Total cash required= (15,820)
Explanation:
Giving the following information:
Crane Corporation is projecting a cash balance of $33,900 in its December 31, 2019, balance sheet. Crane’s schedule of expected collections from customers for the first quarter of 2020 shows total collections of $209,050. The schedule of expected payments for direct materials for the first quarter of 2020 shows total payments of $48,590. Other information gathered for the first quarter of 2020 is: sale of equipment $3,390; direct labor $79,100, manufacturing overhead $39,550, selling and administrative expenses $50,850; and purchase of securities $15,820. Crane wants to maintain a balance of at least $28,250 cash at the end of each quarter.
Cash budget:
From last year= 33,900
Collections= 209,050
Direct material= (48,590)
Equipment= 3,390
Direct labor= (79,100)
Overhead= (39,550)
Selling and administrative expenses= (50,850)
Securities= (15,820)
Ending inventory= (28,250)
Total= (15,820)
ABC and XYZ are all-equity firms. ABC has 1,750 shares outstanding at a market price of $20 a share. XYZ has 2,500 shares outstanding at a price of $28 a share. XYZ is acquiring ABC for $36,000 in cash. The incremental value of the acquisition is $3,000. What is the net present value of acquiring ABC to XYZ?
Answer:
$2,000
Explanation:
The computation of the net present value is shown below:
= Number of outstanding shares × market price per share + incremental value of the acquisition - acquired value in cash
= 1,750 shares × $20 + $3,000 - $36,000
= $35,000 + $3,000 - $36,000
= $2,000
All other information which is given is not relevant. Hence, ignored it
Ann would like to buy a house. It costs $2,500,000. Her down payment will be $50,000. She will take out a mortgage for the remainder. It will be a 30 year, fully amortizing, FRM, with constant monthly payments and monthly compounding. The annual interest rate is 4.00%. She will pay $5,000 in closing costs at origination. She will also pay 1.75% of the balance in buy-down points at origination. Note: the home is bought and the loan is taken in month 0, the first payment is due in month
1. In the spreadsheet where it says "cash inflow", "outflow" and "net cash flow" you should only take into account cash flow related to the mortgage.
2. Fill in the spreadsheet (sheet "FA AMORTIZATION SCHEDULE") for Ann. (It is called an amortization schedule or amortization calendar.)
3. Compute Ann's annualized IRR for the mortgage in the spreadsheet. (Use the net cash flow.)
(3.a) What is the annualized IRR for the mortgage?
(3.b) Is it higher or lower than the mortgage contract rate?
(3.c) Why? in excel
Answer:
Please find the cash flow calculation in the excel attached
Explanation:
The Equated Monthly Installment (Monthly payment is calculated based on the fact that there is a balloon payment at the end of the term.
3b)IRR is lower than the
mortgage contract rate
3c) The reason for lower IRR is the inclusion of Balloon Payment
Please find the cash flow calculation:-
The risk premium of a security is determined by its ________ risk and does not depend on its
________ risk.
A) systematic, undiversifiable
B) systematic, unsystematic
C) undiversifiable, diversifiable
D) diversifiable, undiversifiable
Answer: (B) Systematic, Unsystematic
Explanation:
The systematic risk is one of the type of investment and it is measured by investment return covariance in the market. The systematic risk is basically divided by market risk once it is calculated.
The premium risk of the security is mainly determine by the systematic risk and it is not depend upon its unsystematic risk.
The unsystematic risks is basically inherited from the specific industry and the risk can be reduced by the diversification.
Therefore, Option (B) is correct.
Morgan, the best candidate for the position of director of marketing, has tested positive for the presence of illegal drugs in a hair sample. Given this scenario, the HR manager should: Group of answer choices
a. hire Morgan and inform him of the company’s Employee Assistance program.
b. inform Morgan that someone else has been hired.
c. notify Morgan that he was denied the job because of a positive drug test.
d. ask Morgan to submit to a second type of drug test at another laboratory.
Answer: The correct answer is "d. ask Morgan to submit to a second type of drug test at another laboratory.".
Explanation: Given this scenario, the HR manager should: ask Morgan to submit to a second type of drug test at another laboratory to prove whether Morgan has actually used drugs and evaluate whether it is convenient to hire him or not.
Why, with the monetary policy tools it had used prior to the financial crisis, could the Fed not control the federal funds rate?
(A) The Fed would have needed to conduct a massive open market purchase of government securities.
(B) Investor and consumer behavior was not conforming to normal patterns.
(C) Using the tools the Fed had available would have disrupted the financial system.
(D) Reserves would have needed to be increased by too large an amount.
Answer:
(C) Using the tools the Fed had available would have disrupted the financial system.
Explanation:
Every time the solution of any problem is not available with the resources we have, rather the available resources might add up to the cost of damage.
In the given case also, this general phenomenon is applicable.
As the Fed had monetary policy tools, which it even used earlier are not good for the problem of financial crisis. That the policies could even turn the situation worse as the country is already facing the crisis, and the policies would not contribute to the well being.
Katzev Company manufactures a personal computer designed for use in schools and markets it under its own label. Katzev has the capacity to produce 40,000 units a year but is currently producing and selling only 32,000 units a year. The computer’s normal selling price is $750 per unit with no volume discounts. The unit-level costs of the computer’s production are $250 for direct materials, $225 for direct labor, and $62.50 for indirect unit-level manufacturing costs. The total product- and facility-level costs incurred by Katzev during the year are expected to be $2,000,000 and $500,000, respectively. Assume that Katzev receives a special order to produce and sell 6,000 computers at $562.50 each.
Should katzev accept or reject the special order?
Answer:
Accept the special order.
Explanation:
To accept a special order, the price of the special order should be lower than the making price.
If Katzev accepts the special order,
the revenue ($562.50 x 6,000 computers) = $3,375,000
Less: Avoidable costs (Unit-level costs)
Materials ($250 x 6,000) 1,500,000
Direct labor ($225 x 6,000) 1,350,000
Manufacturing costs 375,000
($62.5 x 6,000)
Total Avoidable costs $3,225,000
Profit if accepts the special order $ 150,000
As the company will receive profit, the company should accept the order.
Note: Fixed costs cannot be avoided irrespective of accepting order or making products. Therefore, total product- and facility-level costs are not deducted.
Considering the incremental cost and revenue, and the company's production capacity, it is beneficial for Katzev to accept the special order as it would result in additional profits.
Explanation:To determine whether Katzev Company should accept the special order, Katzev needs to consider the incremental cost and incremental revenue associated with accepting this order. The unit-level cost of a computer is $250 for direct materials, $225 for direct labor, and $62.50 for indirect unit-level manufacturing costs. So, the total unit-level cost is $537.50 per computer. Multiplying by 6,000 for the special order yields an incremental cost of $3,225,000.
On the revenue side, the special order price is $562.50, so multiplying by 6,000 computers equals $3,375,000. So, the incremental revenue is higher than the incremental cost, meaning the company would make a profit from accepting the special order. Also, it's noted that the company has the capacity to produce 40,000 units but is currently only producing 32,000 units. This means that the company has enough capacity to fill this special order without having to incur additional costs. Therefore, given these considerations, Katzev should accept the special order.
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Cameron Company had 10,000 shares of common stock authorized and 9,500 shares issued and outstanding at the beginning of the year. There were no stock transactions during the year. During the year, the company reported net income of $30,000. Cameron Company has no preferred stock authorized. The company's basic earnings per share (rounded to two decimal points) is
Answer:
The basic earnings per share of the company is $3.16.
Explanation:
The formula to compute the basic earnings per share is as:
Basic earnings per share = (Net Income - Preferred dividends) / Weighted average common shares outstanding
where
Net Income is $30,000
Preferred dividends is $0
Weighted average common shares outstanding is 9,500
Putting the values in the above formula:
= ($30,000 - $0) / 9,500
= $30,000 / 9,500
= $3.16 per share
Suppose there are only two goods produced in an economy: phones and meals. Maria is adept at assembling electronics but has poor skills at preparing food. Mike is an accomplished chef but is not very skilled at assembling electronics.
Currently Mike and Maria each work independently, and they each produce both meals and phones. However, they are considering trading some of their respective output with each other, but only if that would allow each person to become more propserous.
Which statement is not true?
O Mike should produce more food and fewer phones, and Maria should produce more phones and fewer meals.
O Customers will gain if Mike and Maria decide to specialize in what they do best and trade their output.
O Mike and Maria would gain by using their time making only the one good that they are best at producing.
O Mike and Maria will both gain only if they trade the same number of phones for the same number of meals.
Answer:
This statment is not true: O Mike and Maria will both gain only if they trade the same number of phones for the same number of meals.
Explanation:
Mike and Maria agreed to trade part of their results only if that option brought prosperity for both. So we must consider that exchanging the same number of phones and meals would not bring a balance of gain to both, since the financial value of a cell phone is much higher than that of a meal, so Maria would lose.
Compared to the other statements, all are true, because specialization in what they do best would provide added benefits to customers and producers, who would find ways to produce the good more effectively and streamlined processes.
The incorrect statement is that Mike and Maria must trade equal numbers of phones and meals to benefit. They should specialize in the production of goods where they have a comparative advantage, and then trade to improve both of their consumption possibilities.
Explanation:The statement that is not true is that Mike and Maria will both gain only if they trade the same number of phones for the same number of meals. This is based on understanding the principle of comparative advantage and specialization. While Mike should indeed produce more food and fewer phones, and Maria should produce more phones and fewer meals, the key to their gain from trade is that each specializes in producing the good for which they have a comparative advantage. By doing so, both can increase their total output, and through trade, they can improve their consumption possibilities.
Division of labor increases productivity by allowing workers to focus on tasks that make the best use of their abilities and skills. In the case of specialized workers like a baker and a chef, if each specializes in their best task, the kitchen can produce more meals efficiently because each worker's productivity is maximized. This principle extends to economies at the macro level, where countries specialize in producing goods for which they have a comparative advantage and engage in international trade, thereby increasing overall welfare.
A machine that cost $192,000 has an estimated residual value of $24,000 and an estimated useful life of 24,000 machine hours. The company uses units-of-production depreciation and ran the machine 6,000 hours in year 1, 7,000 hours in year 2, and 8,000 hours in year 3.
The book value of the machine at the end of year 3, using the units-of-production depreciation method, is $144,000. This is calculated based on the machine's actual usage of 8,000 hours in year 3.
To calculate the book value at the end of year 3 using the units-of-production depreciation method, we'll follow these steps:
1. Determine the depreciation per machine hour:
[tex]\[\text{Depreciation per Hour} = \frac{\text{Cost} - \text{Residual Value}}{\text{Total Estimated Machine Hours}}\][/tex]
2. Calculate the accumulated depreciation for each year:
[tex]\[\text{Accumulated Depreciation} = \text{Depreciation per Hour} \times \text{Actual Machine Hours}\][/tex]
3. Determine the book value at the end of each year:
[tex]\[\text{Book Value} = \text{Cost} - \text{Accumulated Depreciation}\][/tex]
Let's calculate it:
Given:
- Cost = $192,000
- Residual Value = $24,000
- Estimated Useful Life = 24,000 machine hours
- Actual Machine Hours in Year 1 = 6,000 hours
- Actual Machine Hours in Year 2 = 7,000 hours
- Actual Machine Hours in Year 3 = 8,000 hours
1.
[tex]\[\text{Depreciation per Hour} = \frac{192,000 - 24,000}{24,000 \text{ hours}} = 6[/tex]
2.
[tex]\[\text{Accumulated Depreciation Year 1} = $6 \times 6,000 \text{ hours} = $36,000\\\text{Accumulated Depreciation Year 2} = $6 \times 7,000 \text{ hours} = $42,000\\\text{Accumulated Depreciation Year 3} = $6 \times 8,000 \text{ hours} = $48,000[/tex]
3.
[tex]\text{Book Value Year 1} = $192,000 - $36,000 = $156,000\\\text{Book Value Year 2} = $192,000 - $42,000 = $150,000\\\text{Book Value Year 3} = $192,000 - $48,000 = $144,000[/tex]
Therefore, the book value at the end of year 3 is $144,000.
The complete question is:
A machine that cost $192,000 has an estimated residual value of $24,000 and an estimated useful life of 24,000 machine hours. The company uses units-of-production depreciation and ran the machine 6,000 hours in year 1, 7,000 hours in year 2, and 8,000 hours in year 3.
Calculate its book value at the end of year 3.
An owner lists his home and agrees to pay a 6% commission provided he nets $10,000 after paying the commission and the balance of his mortgage, which is $75,000. To the nearest dollar, what should the selling price be to net the owner his $10,000?
Answer:
selling price is $90425.53
Explanation:
GIVEN DATA:
Commission 6%
net funds $10,000
mortgage is $75,000
Required selling price is given as
[tex]= \frac{Net\ funds\ required}{1 - commission}[/tex]
[tex]= \frac{10,000 + 75000}{1 - 0.06}[/tex]
[tex]=\frac{85000}{0.94}[/tex]
=$90425.53
selling price is $90425.53
To find the selling price that will net the owner $10,000, subtract the commission and mortgage balance from the selling price and solve for x. The selling price should be $90,425.
Explanation:To find the selling price that will net the owner $10,000, we need to take into account the 6% commission and the balance of the mortgage. Let's represent the selling price as x. The commission would be 0.06x, and the balance of the mortgage is $75,000. So, the equation we can set up is:
x - 0.06x - $75,000 = $10,000
To solve for x, we can combine like terms:
0.94x - $75,000 = $10,000
Then, we can isolate x by adding $75,000 to both sides:
0.94x = $85,000
Dividing both sides by 0.94:
x = $90,425
Therefore, the selling price should be $90,425 to net the owner $10,000.
What is credit??????
Answer:
Credit is the provision of money or bills, based on a loan agreement between the bank and another party that requires the borrower to carry out the amount of interest in return
Note :
Sorry if my English ia a mess. becaues, I can't speak English
Credit:
Credit is the customer's ability to obtain services or goods before payment, based on the confidence that money to be paid will be made by him/her in the future.
In accounts, credit in an entry recording is a sum received listed on the right-hand side or column of an account.
Your financial power is part of the credit. You get what you need today, such as a car loan or a credit card, depending on the assurance that you can pay later. Planning to strengthen your mortgage helps ensure that you apply for credit if you need it.
Your statement is the basis for determining your credit score by the various financial reporting agencies that the borrowers use to assess your value of loan.
Bank of America, TransUnion and Equifax are three major national credit service companies.
Six months ago, you purchased 2,700 shares of ABC stock for $44.81 a share. You have received dividend payments equal to $.50 a share. Today, you sold all of your shares for $47.49 a share. What is your total dollar return on this investment?
The total dollar return on the investment is calculated by adding the total capital gain ($7,236) and the total dividends ($1,350) which results in a total return of $8,586.
The question involves calculating the total dollar return on an investment in the stock market. To determine the total dollar return, we must consider both the capital gain (or loss) and the dividend payments received during the investment period.
First, let's calculate the capital gain:
Sale price per share: $47.49
Purchase price per share: $44.81
Number of shares: 2,700
Capital gain per share: $47.49 - $44.81 = $2.68
Total capital gain: $2.68 \\u00d7 2,700 shares = $7,236
Next, let's calculate the dividend earnings:
Dividend per share: $0.50
Total dividends: $0.50 \\u00d7 2,700 shares = $1,350
Now, we can calculate the total dollar return:
Total capital gain: $7,236
Total dividends: $1,350
Total dollar return: $7,236 + $1,350 = $8,586