Answer:
Best case scenario:
Selling price = $1,656 per unit
Variable costs = $391 per unit
Fixed costs = $3.315 million
Quantity sold = 97,750 units.
Worst case scenario:
Selling price = $1,224 per unit
Variable costs = $529 per unit
Fixed costs = $4.485 million
Quantity sold = 72,250 units.
Explanation:
Selling price (P) = $1,440 per unit
Variable costs (V) = $460 per unit
Fixed costs (F)= $3.9 million
Quantity sold (Q) = 85,000 units.
The company's revenue is given by:
[tex]R=P*Q - (V*Q) - F[/tex]
For the best case scenario, that is, to maximize revenue, price and quantity sold must be at the highest value (+15%) while fixed and variable costs must be at the lowest value (-15%).
Selling price (P) = $1,440 * 1.15 = $1,656 per unit
Variable costs (V) = $460 *0.85 = $391 per unit
Fixed costs (F)= $3.9 *0.85 = $3.315 million
Quantity sold (Q) = 85,000 *1.15 = 97,750 units.
For the worst case scenario, that is, to minimize revenue, price and quantity sold must be at the lowest value (-15%) while fixed and variable costs must be at the highest value (-15%).
Selling price (P) = $1,440 * 0.85 = $1,224 per unit
Variable costs (V) = $460 *1.15 = $529 per unit
Fixed costs (F)= $3.9 *1.15= $4.485 million
Quantity sold (Q) = 85,000 *0.85 = 72,250 units.
The best-case scenario variables would be: price = $1,656 per unit, variable costs = $391 per unit, fixed costs = $3.315 million, quantity = 97,750 units. The worst-case scenario variables would be: price = $1,224 per unit, variable costs = $529 per unit, fixed costs = $4.485 million, quantity = 72,250 units.
Explanation:In order to work out the best-case and worst-case scenarios for the Sloan Transmissions, Inc., we must take into account the provided estimate that all the given variables are accurate to within ±15%. When it comes to the best-case scenario, we will assume a higher price and quantity, and lower costs.
So, the best-case scenario variables would be: price = $1,656 per unit (1440*1.15), variable costs = $391 per unit (460*0.85), fixed costs = $3.315 million (3.9*0.85), quantity = 97,750 units (85000*1.15). For the worst-case scenario, we will assume a lower price and quantity, and higher costs. This would result in: price = $1,224 per unit (1440*0.85), variable costs = $529 per unit (460*1.15), fixed costs = $4.485 million (3.9*1.15), quantity = 72,250 units (85000*0.85).
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In the money creation process, the simple money multiplier assumes that banks hold no excess reserves. What is the consequence of a bank holding excess reserves? Choose one:
A. The simple money multiplier becomes smaller as less money is loaned out.
B. The simple money multiplier becomes smaller as fewer deposits are made.
C. The simple money multiplier becomes larger as more deposits are made.
D. The simple money multiplier initially increases but then decreases as loans are paid off.
E. The simple money multiplier becomes larger as more money is loaned out.
Answer:
The correct answer is B
Explanation:
Money creation process is the procedure of a natural feature having a fractional-reserve banking which happen as banks will act as both financial intermediaries and the safe keepers of deposits for making loans.
Under this process, if banks will hold the excess reserve, then this will lead to less circulation of the money in the market, which will result into the less or smaller money multiplier.
Answer:
A. The simple money multiplier becomes smaller as less money is loaned out.
Explanation:
The multiplier becomes smaller because less money is loaned out, not because fewer deposits are made.
The following financial information applied to your company for 2018:
• Sales revenues, $4,350,000 • Labor and materials, $970,000
• Depreciation for existing assets purchased prior to 2018, $80,000
• On January 5, 2018, you purchased $130,000 of equipment classified as 5-year MACRS assets
• On September 23, 2018, you purchased $210,000 of equipment classified as 7-year MACRS assets
a) Calculate the total depreciation expenses allowed in 2018.
b) Calculate the taxes your company owes for 2018 and your net income for 2018.
Answer:
a) fiscal-year depreciation 136,009
b) fiscal year taxable income 3,243,991
Explanation:
fiscal-year depreciation:
The MACRS (Modified Accelerated Cost Recovery System) always use alf-year convention
for the 5-year class:
130,000 x 20% = 26,000
for the 7-years class:
210,000 x 14.29% = 30,009
previous year assets: 80,000
total depreciation: 136.009
taxale income:
sales revenues 4,350,000
operating expense (970,000)
depreciaiton expense (136, 009)
net income: 3,243,991
Consider the following balance sheet for the Wahoo Bank. Use it to answer the two questions that follow. Use a required reserve ratio of 10% and assume that the bank keeps no excess reserves. What will change on the balance sheet if the Fed buys $800 in government securities from the bank? Wahoo Bank Balance Sheet Assets Liabilities and net worth Government $1,600 Liabilities: securities Required reserves Excess reserves Loans $400 $0 Checking deposits $4,000 $1,000 $3,000 Net worth Total assets $5,000
Answer:
Please see attachment
Explanation:
Please see attachment
Apple Inc. is the number one online music retailer through its iTunes music store. Apple sells iTunes gift cards in $15, $25, and $50 increments. Assume Apple sells $20.4 million in iTunes gift cards in November, and customers redeem $13.4 million of the gift cards in December. 3. What is the ending balance in the Deferred Revenue account? (Enter your answer in dollars, not in millions. (i.e. 5.5 should be entered as 5,500,000).)
The ending balance in the Deferred Revenue account for Apple Inc. would be $7,000,000 after selling $20.4 million in iTunes gift cards and having $13.4 million redeemed.
Explanation:The student asked about the ending balance in the Deferred Revenue account for Apple Inc. after it sold $20.4 million in iTunes gift cards in November and customers redeemed $13.4 million of the gift cards in December. Deferred revenue, also known as unearned revenue, represents a liability for services or goods which have been sold but not yet delivered or provided.
To calculate the ending balance in the Deferred Revenue account, you subtract the amount redeemed ($13.4 million) from the total amount sold ($20.4 million). Therefore, the ending balance is $20,400,000 (sold) - $13,400,000 (redeemed) = $7,000,000.
Bumblebee Company estimates that 403,000 direct labor hours will be worked during the coming year, 2017, in the Packaging Department. On this basis, the budgeted manufacturing overhead cost data are computed for the year. Fixed Overhead Costs Variable Overhead Costs Supervision $94,920 Indirect labor $161,200 Depreciation 66,360 Indirect materials 112,840 Insurance 29,760 Repairs 80,600 Rent 29,400 Utilities 100,750 Property taxes 22,560 Lubricants 24,180 $243,000 $479,570 It is estimated that direct labor hours worked each month will range from 29,800 to 36,100 hours. During October, 29,800 direct labor hours were worked and the following overhead costs were incurred. Fixed overhead costs: Supervision $7,910, Depreciation $5,530, Insurance $2,435, Rent $2,450, and Property taxes $1,880. Variable overhead costs: Indirect labor $13,010, Indirect materials, $7,924, Repairs $5,910, Utilities $7,890, and Lubricants $2,098.
(a) Prepare a monthly manufacturing overhead flexible budget for each increment of 2,100 direct labor hours over the relevant range for the year ending December 31, 2017.
(b) Prepare a flexible budget report for October. (List variable costs before fixed costs.)
Answer:
The answers are attached in the following microsoft excel document.
Explanation:
Consider the data provided by you. The solution of the problems are attached below with the explanations necessary to resolve the problems. If you have any question please ask.
Mary Stahley invested $4500 in a 48-month certificate of deposit (CD) that earned 9.5% annual simple interest. When the CD matured, she invested the full amount in a mutual fund that had an annual growth equivalent to 21% compounded annually. How much was the mutual fund worth after 10 years? (Round your answer to the nearest cent.)
Answer:
Please see attachment
Explanation:
Please see attachment
When calculating simple interest, the interest earned cannot earn any interest while in compound interest. The interest itself starts earning money when it is due.
This is the reason why compound interest gives a higher return.
We'll first find the maturity value of the CD at the end of 48 months ( 4years).
=4500 + 4500 ∗ 0.095 ∗ 4 = 6210
She will invested $6210 into the mutual fund
h= After 10 years
R= 21% compound interest
P(1 + R/100) h
6210 (1+21/100) 10 (note that it is raise to power 10
when you use your calculator to sum the above together, it will give you.
$ 41,777.75
Conclusively, the mutual fund worth after 10 years is $ 41,777.75.
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Westford Corporation has $185 million dollars of interest-bearing debt outstanding at the end of fiscal 2014 year. In addition, the company incurred $26 million dollars of interest expense in 2014.
If the company has a marginal tax rate of 35% calculate Westford's cost of debt capital.
A) 14.1%
B) 9.1%
C) 9.8%
D) 11.1%
Answer:
B) 9.1%
Explanation:
Cost of debt is the interest rate paid by a company due to borrowing money; i.e debt from investors.
$185million in debt is the face value of debt that Westford Corporation had and the $26 million dollars of interest expense is the cost of the debt in dollars;
First, find pretax cost of debt ;
Pretax cost of debt = (Interest expense / Face value of debt )*100
= (26,000,000/ 185,000,000 )*100
=0.1405 *100
= 14.05%
Next, use pretax cost of debt to find after-tax cost of debt;
After-tax cost of debt = Pretax cost of debt (1-tax)
= 14.05% *(1-0.35)
= 9.13%
Therefore, Westford's cost of debt capital is 9.1%
The sales and cost data for two companies in the transportation industry are as follows: X Company Y Company Amount Percent Amount Percent Sales $120,000 100 $120,000 100 Variable costs 72,000 60 36,000 30 Contribution margin 48,000 40 84,000 70 Fixed costs 36,000 72,000 Operating income $12,000 $12,000 The annual breakeven point in sales dollars for X Company is:
Answer:
The annual breakeven point in sales dollars for Company X is $90,000
Explanation:
Hi, in order to find the break even point (BEP) in dollars, we need to use the following formula.
[tex]BEP(Dollars)=\frac{FixedCosts}{ContributionMargin}[/tex]
Everything should look like this.
[tex]BEP(Dollars)=\frac{36,000}{0.4} =90,000[/tex]
Best of luck.
Final answer:
The breakeven point for X Company is calculated by dividing the fixed costs by the contribution margin ratio, which results in a breakeven point of $90,000 in sales.
Explanation:
To calculate the annual breakeven point in sales dollars for X Company, we use the breakeven formula which is Fixed Costs divided by the Contribution Margin Ratio. The Contribution Margin Ratio (CM Ratio) is calculated by dividing the Contribution Margin by the Sales. For X Company, the CM Ratio is $48,000 divided by $120,000, which equals 0.4 or 40%. The breakeven point in sales dollars is then found by dividing the Fixed Costs ($36,000) by the CM Ratio (0.4), which results in a breakeven point of $90,000.
X Company needs to achieve $90,000 in sales to cover all its fixed and variable costs and to break even.
Bark Company is considering buying a machine for $240,000 with an estimated life of ten years and no salvage value. The straight-line method of depreciation will be used. The machine is expected to generate net income of $6,000 each year. The cash payback period on this investment is:
a. 20 years
b. 10 years
c. 8 years
d. 4 years
Answer:
option (c) 8 years
Explanation:
Data provided in the question:
Cost of the machine = $240,000
Useful life = 10 years
Salvage value = 0
Net income = $6,000 each year
Now,
Using the straight-line method of depreciation
Annual depreciation = [ Cost - Salvage value ] ÷ Useful life
= [ $240,000 - 0 ] ÷ 10
= $24,000
Thus,
Cash flow = $6,000 + $24,000
= $30,000
Therefore,
The payback period = ( Cost ) ÷ ( Cash flow )
= $240,000 ÷ $30,000
= 8 years
Hence,
the correct answer is option (c) 8 years
You work in the customer care division at Flannery Electronics. Mr. Gallegos, a longtime customer, is experiencing a problem with his home theater system and has submitted a letter requesting that Flannery Electronics either fix or replace his system at no cost. Unfortunately, Mr. Gallegos’s customer service and factory warranties expired three months ago. You must write to Mr. Gallegos and inform him that Flannery will be unable to honor his request. Should the tone for this message be formal or informal? Formal Informal
Answer:
Formal
Explanation:
The tone of the message should be forma because, first of a it was addressed to the company(Flannery Electronics) making it official.
In the capacity of a representative of Flannery Electronics the letter should be addressed formally
A formal letter is one written in a formal and specific language and follows a certain format. Letters like these are written for official purposes and are addressed to authorities, dignitaries, colleagues, seniors, etc and not to personal contacts, friends or family.
MFG Company experiences the following cost behavior patterns each week: Fixed costs: supervisor’s salary $3,000; factory rent $6,500 Mixed costs: utilities $3,500 + $10.25 per unit Variable costs per unit: manufacturing labor wages $30.00; supplies used in production $13.50; packaging cost $7.25; warranty cost $4 Required: Compute total costs to be incurred for a week with 2,950 units of activity. (Do not round intermediate calculations.)
Answer:
Total cost= $204,750
Explanation:
Giving the following information:
Fixed costs: supervisor’s salary $3,000; factory rent $6,500
Mixed costs: utilities $3,500 + $10.25 per unit
Variable costs per unit:
manufacturing labor wages $30.00
supplies used in production $13.50
packaging cost $7.25
warranty cost $4
Required: Compute total costs to be incurred for a week with 2,950 units of activity.
Fixed costs= 3,000 + 6,500 + 3,500= $13,000
Variable costs= (10.25 + 30 + 13.5 + 7.25 + 4)*2,950= $191,750
Total cost= $204,750
The BRS Corporation makes collections on sales according to the following schedule: 40% in month of sale 56% in month following sale 4% in second month following sale The following sales have been budgeted: Sales April $ 150,000 May $ 160,000 June $ 150,000 Budgeted cash collections in June would be:
Answer:
Budgeted cash collections in June would be: $155,600
Explanation:
In The BRS Corporation:
Budgeted cash collections in June = 40% sales amount in June + 56% sales amount in May + 4% sales amount in April
Sales have been budgeted: in April: $150,000, in May: $160,000, in June: $150,000
Therefore, Budgeted cash collections in June = 40% x $150,000 + 56% x $160,000 + 4% x $150,000 = $60,000 + $89,600 + $6,000 = $155,600
The budgeted cash collections for BRS Corporation in June would be $155,600, which is the sum of 40% of June's sales, 56% of May's sales, and 4% of April's sales.
To calculate the budgeted cash collections for BRS Corporation in June, we use the provided percentages for collections in the month of sale, the month following the sale, and the second month following the sale. We will apply these percentages to the budgeted sales figures for April, May, and June.
Calculating June Collections:
Collections from June sales (40% of June sales):Now, we add the amounts collected for each month:
Total budgeted cash collections in June = $60,000 (June) + $89,600 (May) + $6,000 (April) = $155,600
A portfolio is invested 18 percent in Stock G, 58 percent in Stock J, and 24 percent in Stock K. The expected returns on these stocks are 7 percent, 13 percent, and 17 percent, respectively. What is the portfolio's expected return?
Answer:
The portfolio´s expected return is 12.88%
Explanation:
Hi, in order to find the expected return of this portfolio, we need to use the wheighted average formula with the information given. That is as follows.
[tex]E(r)=G(percentage)*G(return)+J(percentage)*J(return)+K(percentage)*K(return)[/tex]
It should look like this.
[tex]E(r)=0.18*0.07+0.58*0.13+0.24*0.17=0.1288[/tex]
Therefore, the expected return of this portfolio is 12.88%
Best of luck
Which of the following policies represents an automatic stabilizer with respect to fiscal policy?A. Elected officials decide to raise the minimum wage just as the economy starts to slow down. B. The government builds more roads to reduce commuting time. C. As corporations report lower profits, their tax bill falls. D. The government agrees to review income tax rates whenever economic conditions warrant.
Answer:
C. As corporations report lower profits, their tax bill falls.
Explanation:
You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.
Stutz, Inc. designs and builds basketball gymnasiums. Each gymnasium is custom-built to individual customers’ specifications. Stutz uses job-order costing to keep track of its costs. In February it worked on three jobs. Data for these jobs are as follows: Job 175 Job 178 Job 179 Balance 2/1 $13,790 $ 0 $ 0 Direct Materials 16,200 8,500 30,500 Direct Labor Cost 23,300 7,600 45,000 Machine Hours 400 hrs. 300 hrs. 2,000 hrs. Overhead is applied to jobs at the rate of $25 per machine hour. By February 28, Job 178 is the only one unfinished. The balance of Finished Goods on February 1 is $94,000 (consisting of Job 177). Jobs 177 and 179 are sold during February. Stutz sells its product at cost plus 40%. Refer to Figure 5-6. What is sales revenue for February?
Answer:
$307,300
Explanation:
Total cost of Job 179:
= Direct material for Job 179 + Direct labor cost for Job 179 + Overhead cost for Job 179
= $30,500 + $45,000 + (2,000 × $25)
= $30,500 + $45,000 + $50,000
= $125,500
Total cost of Job 177 and Job 179:
= Total cost of Job 179 + cost of Job 177
= $125,500 + $94,000
= $219,500
Sales revenue for February:
= Total cost of Job 177 and Job 179 × Markup percentage
= $219,500 + ($219,500 × 40%)
= $219,500 + $87,800
= $307,300
The sales revenue for February is $70,400.
Explanation:To calculate the sales revenue for February, we need to determine the cost of Job 178, the unfinished job. From the given data, we know that Job 178 had direct materials cost of $8,500, direct labor cost of $7,600, and machine hours of 300. The overhead is applied at a rate of $25 per machine hour. Therefore, the overhead cost for Job 178 is $25 x 300 = $7,500.
Adding up the direct materials, direct labor, and overhead costs, the total cost of Job 178 is $8,500 + $7,600 + $7,500 = $23,600.
Since Job 178 is the only unfinished job and the finished goods balance on February 1 is $94,000, the sales revenue for February would be $94,000 - $23,600 = $70,400.
For product M, a firm has an annual holding cost percentage of 20%, an ordering cost of $80 per order, and annual demand of 10,000 units. If they order less than 1100 units at a time, the purchase price is $10.00. If they order 1100 or more units, then the purchase price for all units is only $8.00. How much should the firm order at one time? The correct Answer is 1,100. Please show me how to come up with this answer. Show work and give explanation.
Answer:
Comparing Total cost at EOQ = 895 and Q = 1100 . we find that the total cost is minimum at Q =1100. Therefore firm should order 1100 or more.
Explanation:
Annual Demand = 10,000 units
Ordering cost = $80
Holding Cost = 20% = 0.2
less than 1100 price $10
more than 1100 price $8
EOQ when p = $10
EOQ = sqrt((2 * 10,000 * 80) / (0.2*10)) = 894.43 = 895 units
Total Cost at EOQ
TC = (Annual demand * Unit price) +((Annual demand / Quantity) * Ordering cost) + (( Quantity / 2 ) * Holding rate * Unit Price)
TC = (10,000 * 10) + ((10,000 / 895) * 80) + ((895/2) * (0.2 * 10) = $1,01,788.85
Now for ordered quantity 1100 or more
TC at Q = 1100
TC = (10,000 * 8) + ((10,000 / 1100) * 80) + ((1100/2) * (0.2 * 8) = $81607.27
Comparing Total cost at EOQ = 895 and Q = 1100 . we find that the total cost is minimum at Q =1100. Therefore firm should order 1100 or more.
You are the auditor of South Face, a public company. South Face ("the Company") manufactures and distributes ski and snowboard equipment worldwide through a network of independent distributors. You are conducting the audit for the year ended December 31, 2019. The following unrelated events occur and/or come to your attention after the balance sheet date but before the date of your opinion on the financial statements (February 28, 2020):
South Face’s largest customer, Ratagonia, filed bankruptcy (due to deteriorating financial condition) in January 2020. South Face has a material accounts receivable balance due from Ratagonia as of December 31, 2019.
The Company was so caught up in its own success that it forgot to accrue for bonuses earned by senior management during 2019 but payable in February 2020. The aggregate bonus amount was $920,000.
There was an avalanche in Park City, Utah resulting in serious damage to the Company’s main manufacturing plant on February 14, 2020. Even after insurance reimbursements, the Company expects to have material losses as a result of the avalanche. (Note: you do not need to discuss the adequacy of their insurance policy).
An elderly long-time user of South Face equipment was paralyzed in a skiing accident on December 28, 2019. Her family files a lawsuit against the Company on February 21, 2020 alleging that her accident was related to an issue with her ski bindings. Ms. P Street, the Company’s attorney, believes that a significant settlement is probable but the actual amount cannot yet be estimated. The financial statements for the year ended December 31, 2019 do not include an accrual for the pending settlement.
South Face declared a cash dividend of $2.00/common share outstanding on December 27, 2019. The dividend is payable on February 3, 2020 to the common shareholders of record on the declaration date. No entries have been made in the accounting records in relation to this declaration. There were 425,210 common shares outstanding on December 27, 2019.
The price of the Company stock increased from $35 per share on December 31, 2019 to $60 per share on March 1, 2020. It’s a volatile market!
II. For each of the above six items, state the appropriate action for the situation:
A. Adjust the December 31, 2019 financial statements
B. Disclose the information in a footnote to the December 31, 2019 financial statements but
do not adjust the 2019 financial statements
C. No action is required
Answer:1. A adjust the December 31 2019 financial statement. This item was available as at year end and may affect going concern.
2. A. adjust the December 31 2019 financial statement, since the bonus was earned in 2019.
3.B. this will only be disclose as it's not related to 2019
4.B. since it's only probably and not certain
5A . since the declaration is for 2019 financial year
6 C this is just a market information.
Explanation:
vINet Library issued $85 par value preferred stock that pays a 7.25% dividend rate per year. The stock has a beta of 1.13. The current risk-free rate is 2.1% and the market return is 11.2%. Assuming that CAPM holds, what is the intrinsic value of this preferred stock?
Answer:
$49.77
Explanation:
For computing the intrinsic value, first we have to determine the current year dividend and expected rate of return which is shown below:
The computation of the dividend is shown below:
= $85 × 7.25%
= $6.1625
And, the expected rate of return would be
= Risk-free rate of return + Beta × (Market rate of return - Risk-free rate of return)
= 2.1% + 1.13 × (11.2% - 2.1%)
= 2.1% + 1.13 × 9.1%
= 2.1% + 10.283%
= 12.38%
Now the intrinsic value would be
= (Dividend) ÷ (Required rate of return)
= $6.1625 ÷ 12.38%
= $49.77
Answer: 49.77
Explanation:
.0210 + 1.13 ( 0.112 - .0210 ) = 12.38%
7.25% x 85 = 6.163
6.163 / 12.38% = 49.77
(Learning Objective 2: Distinguish among operating, financing, and investing activities indirect method) Crater HVAC Systems is preparing its statement of cash flows (indirect method) for the year ended March 31, 2018. To follow, in no particular order, is a list of items that will be used in preparing the company's statement of cash flows. Identify each item as an operating activity addition to net income; an operating activity subtraction from net income; an investing activity; a financing activity; or an activity that is not used to prepare the cash flows statement. a. Increase in inventory b. Issuance of common stock c. Decrease in accrued liabilities d. Net income h. Retained earnings i. Payment of dividends j. Increase in accounts payable k. Decrease in accounts receivable L Gain on sale of a building m. Loss on sale of land n. Depreciation expense Decrease in prepaid expense f. Collection of cash from customers g. Purchase of equipment with cash
Answer:
Explanation:
Basically there are three types of activities:
1. Operating activities: It includes those transactions which affect the working capital, and it records gain or loss on sale of fixed assets
2. Investing activities: It records those activities which include purchase and sale of the fixed assets
3. Financing activities: It records those activities which affect the long term liability and shareholder equity balance.
So, the classification is shown below:
a. Increase in inventory - deduct from operating activity
b. Issuance of common stock - financing activity
c. Decrease in accrued liabilities - deduct from operating activity
d. Net income - Add to operating activity
e. Decrease in prepaid expense - add to operating activity
f. Collection of cash from customers - an activity that is not used to prepare the cash flows statement through indirect method
g. Purchase of equipment with cash - investing activity
h. Retained earnings - an activity that is not used to prepare the cash flows statement
i. Payment of dividends - deduct from financing activity
j. Increase in accounts payable - add to operating activity
k. Decrease in accounts receivable - add to operating activity
L Gain on sale of a building - deduct from operating activity
m. Loss on sale of land - add to operating activity
n. Depreciation expense
BSW Corporation has a bond issue outstanding with an annual coupon rate of 7 percent paid quarterly and four years remaining until maturity. The par value of the bond is $1,000. Determine the fair present value of the bond if market conditions justify a 14 percent, compounded quarterly, required rate of return. (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))
Final answer:
The fair present value of a BSW Corporation bond with a coupon rate of 7% paid quarterly, four years to maturity, and a required market return of 14% compounded quarterly, is determined by discounting the future coupon payments and the bond's par value using the present value of an annuity formula and the present value of a lump sum formula, respectively. The coupon payments and par value are calculated separately and then summed to find the total present value of the bond.
Explanation:
To calculate the fair present value of the BSW Corporation bond with an annual coupon rate of 7 percent paid quarterly, we must consider the stream of future payments and discount them back to their present value at the market's required rate of return. Since the required rate of return is 14 percent compounded quarterly, we will use this rate for our discounting process.
To find the present value of the bond's coupon payments, we use the present value of an annuity formula: PV = C × [(1 – (1 + r)⁽⁻ⁿ⁾) / r], where PV is the present value, C is the coupon payment per period, r is the discount rate per period, and n is the total number of periods. In this case, the quarterly coupon payment (C) is $17.50 (7% of $1,000 divided by 4), the discount rate per quarter (r) is 3.5% (14% divided by 4), and 16 quarters are remaining (n) since we have four years until maturity. The present value of coupon payments can be calculated using this formula.
Additionally, we must calculate the present value of the bond's par value, which will be received at maturity. This is calculated as P = F / (1 + r)ⁿ, where P is the present value of the par value, F is the face value of the bond, and n is the total number of periods until maturity.
After finding the present values of both the annuity (coupon payments) and the lump sum (par value), we sum them up to arrive at the fair present value of the bond. Be sure to round the final answer to two decimal places.
Fair present value of the bond, with 7% quarterly coupon and 14% required rate, is approximately $702.09.
To determine the fair present value of the bond, we can use the present value formula for a bond's cash flows.
Given:
- Coupon rate: 7% (paid quarterly)
- Time to maturity: 4 years
- Par value of the bond: $1,000
- Required rate of return: 14% compounded quarterly
Step-by-Step Calculation:
1. Calculate the quarterly coupon payment:
- Coupon rate: 7% annual rate, paid quarterly
- Quarterly coupon payment = (Coupon rate / 4) [tex]\times\\[/tex] Par value
- Quarterly coupon payment = (0.07 / 4) [tex]\times\\[/tex] $1,000
- Quarterly coupon payment = $17.50
2. Determine the number of periods:
- Total periods = Number of years until maturity [tex]\times\\[/tex] Number of payments per year
- Total periods = 4 years [tex]\times\\[/tex] 4 payments per year
- Total periods = 16 quarters
3. Calculate the present value of the bond's cash flows:
- Use the present value of an annuity formula to calculate the present value of the coupon payments.
- PV of annuity = Payment [tex]\times\\[/tex] [tex][1 - (1 + r)^-n] / r[/tex]
- PV of annuity = $17.50 [tex]\times\\[/tex] [tex][1 - (1 + 0.14/4)^-16] / (0.14/4)[/tex]
- PV of annuity ≈ $17.50 [tex]\times\\[/tex] [1 - [tex](1 + 0.035)^-16[/tex]] / 0.035
- PV of annuity ≈ $17.50 [tex]\times\\[/tex] [1 - [tex](1.035)^-16[/tex]] / 0.035
- PV of annuity ≈ $17.50 [tex]\times\\[/tex] [1 - 0.6652] / 0.035
- PV of annuity ≈ $17.50 [tex]\times\\[/tex] 0.3348 / 0.035
- PV of annuity ≈ $17.50 [tex]\times\\[/tex] 9.5665
- PV of annuity ≈ $167.4575
4. Calculate the present value of the bond's par value:
- Use the present value formula for a single cash flow.
- PV of par value = Par value / [tex](1 + r)^n[/tex]
- PV of par value = $1,000 / [tex](1 + 0.14/4)^16[/tex]
- PV of par value = $1,000 / [tex](1.035)^16[/tex]
- PV of par value = $1,000 / 1.8691
- PV of par value ≈ $534.63
5. Total present value of the bond:
- Total present value = Present value of annuity + Present value of par value
- Total present value ≈ $167.4575 + $534.63
- Total present value ≈ $702.09
Answer:
The fair present value of the bond, given a 14% compounded quarterly required rate of return, is approximately $702.09.
M. Cotteleer Electronics supplies microcomputer circuitry to a company that incorporates microprocessors into refrigerators and other home appliances. One of the components has an annual demand of 250 units, and this is constant throughout the year. Carrying cost is estimated to be $0.25 per unit per year, and the ordering (setup) cost is $21 per order. To minimize cost, how many units should be ordered each time an order is placed?
Answer:
205 units
Explanation:
In this question, we have to compute the economic order quantity which is shown below:
The formula to calculate the economic order quantity is shown below:
= [tex]\sqrt{\frac{2\times \text{Annual demand}\times \text{Ordering cost}}{\text{Carrying cost}}}[/tex]
= [tex]\sqrt{\frac{2\times \text{250}\times \text{\$21}}{\text{\$0.25}}}[/tex]
= 205 units
In these units, the ordering cost and the carrying cost are equal so that no wastage of the stock is done and it tells about the minimum inventory the company has to produced.
Michigan unemployment tops 15% The U.S. Department of Labor reported that Michigan's unemployment rate in June 2009 rose to 15.2%, becoming the first state in 25 years to suffer an unemployment rate exceeding 15%. Michigan has been battered by the collapse of the auto industry and the housing crisis and has had the highest unemployment rate in the nation for the past 12 months. Source: CNNMoney, July 17, 2009 Is this increased unemployment frictional, structural, or cyclical? Explain. The increased unemployment rate in Michigan is _____. A. structural, frictional, and cyclical, which are all due in part to the downturn in the U.S. economy B. cyclical that arises due to a downturn in the U.S. economy and frictional that arises due to changes in international competition C. structural that arises due to changes in international competition, and cyclical due to a downturn in the U.S. economy D. cyclical only, and is due to a downturn in the U.S. economy E. frictional that arises due to normal labor turnover
Machinery purchased for $50,000 by Tom Brady Co. in 2010 was originally estimated to have a life of 10 years with a salvage value of $5,000 at the end of that time. Depreciation has been entered for 6 years on this basis. In 2016, it is determined that the total estimated life should be 12 years with a salvage value of $2,500 at the end of that time. Assume straight-line depreciation. Determine the depreciation expense for 2016.
Answer:
$3,417
Explanation:
Annual depreciation:
= (Cost of machinery - Salvage value) ÷ Usable life
= ($50,000 - $5,000) ÷ 10 years
= $4,500 per year
Net book value at the beginning of 2016:
= Cost of machinery - (Annual depreciation × basis years)
= $50,000 - ($4,500 × 6)
= $23,000
Depreciation expense for 2016:
= (Net book value at the beginning of 2016 - salvage value at the end of that time) ÷ 6 years
= ($23,000 - $2,500) ÷ 6
= $3,417
n 2010, the country of Vesey exported goods worth $312 billion and services worth $198 billion. It imported goods worth $525 billion and services worth $255 billion. It sent $1.2 billion in famine relief to Africa, and received $3 billion to support its first democratic election efforts. What was the current account balance in Vesey for 2010 in US Dollars?
The current account balance of Vesey in 2010 was -$268.2 billion. This figure was obtained by summing the credits (exports and incoming transfers) and subtracting the debits (imports and outgoing transfers).
Explanation:To determine the current account balance of Vesey in 2010, we need to sum the exports of goods and services and the received government support, and subtract the imports of goods and services and the sent famine relief. In other words, the exports (+ received financial support) are credits while the imports (+ sent financial support) are debits on the current account.
Therefore, the current account balance for Vesey is $312 billion (goods exported) + $198 billion (services exported) + $3 billion (received support) - $525 billion (goods imported) - $255 billion (services imported) - $1.2 billion (sent relief) = -$268.2 billion.
This means that Vesey had a current account deficit of $268.2 billion in 2010.
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Cedar Corporation incurs a net capital loss of $20,000 in 20X3 that cannot be deducted on its income tax return but must be carried forward to 20X4. However, Cedar will deduct the net capital loss in the computation of current earnings and profits for 20X3.
A. True
B. False
Answer:True
Explanation:
The computation of profit for accounting purposes differs from profit for tax purposes. An item may be deducted for accounting purposes but not allowed for tax purposes e.g donations and these are referred to as permanent timing differences.
Some items are referred to as temporary timing differences which means they are consider for either tax or accounting in the current year and they are not consider for tax or accounting in the current year. This is called defer tax and it can be an asset if it leads less tax in future or a liability if it leads more tax payment in future.
The above explains why the net capital loss will be deducted in the current year for accounting profit and in the future for tax profit.
3 main sections of the blance sheet
3 main sections of the balance sheet are:
Answer:
1. ownership equity
2. liabilities
3. assets
Answer:
Asset, liability and equity
Explanation:
There are 3 main sections in balance sheets;
1. Assets - have value because a business can use or exchange them to produce the services or products of the business. Assets mainly categorize into current and non-current.
2. Liabilities - are the debts owed by a business, often incurred to fund its operation, it results to a possible outflow in the future. Liabiities also divided into current and non-current portion, that depends on its maturity period.
3. Equity - represents retained earnings and funds contributed by its shareholders
Assume the same set of facts for Berol Corporation as in Exercise 10-16 except that it received $109,862 in return for the issuance of the bonds when the market rate was 8%.Facts were: Berol Corporation sold 20-year bonds on January 1, 2012. The face value of the bonds was $100,000, and they carry a 9% stated rate of interest, which is paid on December 31 of every year. Berol received $91,526 in return for the issuance of the bonds when the market rate was 10%. Any premium or discount is amortized using the effective interest method.Required:
1.Prepare the journal entry to record the sale of the bonds on January 1, 2012, and the proper balance sheet presentation on this date.2,Prepare the journal entry to record interest expense on December 31, 2012, and the proper balance sheet presentation on this date.
Explain why the company was able to issue the bonds for $109,862 rather than for the face amount.
Answer
The answer and procedures of the exercise are attached in a microsoft excel document.
Explanation
Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in a single sheet with the formulas indications.
issues $10,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2018. Interest is paid on June 30 and December 31. The proceeds from the bonds are $9,802,072. Using effective-interest amortization, how much interest expense will be recognized in 2018?
A. $780,000
B. $784,249
C. $784,166
D. $390,000
Answer:
B. $784,249
Explanation:
The effective interest amortization is an accounting practice used for discounting a bond. This method isused for bonds sold at a discount; the amount of the bond discount is amortised as interest expense over the bond's life
Interest expenses for 6 months from Jan 1st to Jun 30th is $392,083 = $9,802,072* 8%/2
Amortization of Discount is $2,083= $9,802,072* 8%/2 - 10,000,000*7.8%,/2
Carry Amount of Bond on June 30 $9,804,155= bond proceed of $9,802,072 + Amortization of Discount is $2,083
Interest expenses for 6 months from Jul 1st to Dec 31st is $392,166 = Carry amount of Bond $9,804,155 x effective rate 8%/2
Total interest expense will be recognized in 2018 is $784,249 = $392,083 + $392,166
The interest expense recognized in 2018 would be $784,166.
Explanation:To calculate the interest expense recognized in 2018, we need to determine the bond interest payable for the year. The bond interest payable is calculated by multiplying the carrying value of the bonds (proceeds from the bonds minus any initial discount or plus any initial premium) by the effective interest rate. In this case, the carrying value of the bonds on January 1, 2018, is $9,802,072, and the effective interest rate is 8%. Therefore, the interest expense recognized in 2018 would be $784,166 (rounded to the nearest dollar), option C.
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E-procurement:
a. works best in long-term contract situations but is not suited for auctions.
b. is purchasing facilitated through the Internet.
c. has many benefits but requires a lot of paperwork.
d. is illegal in all states except Nevada and New Jersey.
e. All of these are true of e-procurement.
Answer:
The correct answer is B.
Explanation:
E-procurement also called as the supplier exchange which involves business to consumer or the business to government or the business to business for the sale or purchase of supplies, services and work through the medium of Internet and networking system.
So, the option which is best describe the term is that it involves buying or purchasing facilitated through Internet.
Jason’s Petrochems is a firm that brings in chemical intermediates such as organic fertilizers and organic solvents from different countries and processes them in its labs before selling it in its domestic market. The firm also uses these chemical intermediates in the production of its various fertilizers and solvents. Jason’s Petrochems can be regarded as a(n) _________?
1. EMC contractor
2. licensee
3. franchisee
4. importer