Answer:
Year 1
$ 40.000 - Total Dividends
$ 20.000 - Preferred Stockholers
$ 20.000 - Common Stockholers
Year 2
$ 10.000 - Total Dividends
$ 10.000 - Preferred Stockholers
$ 0 - Common Stockholers
Year 3
$ 60.000 - Total Dividends
$ 30.000 - Preferred Stockholers
$ 30.000 - Common Stockholers
Total
$ 60.000 Preffered Stockholers
$ 50.000 Common Stockholers
Explanation:
First it's necessary to said that the preferred stockholders have a higher claim to dividends than common stock, it means that each time that the company paid dividends, the one corresponding to Preffered Stockholers must be paid first and if one year there are not enough dividends to pay then they must be paid the next year along with the dividends of next year, it's a kind of guaranteed dividend.
Total Dividends to Preferred Stockholders
10.000 Shares
2% percent of par value
$100 Par Value
Total Dividends: 10,000 * 2% * $100 = $ 20.000 of Dividend each year.
Preferred dividends for preferred stock.
$ 20.000
Total Dividends to be paid by the company each year
Year 1 Year 2 Year 3
$ 40.000 $ 10.000 $ 60.000
$ 20.000 $ 10.000 $ 30.000 Preffered Stockholers
$ 20.000 $ 30.000 Common Stockholers
Answer:
Year 1:
Dividend per common share: $0.4
Dividend per preferred share: $2
Year 2:
Dividend per common share: $0
Dividend per preferred share: $1
Year 1:
Dividend per common share: $0.6
Dividend per preferred share: $3
Explanation:
Year 1:
Dividend has to be paid to preferred stocks = 2% x 100 x 10,000 = $20,000 => Dividend per one preferred stock = 20,000/10,000 = $2
Dividend left to be paid to common share = (40,000-20,000) = $20,000 => Dividend per one common share = 20,000/50,000 = $0.4
Year 2:
Dividend has to be paid to preferred stocks = 2% x 100 x 10,000 = $20,000; Dividend actual paid-out = $10,000 => Dividend per one preferred stock = 10,000/10,000 = $1 & the other $1 per share will be paid later.
Dividend left to be paid to common share = 0
Year 3:
Dividend has to be paid to preferred stocks = 2% x 100 x 10,000 = $20,000 => Dividend per one preferred stock = 20,000/10,000 = $2. This plus $1 dividend per share payable from Y2 making the Dividend per one preferred stock paid out in Y3 = $3 => Total dividend paid to preferred stock = 3 x 10,000 =$30,000
Dividend left to be paid to common share = (60,000-30,000) = $30,000 => Dividend per one common share = 30,000/50,000 = $0.6
Greg purchased stock in Bear Stearns and Co. at a price of $88 per share one year ago. The
company was acquired by JP Morgan at a price of $11 per share. What is Gregʹs return on his
investment?
A) -87.50%
B) -113.75%
C) -100.62%
D) -96.25%
Answer:
A) -87.50%
Explanation:
The computation of the return on the investment is shown below:
= (Acquired price by JB Morgon - purchase price per share) ÷ (purchase price per share)
= ($11 per share - $88 per share) ÷ (88 per share)
= - ($77 per share) ÷ (88 per share)
= -87.50%
We simply take the difference of the price and then divide it with the purchase price per share so that the correct percentage can come.
Final answer:
Greg experienced a return on investment of -87.50% when Bear Stearns and Co. was acquired by JP Morgan at a much lower price than his original purchase price.
Explanation:
Greg's return on investment (ROI) is calculated by finding the percentage change from the original purchase price to the acquisition price. To find the ROI, we use the following formula:
ROI = ((Final Value of Investment - Initial Value of Investment) / Initial Value of Investment) * 100
Using the numbers given:
Initial Value = $88 per share
Final Value = $11 per share
ROI = (($11 - $88) / $88) * 100
Thus, ROI = ((-$77) / $88) * 100 = -87.5%
Therefore, Greg's return on his investment is -87.50%, which means he suffered a significant loss on his investment after the company was acquired.
Each of the following parts describes a firm that was an early mover in its market. In light of the information provided, indicate whether the firm’s position as an early mover is likely to be the basis of a sustainable competitive advantage, and explain why or why not.A firm has a 60% share of T3MP, a commodity chemical used to make industrial solvents. Minimum efficient scale is thought to be 50% of current market demand. Recently, a change in environmental regulation has dramatically raised the price of a substitute chemical that indirectly competes with T3MP. This undermines the market for the substitute, which is about twice the size of the market for T3MP.
Answer:
Check the following explanation
Explanation:
Let us consider Porter’s Five forces strategy, in analyzing the particular scenario of Bank and that of the firm which produces T3MP chemical.
As the bank is an early mover in the issuance of ATM cards, the bank definitely got the competitive advantage. As an early mover, the bank faced very low threat of new entrants with regard to distribution of ATM cards. Therefore, the bank could capture a large area of urban region. Also, the switching cost for bank customers is quite high and in the case of banks, generally the individual customers prefer to stick to one or two banks. As an early mover, this was definitely an advantage to the bank. As a result, the bank also got a loyal customer base in the long run. When the brand loyalty was combined with the high switching cost of bank products; in terms of ATM, the entry of a potential competitor was difficult for the bank. Since the ATM cards are unique to each customer and bank, the ATM products adopts a generic differentiation strategy in terms of technology and point of locations. The place is definitely a competitive advantage of bank ATMs and being an early mover, they could capture a large share of customers in the urban areas.
As the ATM cards are specially made for the particular banks, they are definitely a tool for gaining advantage over the competitors. Hence the bank enjoys a definitive leadership in terms of its competitive advantage as an early mover where it could capture a large urban area, and in terms of technology where one bank’s ATM card doesn’t fit into another.
In the case of second firm, which has a 60 percent share of T3MP, faces the threat from substitute products. But T3MP has got the competitive advantage over its substitute product, due to the low bargaining power of customers. T3MP seems to have only a major substitute, whose market share seemed to have dented by the increase in price of the substitute. The low price of T3MP compared to the substitute is definitely a competitive advantage for the firm. This would decrease the competition from the substitute product which in turn will increase the sale of T3MP. Further, the substitute won’t be able to limit the growth of T3MP by setting a sealing price. The firm could increase its marginal returns through increased sale of T3MP. Thus the firm could capture the market share of the substitute which is twice as that of T3MP and could increase its revenue and earning potential.
Darnell wants to purchase a new computer and go to the Caribbean for spring break. The computer is priced at $1,299, and the vacation is priced at $800. He has only $1,574 in his checking account, so he cannot afford to purchase both. After much thought, Darnell buys the computer and writes a check for $1,299. Identify what role money plays in each of the following parts of the story. Hint: Select each role only once. Role of Money Medium of Exchange Unit of Account Store of Value Darnell can easily determine that the price of the computer is more than the price of the vacation. Darnell has $1,574 in his checking account. Darnell writes a check for $1,299.
Answer:
Unit of Account
Store of Value
Medium of Exchange
Explanation:
Money can be exchanged for goods and services. Darnell exchanged money ($1299) for a computer. For money to be used as a medium of exchange, it should be generally recognised and accepted.
Money is a unit of account. Darnell compared the value of a vacation with that of a computer using their prices.
Money functions as a store of value. Money can be used to store wealth. Darnell kept his wealth (value) as money in his checking account. For money to be used as a store of value, it should be able to retain its value for a long time.
Carmel Corporation is considering the purchase of a machine costing $41,000 with a 8-year useful life and no salvage value. Carmel uses straight-line depreciation and assumes that the annual cash inflow from the machine will be received uniformly throughout each year. In calculating the accounting rate of return, what is Carmel's average investment? Multiple Choice
A. $5,125.
B. $23,063.
C. $41,000.
D. $5,766.
E. $20,500.
Answer:
E. $20,500
Explanation:
The average investment is defined as the average between the initial investment and the salvage value of the equipment.
In this situation, Carmel Corporation had an initial investment of $41,000 for the machine and its salvage value is zero. Therefore, Carmel's average investment is:
[tex]AI = \frac{\$41,000+0}{2} \\AI = \$20,500[/tex]
The answer is alternative E. $20,500
Indicate whether each of the following is an example of an automatic stabilizer or discretionary fiscal policy.
1. The government increases the top income tax bracket to 35%.
2. The tax rate paid by an individual falls from 20% to 15% when his pay is reduced during a recession.
3. A person qualifies for unemployment compensation when she loses her job during a recession.
4. The government votes to increase military spending.
5. The government collects more tax revenue during an expansion because the stock market is booming.
Answer:1. Discretionary fiscal policy.
2. Automatic stabilizer.
3 Automatic stabilizer
4. Discretionary fiscal policy
5. Discretionary fiscal policy
Explanation:
Automatic stabilizer are already existing Government legislation built in to stabilize the economy without direct goverments intervention. E.g the progressive tax system which takes more tax as income increases and less tax as it decreases, the bottom line is that this policy already exists in the Government system in controlling the economy.
Discretionary fiscal policy are new and direct Goverments policy to control the economy like new spending, new tax etc.
For the year ended December 31, 2021, Norstar Industries reported net income of $975,000. At January 1, 2021, the company had 1,110,000 common shares outstanding. The following changes in the number of shares occurred during 2021: Apr. 30 Sold 95,000 shares in a public offering. May 24 Declared and distributed a 5% stock dividend. June 1 Issued 108,000 shares as part of the consideration for the purchase of assets from a subsidiary. Required: Compute Norstar's earnings per share for the year ended December 31, 2021. (Enter your answers in thousands. Round "EPS" answer to 2 decimal places. Do not round intermediate calculations.)
To calculate Norstar Industries' earnings per share (EPS), we need to determine the weighted average number of common shares outstanding and divide the net income by this number.
Explanation:The first step in calculating Norstar Industries' earnings per share (EPS) is to determine the weighted average number of common shares outstanding.
To do this, we start with the number of shares at the beginning of the year, add any shares issued or sold, and subtract any shares repurchased or retired. In this case, we have 1,110,000 shares at the beginning of the year, sold 95,000 shares in April, issued 108,000 shares in June, and no shares repurchased or retired.
Next, we divide the net income of $975,000 by the weighted average number of shares outstanding to calculate the EPS. The weighted average number of shares is (1,110,000 * 12) + (95,000 * 8) + (108,000 * 7) = 22,320,000 shares. Therefore, the EPS is $975,000 / 22,320,000 = $0.0436 per share.
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Effect of Transactions on Cash Flows State the effect (cash receipt or payment and amount) of each of the following transactions, considered individually, on cash flows: Retired $190,000 of bonds, on which there was $1,900 of unamortized discount, for $198,000. Sold 7,000 shares of $30 par common stock for $69 per share. Sold equipment with a book value of $45,100 for $64,900. Purchased land for $417,000 cash. Purchased a building by paying $85,000 cash and issuing a $100,000 mortgage note payable. Sold a new issue of $320,000 of bonds at 99. Purchased 5,400 shares of $20 par common stock as treasury stock at $39 per share. Paid dividends of $2.00 per share. There were 33,000 shares issued and 5,000 shares of treasury stock.
Answer:
Explanation:
The effects of (cash receipt or payment and amount) is shown below:
Retired $190,000 of bonds, on which there was $1,900 of unamortized discount, for $198,000. - cash payment of $198,000
Sold 7,000 shares of $30 par common stock for $69 per share - cash receipts for $483,000 (7,000 shares × $69)
Sold equipment with a book value of $45,100 for $64,900 - cash receipts for $64,900
Purchased land for $417,000 cash - cash payment for $417,000
Purchased a building by paying $85,000 cash and issuing a $100,000 mortgage note payable - cash payment for $85,000
Sold a new issue of $320,000 of bonds at 99 - cash receipts for $316,800 ($320,000 × 0.99)
Purchased 5,400 shares of $20 par common stock as treasury stock at $39 per share - $210,600 (5,400 shares × $39)
Paid dividends of $2.00 per share. There were 33,000 shares issued and 5,000 shares of treasury stock - cash payment for $52,000
(33,000 shares - 5,000 shares) × $2
Use the theory of comparative advantage to explain the way in which Logitech has configured its global operations. Why does the company manufacture in China and Taiwan, undertake basic R&D in California and Switzerland, design products in Ireland, and coordinate marketing and operations from California?
Answer:
Comparative advantage is defined as the quality of a firm or country to produce something at a lower economic oportunity cost than other firm.
These operations can be easily explained by defining the comparative advantages of each country.
Manufacturing in China and Taiwan - This two countries have a comparative advantage in manufacturing because of low labor costs, and great infraestructure (ports, trains, airports, facilities).
Basic R$D in California and Switzerland - Both regions have a comparative advantage in human capital. They have prestigious universities, and are at the forefront of scientific and technological research.
Design products in Ireland - Ireland also has good human capital, but perhaps not as good as California or Switzerland. Therefore, product design, which usually comes after basic research, is undertaken there.
Coordinates marketing and operations in California - California is a huge market, and being close to potential customers is always a comparative advantage for marketing and managerial operations.
Logitech has configured its global operations based on the theory of comparative advantage by allocating different stages of its production process to countries where they can be performed most efficiently and effectively.
Logitech manufactures its products in China and Taiwan because these countries offer a comparative advantage in manufacturing due to lower labor costs, established supply chains, and high production capacities. This allows Logitech to produce goods at a lower cost, which is crucial for price-competitive electronics.
Basic R D activities are conducted in California and Switzerland because these locations have a comparative advantage in research and development, with access to highly skilled labor, innovative environments, and strong intellectual property protection. California's Silicon Valley is a hub for technology innovation, while Switzerland has a reputation for high-quality research institutions.
Product design is centered in Ireland, which likely reflects Ireland's comparative advantage in design talent, possibly due to a favorable business environment, a skilled workforce, and government incentives for design and innovation. Ireland's corporate tax policies may also play a role in attracting such activities.
Marketing and operations are coordinated from California, where Logitech's headquarters are located. This centralization allows for better coordination and control of global operations. California's diverse and large market, along with its proximity to Silicon Valley's talent pool, provides a comparative advantage for managing global marketing and supply chain operations.
By leveraging the comparative advantages of different regions, Logitech maximizes its efficiency, reduces costs, and maintains a competitive edge in the global market. This strategic distribution of tasks across the globe enables the company to benefit from the unique strengths of each location, ultimately contributing to its overall success."
Jiffy Co. expects to pay a dividend of $3.00 per share in one year. The current price of Jiffy common stock is $60 per share. Flotation costs are $3.00 per share when Jiffy issues new stock. What is the cost of internal common equity (retained earnings) if the longminusterm growth in dividends is projected to be 8 percent indefinitely
Answer:
B13%, explained below:
Explanation:
Flotaion cost doesn't impact the cost of existing equity and it only impact the cost of new equity. The question asks about cost of existing equity, hence
Cost of equity ={ Expected dividend in one year/ Stock price} + growth rate = 3 /60% + 8%
Cost of existing equity (Retained earnings) = 13%
Jensen Company reports the following:
Direct materials used $345,000
Direct labor incurred 250,000
Factory overhead incurred 400,000
Operating expenses 175,000
Jensen Company’s period costs are
a. $345,000
b. $250,000
c. $400,000
d. $175,000
Answer:
d. $175,000
Explanation:
The computation of the period cost is shown below:
Period costs = Operating expenses
= $175,000
It records only that expenses which are incurred during the particular year. Examples - Salaries expense, Depreciation, Repairs, and maintenance, Advertising expense, sales commission, etc
All other information which is given is not relevant. Hence, ignored it
Final answer:
The Jensen Company's period costs are its operating expenses, which are not directly tied to production. The correct period cost given in the question is $175,000, representing the operating expenses.
Explanation:
The student asked what Jensen Company's period costs are, given a breakdown of expenses including direct materials, direct labor, factory overhead, and operating expenses. Period costs are those costs that are not directly tied to the production process and are expensed in the period they are incurred. From the options given, the correct answer is d. $175,000, which represents the operating expenses. These costs are not involved in manufacturing but rather in non-production activities of the company.
The following present value factors are provided for use in this problem. Periods Present Value Present Value of an of $1 at 8% Annuity of $1 at 8% 1 0.9259 0.9259 2 0.8573 1.7833 3 0.7938 2.5771 4 0.7350 3.3121 Xavier Co. wants to purchase a machine for $37,000 with a four year life and a $1,000 salvage value. Xavier requires an 8% return on investment. The expected year-end net cash flows are $12,000 in each of the four years. What is the machine's net present value (round to the nearest whole dollar)? a. $3,480.b. $2,745.c. $40,480d. none of the above
Answer:
a. $3,480
Explanation:
Please see attachment.
Net income was $470,000. Issued common stock for $72,000 cash. Paid cash dividend of $11,000. Paid $125,000 cash to settle a note payable at its $125,000 maturity value. Paid $121,000 cash to acquire its treasury stock. Purchased equipment for $87,000 cash.Use the above information to determine this company's cash flows from financing activities. (Amounts to be deducted should be indicated with a minus sign. Omit the "$" sign in your response.)Statement of Cash FlowsCash flows from financing activities$ ...... ............. ............. ............ ........
Answer:
310500.
Explanation:
Given: Net income= 470000
Issued common stock= 72000
Paid cash dividend= 11000
Paid cash to settle a note payable= 125000
Paid for treasury stock= 121000
Purchased equipment= 87000
Cash flow from financial activities are the cash inflow that are used to fund company. Here we consider all financial activities which involve cash.
We add all cash inflow from issuing debt and equity then deduct all cash outflow from stock repurchase, cash paid in dividend and other financial activities.
Cash flow from financial activities (CFF)= [tex](470000+72000)-11000-125000-121000-87000[/tex]
Cash flow from financial activities (CFF)= [tex](542000)-(231500)= 310500[/tex]
∴ Cash flow from financial activities is 310500.
Changes in governments or ruling political parties can affect businesses. The main concern of a multinational corporation is
Multiple Choice
A. change in the economic risk.
B. access to open markets.
C. the continuity of the set of rules, codes of behaviors, and the rule of law.
D. which government is in power.
E. the exchange rate and trade policies.
Answer:
D. which government is in power.
Explanation:
In a democratic system of ruling when one party come into power after getting majority votes the main concern of the corporation unit is to know which government is in power or which political party has a chance to gain majority votes.
Every government that takes oath for next five year or defined year has its own policy on economic or for business. This predefined rules and policy may be differ from exciting government or may be followed the path of previous government. therefore corporation unit are always in a mood to go with coordination with new government to have maximum advantage
You are an economic adviser to a candidate for national office. She asks you for a summary of the economic consequences of a balanced-budget rule for the federal government and for your recommendation on whether she should support such a rule. How do you respond?
Answer:
Recommendation: Do not support such rule
Explanation:
This type of budget rules restrain governments from employing taxes and transfers as automatic stabilizers. This due to the fact that these rules tend to bring deficits and surpluses.
The investments of Steelers Inc. include a single investment: 42,730 shares of Bengals Inc. common stock purchased on September 12, Year 1, for $14 per share including brokerage commission. These shares were classified as available-for-sale securities. As of the December 31, Year 1, balance sheet date, the share price declined to $12 per share.
Required:
A. Journalize the entries to acquire the investment on September 12 and record the adjustment to fair value on December 31, Year 1. Refer to the Chart of Accounts for exact wording of account titles.
B. How is the unrealized gain or loss for available-for-sale investments disclosed on the financial statements?
Answer:
Explanation:
A. The journal entries are shown below:
On September 12
Investment A/c - Bengals Inc A/c Dr $598,220 (42,730 × $14)
To Cash A/c $598,220
(Being the acquired investment including brokerage commission is recorded)
On December 31
Unrealized gain or loss on available-for-sale securities A/c Dr $85,460
To Valuation allowance for available-for-sale securities $85,460
(Being decline in share value is recorded)
The computation is shown below:
= 42,730 shares × ($14 per share - $12 per share)
= 42,730 shares × $2 per share
= $85,460
B. The unrealized gain or loss for available-for-sale investments is shown in the Stockholder equity section on the balance sheet. It is to be shown in the negative item in the equity section.
Beginning in 2011, the Dodd-Frank Wall Street Reform and Consumer Protection Act requires corporations with a market value over ________ to allow a nonbinding shareholder vote on executive pay.
A. $25,000,000
B. $50,000,000
C. $75,000,000
D. $100,000
E. $750,000
Answer:
The correct answer is letter "C": $75,000,000.
Explanation:
The Dodd-Frank Wall Street Reform and Consumer Protection Act is a federal law of the United States enacted in July 2010. The law revised financial regulation following the 2007–2008 financial crisis. It established that it is mandatory for companies with values over $75,000,000 to allow shareholder votes on matters such us executive payments.
The Dodd-Frank Act requires corporations with a market value over $75,000,000 to allow nonbinding shareholder votes on executive pay. This regulation, implemented in 2011, aims to increase transparency and shareholder influence in executive compensation. thus the correct answer is c.
The Dodd-Frank Wall Street Reform and Consumer Protection Act passed in response to the financial crisis of 2008, includes numerous regulations aimed at increasing the oversight of financial institutions. One specific provision, beginning in 2011, mandates that corporations with a market value over $75,000,000 must allow a nonbinding shareholder vote on executive pay. This was an effort to increase transparency and give shareholders a voice in executive compensation decisions.
You recently purchased a stock that is expected to earn 10 percent in a booming economy, 4 percent in a normal economy, and lose 4 percent in a recessionary economy. There is a 15 percent probability of a boom, a 70 percent chance of a normal economy, and a 15 percent chance of a recession. What is your expected rate of return on this stock? a. 1.85 percent b. 3.70 percent c. 10.00 percent d. 4.67 percent e. 3.33 percent
Answer:
b. 3.70 percent
Explanation:
Expected rate of return of a stock, given probabilities, is calculated by summing up the product of probability of each state occurring by the expected return of the stock should that happen.
Expected rate of return = SUM (probability *return)
Boom;(probability* return) = (0.15* 0.10) = 0.015 or 1.5%
Normal ;(probability* return) = (0.70* 0.04) = 0.028 or 2.8%
Recession ; (probability* return) = (0.15* -0.04) = -0.006 or -0.6%
Next, sum up the expected return for each state of the economy to find the expected rate of return on this stock;
= 1.5% + 2.8% -0.6%
= 3.7%
Therefore, the correct answer is choice B.
Sales-oriented pricing objectives:
A. may include market share targets as well as dollar or unit sales targets.
B. might be achieved and still result in losses.
C. are especially risky during times when a firm's costs are rising rapidly.
D. All of the above are true.
E. None of the above is true.
Sales-oriented pricing objectives can include market share and sales targets but may result in losses, especially risky when firm's costs are rising rapidly.
The question pertains to the application of sales-oriented pricing objectives in the business environment. Option D, All of the above are true, is correct. Sales-oriented pricing objectives may include market share targets, and dollar or unit sales targets (A), meaning the goal is to generate a certain volume of sales, regardless of profitability. These objectives might still result in losses (B) if the revenue generated from the sales doesn't cover the costs of the business. Additionally, pursuing these objectives are especially risky during times when a firm's costs are rising rapidly (C), as it could lead to even higher losses if prices aren't adjusted appropriately.
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Sales-oriented pricing objectives may include market share targets as well as dollar or unit sales targets. Achieving these objectives doesn't guarantee profitability and a company can still experience losses. Pursuing sales-oriented pricing objectives can be particularly risky during periods when a firm's costs are rising rapidly.
Explanation:D. All of the above are true.
Sales-oriented pricing objectives may include market share targets as well as dollar or unit sales targets. Achieving these objectives doesn't guarantee profitability and a company can still experience losses.
Additionally, during periods when a firm's costs are rising rapidly, pursuing sales-oriented pricing objectives can be particularly risky.
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Which of the following reports filter data before it is presented to the manager as information, and only includes information about records that are out of the ordinary or not according to some standard?A) summaryB) exceptionC) externalD) detailedE) none of these
Answer: Option A
Explanation: In wimples words, a summary report refers to the statement that is prepared by the organisation with the sole objective of helping the executive level managers in their decision making.
Such reports go through various phases and is converted from a detailed explanation to the points that are most relevant to the organisation. It provides a short form detail of the factors that needs most attention of top managers.
As the top managers have to attend a number of sues they will be unable to make any step from detailed information as that will be time consuming for them.
A donor pledged $500,000 to a not-for-profit hospital in 2016 to conduct medical research, conditional on the hospital raising $500,000 from other donors. The other donors met the condition in 2016. The donor transferred the funds to the hospital in 2017. In which year would the revenue be recognized?
A) 2004
B) 2005.
C) 2003.
D) None of the above
Answer:
A) 2004
Explanation: A pledge with no restrictions, however conditional on receiving matching pledges will not be recognized in the year pledge was made. The correct answer is A) 2004
The Z Corporation is considering an investment with the following data (Ignore income taxes.): Year 1 Year 2 Year 3 Year 4 Year 5 Investment $ (32,000) $ (12,000) Cash inflow $ 8,000 $ 8,000 $ 20,000 $ 16,000 $ 16,000 Cash inflows occur evenly throughout the year. The payback period for this investment is:
Answer:
3.5 yeas
Explanation:
In the payback, we analyze in how many years the invested amount is recovered. The computation is shown below:
In year 0 = $32,000
In year 0 = $12,000
In year 1 = $8,000
In year 2 = $8,000
In year 3 = $20,000
In year 4 = $16,000
In year 5 = $16,000
If we sum the first 3 year cash inflows than it would be $36,000
Now we deduct the $36,000 from the $44,000 , so the amount would be $8,000 as if we added the fourth year cash inflow so the total amount exceed to the initial investment. So, we deduct it
And, the next year cash inflow is $16,000
So, the payback period equal to
= 3 years + $8,000 ÷ $16,000
= 3.5 yeas
In 3.5 yeas, the invested amount is recovered.
The common stock of Ecolab pays an annual dividend of $1.84 a share. The company has promised to maintain a constant dividend regardless of economic conditions. How much would investors be willing to pay for one share of Ecolab's stock assuming an equity cost of capital of 13.6%?
Answer:
$13.53
Explanation:
Data provided in the question:
Annual dividend per share, D0 = $1.84
Cost of capital, ke = 13.6% = 0.136
Now,
since,
the dividend remains the constant, the growth rate (g) of the dividend will be 0%
Also,
Current price = [ D0 × ( 1 + g ) ] ÷ [ ke - g ]
= [ $1.84 × ( 1 + 0% ) ] ÷ [ 13.6% - 0% ]
= $1.84 ÷ 0.136
= $13.53
On September 1, 2020, Pina Corporation acquired Kingbird Enterprises for a cash payment of $690,000. At the time of purchase, Kingbird’s balance sheet showed assets of $570,000, liabilities of $230,000, and owners’ equity of $340,000. The fair value of Kingbird’s assets is estimated to be $880,000.
Final answer:
When Pina Corporation acquired Kingbird Enterprises, the journal entry would be recorded in the balance sheet. The fair value of Kingbird's assets is higher than the book value, resulting in an increase in the total assets of Pina Corporation.
Explanation:
When Pina Corporation acquired Kingbird Enterprises on September 1, 2020, the journal entry would be:
Dr: Assets $570,000
Cr: Cash $690,000
The fair value of Kingbird's assets is $880,000, which is higher than the book value of $570,000. This implies that the total assets of Pina Corporation would increase by $310,000. The entry to record the increase in value would be:
Dr: Fair Value Adjustment $310,000
Cr: Gain on Bargain Purchase $310,000
As a result, the total assets of Pina Corporation will be $880,000 after the acquisition.
Cardinal Company s considering a project that would require a $2,782,000 Investment in equlpment with a useful life of five years. At the end of five years, the project would terminate and the equlpment would be sold for its salvage value of $200,000 The company's discount rate ls 18%. The project would provide net operating income each year as follows: 2,873,000 Sales Variable expenses 1,019,000 1,854,000 Contribution margin Fixed expenses: Advertising, salaries, and other 754,000 fixed out-of-pocket costs 516,400 Depreciation Total fixed expenses 1,270,400 583,600 Net operating income13. Assume a postaudit showed that all estimates (including total sales) were exactly correct except for the variable expense ratio, which actually turned out to be 45%. What was the project’s actual net present value? (Negative amount should be indicated by a minus sign. Round discount factor(s) to 3 decimal places, intermediate calculations and final answer to the nearest whole dollar amount.)
Answer:
Project's net present value is: $-1,725,937.
Explanation:
Project actual variable cost = 45% x sales = $1,292,850 ( as variable expense ratio post-audit turns out to be 45%).
Actual net operating income each year = Sales - Variable cost - total fixed expenses = $309,750.
Thus, cash flows of the project will be:
Year 0: $-2,782,000.
Year 1 to Year 4: $309,750.
Year 5: 309,750 + 200,000 (salvage value of equipment) = $509,750
NPV of the project = -2,782,000 + [ (309,750/18%) x ( 1 - 1.18^-4) ] + 509,750/1.18^5 = $-1,725,937.
The Cardinal Company's project's actual net present value (NPV), considering the actual variable expense ratio of 45%, turns out to be -$1,743,727. This is calculated by revising the net operating income (NOI), calculating its present value over five years, and subtracting the net initial investment.
Explanation:In this scenario, Cardinal Company needs to evaluate its project using the actual variable expense ratio to find out the project's actual net present value (NPV). The initial variable expenses are $1,019,000, but with a new variable expense ratio of 45%, the actual variable expenses turn out to be $2,873,000 * 45% = $1,292,850. This change would decrease the contribution margin and thus the net operating income (NOI). The altered NOI is $2,873,000 - $1,292,850 - $1,270,400 = $309,750.
We need to calculate the present value of this annual NOI for five years and then subtract the net initial investment to find the actual NPV. Using a discount rate of 18%, the present value of the NOI over the five years is $309,750 * (1 - (1 + 18%)^-5) / 18% = $838,273. The net initial investment is $2,782,000 - $200,000 (salvage value) = $2,582,000. Hence, the actual NPV of the project is $838,273 - $2,582,000 = -$1,743,727, indicating a substantial loss to the company.
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Last year, the House of Orange had sales of $826,650, net operating income of $81,000, and operating assets of $84,000 at the beginning of the year and $90,000 at the end of the year.
What was the company's turnover rounded to the nearest tenth?
A) 9.8
B) 10.2
C) 9.5
D) 9.2
Answer:
The company's turnover rounded to the nearest tenth: C) 9.5
Explanation:
Asset turnover helps investors understand how effectively companies are using their assets to generate sales. Asset turnover is calculated by using following formula:
Asset Turnover = Total Sales or Revenue/ Average Total Assets
where:
Average Total Assets = (Beginning Assets + Ending Assets )/2 = (Assets at the beginning of year +Assets at end of year )/2
In the House of Orange:
Average Total Assets = ($84,000 + $90,000)/2 = $87,000
Asset Turnover = $826,650/$87,000 = 9.5
Final answer:
The company's turnover is found by dividing sales by average operating assets. Sales were $826,650 and the average operating assets were $87,000, resulting in a turnover of approximately 9.5 when rounded to the nearest tenth.
Explanation:
To find the company's turnover, we need to use the formula for asset turnover ratio, which is calculated by dividing sales by average operating assets. For the House of Orange, the sales were $826,650, and the average operating assets are the average of the beginning and end of year assets, which are $84,000 at the beginning and $90,000 at the end. Thus, the average operating assets are calculated as ($84,000 + $90,000) / 2 = $87,000.
Now, we use the sales and average operating assets to find the turnover: Turnover = Sales / Average Operating Assets = $826,650 / $87,000 ≈ 9.506, which rounded to the nearest tenth is 9.5. So, the correct answer would be (C) 9.5.
A firm recently issued $1,000 par value, 20-year bonds with a coupon rate of 6% and semi-annual payments. The bonds sold at par value, but flotation costs amounted to 5% of par value. The firm has a marginal tax rate of 21%. What is the firm's cost of debt for these bonds?
a) 5.09%
b) 6.00%
c) 4.74%
d) 9.48%
e) 6.45%
Answer:
e) 6.45%
Explanation:
Since the coupons are paid semiannually, adjust the coupon payment(PMT), the time (N) of the bond.
You can solve for cost of debt using financial calculator with the following inputs;
Maturity of the bond; N = 20 *2 = 40
Face value; FV = 1000
Coupon payment; PMT = (6%/2) *1000 = 30
Price ; PV = -(1000 - floatation cost) = -(1000 - (5%*1000) = -950
then compute semiannual interest rate; CPT I/Y = 3.224%
Convert semiannual interest rate to annual rate to find the cost of debt;
3.224% *2 = 6.45%
The SP Corporation makes 40,000 motors to be used in the production of its sewing machines. The average cost per motor at this level of activity is:
Direct materials $ 9.90
Direct labor $ 8.90
Variable manufacturing overhead $ 3.65
Fixed manufacturing overhead $ 4.60
An outside supplier recently began producing a comparable motor that could be used in the sewing machine. The price offered to SP Corporation for this motor is $25.15. If SP Corporation decides not to make the motors, there would be no other use for the production facilities and none of the fixed manufacturing overhead cost could be avoided. Direct labor is a variable cost in this company. The annual financial advantage (disadvantage) for the company as a result of making the motors rather than buying them from the outside supplier would be:
Multiple Choice
($76,000)
$254,000
108,000
$184,000
Answer:
c) 108,000 dollars
Explanation:
Buy option:
Purchase: 40,000 motors at 25.15 = 1,006,000
unavoidable fixed cost: 40,000 x 4.60 = 184,000
1,190,000.00
Produce option:
Manufacturing Cost (9.9 + 8.9 + 3.65) x 40,000 = 898,000.00
Fixed cost: 184,000.00
Total Cost 1,082,000.00
Differential: 1,190,000 - 1,082,000.00 = 108,000.00
It is advantageous to continue the production as the unavoidable cost will make the buy option a worse deal
Chauncey Corporation began business on June 30, 2016. At that time, it issued 20,000 shares of $50 par value, six percent, cumulative preferred stock and 90,000 shares of $10 par value common stock. Through the end of 2018, there had been no change in the number of preferred and common shares outstanding. Required a. Assume that Chauncey declared dividends of $69,000 in 2016, $0 in 2017, and $354,000 in 2018. Calculate the total dividends and the dividends per share paid to each class of stock in 2016, 2017, and 2018. Round to two decimal places.
Answer:
Please see attachment
Explanation:
Please see attachment
Lumeris Inc., an automobile manufacturer, has an inflexible work schedule and requires its workers to work nine hours a day and six days a week. Its laborers do not have adequate skills to perform their job efficiently. The inflexible work schedule and inadequate labor skills are examples of _____.
a. physical constraints
b. nonphysical constraints
c. bottleneck activities
d. work order
Answer:
The correct answer is letter "B": nonphysical constraints.
Explanation:
According to the Theory of Constraints (TOC) a constraint is a limiting factor that does not enable companies to perform their work at their maximum capacity for their goals' achievement. In the same sense, nonphysical constraints are not material factors negatively influencing employees' actions. Wages cuts, reduction of benefits, unclear lines of command are examples of that kind of constraint.
Sevenbergen Corporation makes one product and has provided the following information to help prepare the master budget for the next four months of operations: Budgeted selling price per unit $ 92 Budgeted unit sales (all on credit): July 9,000 August 11,300 September 10,400 October 10,800 Raw materials requirement per unit of output 4 pounds Raw materials cost $ 1.00 per pound Direct labor requirement per unit of output 2.8 direct labor-hours Direct labor wage rate $ 22.00 per direct labor-hour Variable selling and administrative expense $ 1.50 per unit sold Fixed selling and administrative expense $ 70,000 per month Credit sales are collected: 40% in the month of the sale 60% in the following month Raw materials purchases are paid: 30% in the month of purchase 70% in the following month The ending finished goods inventory should equal 20% of the following month's sales. The ending raw materials inventory should equal 30% of the following month’s raw materials production needs. If 41,920 pounds of raw materials are required for production in September, then the budgeted raw material purchases for August is closest to: Multiple Choice 57,056 pounds 44,480 pounds 43,712 pounds 70,400 pounds
Answer:
The answer is 43,712
Explanation:
We have:
Beginning finished good of August: 20% of budgeted sales in August = 20% x 11,300 = 2,260 units
Ending finished good of August : 20% of budgeted units required in September = 20% x 10,400 = 2,080 units
=> Units of finished goods to be produced in August = Unit sold - Beginning Inventory + Ending Inventory = 11,300 - 2,260 + 2,080 = 11,120 => Raw material for finished good in August = 4 * 11,120 = 44,480
Beginning Raw material for August = Raw material needed for August x 30% = 44,480 * 30% = 13,344
Ending Raw Material for August = Raw material needed for September x 30% = 41,920 x 30% = 12,576
=> Purchases of raw material in August = Raw material for finished good in August - Beginning Raw material for August + Ending Raw Material for August) = 44,480 - 13,344 + 12,576 = 43,712 pounds