Answer:
$36.84
Explanation:
The computation of the price per share is shown below:
Price per share = (Dividend) ÷ (Equity cost of capital - growth rate)
where,
Dividend one year from now is $1.48
Equity cost of capital = 10.2%
And, the growth rate is 6.4%
So, the price per share is
= ($1.48) ÷ (10.2% - 6.4%)
= ($1.48) ÷ (3.8%)
= $36.84
Suppose government spending increases. True or False: The effect on aggregate demand would be larger if the Federal Reserve held the money supply constant in response than if the Fed were committed to maintaining a fixed interest rate.
Answer:
False
Explanation:
When the government increases spending, aggregate demand increases. This leads to increase in demand of money.
If federal reserve holds money supply constant in this case, interest rate will increase. This will lead to 'crowding out' of private investment; & the total effect of government investment increase on AD is lesser.
If government keeps the interest rate constant, the private investment 'crowding out' effect will not occur. No private investment crowding out effect, & the total effect of government investment increase on AD is lesser.
So; The effect on aggregate demand would be lesser if the Federal Reserve held the money supply constant in response than if the Fed were committed to maintaining a fixed interest rate.
What performance criteria include a broad range of knowledge, skills, traits, and behaviors that are needed to perform a job successfully? A) credibilities B) competencies C) accomplishments D) future possibilities
Answer:
B). Competencies.
Explanation:
These are skill, qualities, knowledge and behavioural traits that makes an applicant worthy of a job.
They are often used as benchmarks to rate and evaluate candidates during the recruitment process, especially when reviewing application forms and at interview.
During the recruitment process, you will likely be asked competency based questions, and the recruiter will use your answers to determine your suitability.
You should therefore identify the key competencies of any given role at the beginning of the application process, and match your skills and experience to them.
A manufacturer has budgeted sales for the first quarter of the next year to be 35 comma 000 units. The inventory in hand at the beginning of quarter is 3 comma 000 units. The desired ending inventory is 5 comma 000 units. Calculate the budgeted production for the quarter.
Answer:
Production= 37,000 units
Explanation:
Giving the following information:
Budgeted sales= 35,000 units
Beginning invnetory= 3,000
Desired ending inventory= 5,000
To calculate the required production, we need to use the following formula:
Production= sales + desired ending inventory - beginning inventory
Production= 35,000 + 5,000 - 3,000
Production= 37,000 units
Haver Company currently produces component RX5 for its sole product. The current cost per unit to manufacture the required 50,000 units of RX5 follows. Direct materials $ 5.00 Direct labor 8.00 Overhead 9.00 Total costs per unit $ 22.00 Direct materials and direct labor are 100% variable. Overhead is 80% fixed. An outside supplier has offered to supply the 50,000 units of RX5 for $18.00 per unit. Required: 1. Calculate the incremental costs of making and buying component RX5.
Answer:
It is cheaper to buy the product than producing it.
Explanation:
Giving the following information:
The current cost per unit to manufacture the required 50,000 units of RX5 follows. Direct materials $ 5.00 Direct labor 8.00 Overhead 9.00 Total costs per unit $ 22.00 Direct materials and direct labor are 100% variable. The Overhead is 80% fixed. An outside supplier has offered to supply the 50,000 units of RX5 for $18.00 per unit.
First, we need to calculate the total cost of making the product:
The total cost of producing 50,000 units:
Direct material= 50,000*5= 250,000
Direct labor= 50,000*8= 400,000
Total overhead= 50,000*9= 450,000
Total cost= 1,100,000
Total cost of purchasing:
Buying= 50,000*18= 900,000
Unavoidable overhead= 50,000*(9*0.2)= 90,000
Total cost= 990,000
It is cheaper to buy the product than producing it.
inancial information for Forever 18 includes the following selected data: ($ in millions except share data) 2021 2020 Net income $ 207 $ 124 Dividends on preferred stock $ 32 $ 23 Average shares outstanding (in millions) 300 200 Stock price $ 11.37 $ 10.32 Required: 1-a. Calculate earnings per share in 2020 and 2021. (Enter your answers in millions (i.e. 5,500,000 should be entered as 5.5).)
Answer:
$0.51 per share and $0.58 per share
Explanation:
The computation of the earning per share is shown below:
As we know that
Earning per share = (Net income - Dividends on preferred stock) ÷ (Average shares outstanding)
For 2020, it is
= ($124 - $23) ÷ (200 millions)
= $0.51 per share
And for 2021, it is
= ($207- $32) ÷ (300 millions)
= $0.58 per share
We simply applied the above formula
In August, one of the processing departments at Knepp Corporation had beginning work in process inventory of $17,000 and ending work in process inventory of $13,000. During the month, $178,000 of costs were added to production.In the department's cost reconciliation report for August, the cost of units transferred out of the department would be:
ordan Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,200 containers follows. Unit-level materials $ 5,800 Unit-level labor 6,400 Unit-level overhead 3,900 Product-level costs* 9,600 Allocated facility-level costs 26,600 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Jordan for $2.80 each. Required Calculate the total relevant cost. Should Jordan continue to make the containers
Final answer:
Jordan Electronics should continue to make the containers, as the total relevant cost of making them ($19,300) is less than buying them from Russo Container Company ($25,760).
Explanation:
To calculate the total relevant cost for Jordan Electronics to decide whether to make or buy the shipping containers, we need to consider only the costs that will change based on the decision. The costs provided are as follows:
Unit-level materials: $5,800
Unit-level labor: $6,400
Unit-level overhead: $3,900
Product-level costs: $9,600 (only one-third is avoidable if buying, so the relevant portion is $3,200)
Allocated facility-level costs: $26,600 (non-relevant as they are likely fixed and allocated broadly across the company's products)
If Jordan Electronics buys the containers from Russo Container Company at $2.80 each for 9,200 containers, the total cost would be 9,200 containers × $2.80 = $25,760. Therefore, the relevant cost of buying is $25,760.
Now, let's calculate the relevant cost of making the containers:
Unit-level materials: $5,800
Unit-level labor: $6,400
Unit-level overhead: $3,900
Relevant product-level costs: $3,200
The total relevant cost of making the containers is $5,800 + $6,400 + $3,900 + $3,200 = $19,300. Since the cost of making ($19,300) is less than buying ($25,760), Jordan Electronics should continue to produce the containers in-house.
Jordan Electronics should purchase the containers from Russo Container Company as the total cost of purchasing ($25,760) is lower than the total relevant cost of making ($45,900).
1. Calculate the total unit-level costs for producing 9,200 containers:
Unit-level materials + Unit-level labor + Unit-level overhead = $5,800 + $6,400 + $3,900 = $16,100
2. Calculate the avoidable product-level costs:
One-third of product-level costs = $9,600 × (1/3) = $3,200
3. Calculate the total relevant cost of making the containers:
Total relevant cost = Unit-level costs + Avoidable product-level costs + Allocated facility-level costs
Total relevant cost = $16,100 + $3,200 + $26,600 = $45,900
4. Calculate the cost of purchasing containers from Russo Container Company:
Cost per container = $2.80
Total cost of purchasing 9,200 containers = Cost per container * Number of containers
Total cost of purchasing containers = $2.80 ×9,200 = $25,760
5. Compare the total relevant cost of making with the cost of purchasing:
Total relevant cost of making = $45,900
Total cost of purchasing = $25,760
Since the total cost of purchasing ($25,760) is lower than the total relevant cost of making ($45,900), Jordan Electronics should purchase the containers from Russo Container Company instead of continuing to make them.
Imagine that you are holding 5,100 shares of stock, currently selling at $30 per share. You are ready to sell the shares but would prefer to put off the sale until next year due to tax reasons. If you continue to hold the shares until January, however, you face the risk that the stock will drop in value before year-end. You decide to use a collar to limit downside risk without laying out a good deal of additional funds. January call options with a strike price of $35 are selling at $1, and January puts with a strike price of $25 are selling at $2. What will be the value of your portfolio in January (net of the proceeds from the options) if the stock price ends up at $21, $30, $41? What will the value of your portfolio be if you simply continued to hold the shares?
Answer:
If stock is continued to hold $107,100, $153,000, $209,100.
Explanation:
The first step is to calculate the value of your portfolio if u simply continued to hold the shares.
The stock holding = 5100
the current price = 30
The value of the portfolio is = 5100 * 30 =$ 153,000
The strike price= $21
The portfolio value is = 5100 * $21 = $107,100
The stock price = 5100 * $41 = $209,100
Thus,
The value of the portfolio calculation (net option proceed)
The current price =$30
Value of portfolio = Holding value + received from call option + paid to buy option
=5100 * 30 + 5100 * 1-5100 * 2
= $147,900
The strike price = $21
The January stock price = $ 25
The profit of option selling = $25 -$21 = $4 * 5100 = $20, 400
Value of portfolio = Holding value + received from call option + paid to buy option
= 5100 * 21 + 5100 * 1-5100 *2 + $20,400
which is = $122,400
Then,
The strike price = $4
The selling option loss = $41-$35= $6 * 5100 = $30,600
Value of portfolio = Holding value + received from call option + paid to buy option
which is = 5100 * 41 + 5100 * 1-5100 * 2 + $30,600
= $173, 400
Therefore
Stock price $21 $30 $41
if collar used $122,400 $147,900 $173,400
If stock is continued to hold stocks$107,100 $153,000 $209,100
Ahngram Corp. has 1,000 defective units of a product that cost $2.70 per unit in direct costs and $6.20 per unit in indirect cost when produced last year. The units can be sold as scrap for $3.70 per unit or reworked at an additional cost of $2.20 and sold at full price of $11.10. The incremental net income (loss) from the choice of reworking the units would be: Multiple Choice $2,200. $0. $8,900. $3,700. ($2,200).
Answer:
the incremental net income from reworking the units would be $8,900
Explanation:
Consider the incremental costs and revenues arising on reworking the units
Note : Manufacturing costs already incurred on the defective units are sunk costs and are therefore irrelevant for this decision.
Sales (1,000×$11.10) $11,100
Less Costs to of reworking (1,000×$2.20) ($2,200)
Net Income $8,900
Therefore, the incremental net income from reworking the units would be $8,900
You have $12,000 to invest and would like to create a portfolio with an expected return of 9.75 percent. You can invest in Stock K with an expected return of 8.05 percent and Stock L with an expected return of 11.7 percent. How much will you invest in Stock K?
$5,589.04
$7,452.05
$4,890.41
$5,876.71
$6,410.96
Answer:
Correct option is $6410.96
Explanation:
Let investment in K=$x
Hence investment in L=(12000-x)
Portfolio return=Respective return*Respective weights
9.75=(x/12000*8.05)+(12000-x)/12000*11.7
(9.75*12000)=8.05x+140400-11.7x
117000=8.05x+140400-11.7x
x=(140400-117000)/(11.7-8.05)
=$6410.96(Approx)=investment in K
Ideally, a company reaches a point where increases in operating efficiency mean that expenses as a percentage of sales revenue flatten or even decline. This is referred to as ________.
Answer:
Ideally, a company reaches a point where increases in operating efficiency mean that expenses as a percentage of sales revenue flatten or even decline. This is referred to as operating leverage.
Ideally, a company achieves a point called constant economies of scale, where operating efficiency improvements cause expenses as a percentage of sales revenue to flatten or decline, signaling significant operational efficiency.
Ideally, a company reaches a point where increases in operating efficiency mean that expenses as a percentage of sales revenue flatten or even decline. This is referred to as constant economies of scale. Constant economies of scale occur when a business that has achieved its least minimum efficient scale sees its long-run average cost remain about the same with continued increases in the size of its operation. Achieving constant economies of scale is significant as it indicates a level of operating efficiency where the business can sustain or even improve profitability with growing operations. It is crucial in competitive seller markets for survival, as it allows a firm to push market prices below the costs of smaller firms, thus leveraging economies of scale for competitive advantage.
Livingston Fabrication has created the following aggregate plan for the next 5 months (see PDF): Assume that Livingston will have nothing in inventory at the end of July. Livingston employs 500 production assembly workers and it takes one production assembly worker 3 minutes to assemble one unit of finished good. (The unit is complete at that point.) Each production assembly worker can provide 160 hours of assembly time a month without requiring overtime pay. a. Livingston wants to complete this plan without working any overtime in assembly. How many additional production assembly workers does Livingston need to hire to accomplish this? When should they be hired? b. Using this production plan, how many units will be in inventory at the end of October? c. What will the average inventory level be each month?
Answer:
Explanation:
worker's production rate = 60/3 = 20units per hour
monthly capacity 160 x 20 = 3200 units.
capacity needed to produce 2000000 units
= 2000000/3200
= 625
therefore, since they already have 500 workers, they need to hire 125 more workers.
b) At the end of October they will have 2 million inventory.
c) Average inventory in each of the months has been listed in the attachment below.
Fees in 1st year Suppose Adrian and Clemens each Invest $10,000. Adrian Invests in an actively managed mutual fund that has an annual expense ratio (a fee charged by the investment manager of 1.3% Clemens Invests in a passively managed index fund linked to the S&P 500 that has an expense ratio of 0.2%. Both Investments earn a 7% rate of return
1. How much does each investor make on his investment with the 7% rate of return?
2. How much does Adrian pay in fees for his actively managed mutual fund? .
3. How much does Clemens pay in fees for the index fund?
4. At the end of the year, what's the total value (AFTER FEES) of Adrian's mutual fund?
5. What's the total value (AFTER FEES) of Clemens's index fund?
6. How much more value does Clemens's investment generate than Adrian's in one year's time?
Answer:
Task 1:
The answer is $700.
Task 2:
The answer is $130.
Task 3:
The answer is $20.
Task 4:
The answer is $10,570.
Task 5:
The answer is $110.
Explanation:
Task 1:How much does each investor make on his investment with the 7% rate of return?Solution:Adrian & Clemens makes [$10,000*0.07] on their investment = $700.
Task 2:How much does Adrian pay in fees for his actively managed mutual fund?Solution:Adrian owes to his broker = (10000*.013) = $130
Task 3:How much does Clemens pay in fees for the index fund?Solution:Clemens owes to his broker= ($10000*.002) = $20
Task 4:At the end of the year, what's the total value (AFTER FEES) of Adrian's mutual fund?Solution:Value of Adrian's stock = $10000+$570 (net of brokerage) = $10,570
Task 5:What's the total value (AFTER FEES) of Clemens's index fund?Solution:Value of clemens' stock = $10000+$680 (net of brokerage) = $10,680
Task 6:How much more value does Clemens' investment generate than Adrian's in one year's time?Solution:Clemens investment makes ($680-$570) than adrian's investment = $110
1. The amount each investor make on the investment is $700.
2 The amount paid in fees should be $130.
3. The amount paid in fees for the index fund is $20
4. The total value after fees should be $10,570
5. The total value after fees should be $10,680
6. The more value should be $110.
Calculation of the amount of each part:
1. The amount that each investor make should be
= 7% of $10,000
= $700
2. The amount paid in fees should be
= 1.3% of $10,000
= $130
3. The amount paid in fees for the index fund is
= 0.2% of $10,000
= $20
4. The total value after fees should be
= $10,000 + $570
= $10,570
5. The total value after fees should be
= $10,000 + $680
= $10,680
6. The more value should be
= $680 - $570
= $110
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Which of the following statements are true regarding dividends? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.)
A large stock dividend is a distribution of more than 25% of previously outstanding shares.
A stock dividend commonly indicates management's confidence that the company is doing well.
The account Paid-in Capital in Excess of Par Value is always credited when a large stock dividend is declared.
The payment date reflects the date a cash dividend is paid to stockholders.
Answer:
A large stock dividend is a distribution of more than 25% of previously outstanding shares.
The account Paid-in Capital in Excess of Par Value is always credited when a large stock dividend is declared.
Explanation:
A dividend is considering parsing or separating out profit sharing. A dividend has also, tax rate. For example, there is sometimes in the world situation where we get to see increasing of values of stock and in that time, shareholder can choose what he will do. He can sell the stock and if he does that, he will have to play a tax on capital gains.
So, if someone is sharing a dividend stock, he will be paid an amount of money that the company will earn in the meantime. Companies can device when and how will they pay their dividends.
Large stock dividends, the use of dividends as signals of corporate health, and the significance of the payment date in cash dividends are all correctly described statements. However, it's not always the case that the account Paid-in Capital in Excess of Par Value is credited when a large stock dividend is declared.
Explanation:The following statements are true:
A large stock dividend is indeed defined as a distribution of more than 25% of previously outstanding shares. The company issues additional shares to stockholders relative to the shares those stockholders already own. A stock dividend can indicate management's confidence in the company's well-being. It's a way of returning profits back to shareholders, which is often seen as a positive signal of the company's financial health. The payment date does reflect the day a cash dividend is paid to stockholders. It's the date on which the company actually dispatches the dividend to the shareholders.However, the statement that the account Paid-in Capital in Excess of Par Value is always credited when a large stock dividend is declared is not necessarily true. This account represents the amount received from the issue of stock that is above its par value, but whether it is credited or not depends on the specific accounting practices of the company.
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On January 1, Year 3, Wayfarer Co.'s assets were $365,000 and its stockholders' equity was $153,000. During the year, assets increased $21,500 and liabilities decreased $23,000. Required: Determine the amount of stockholders' equity at December 31, Year 3.
Final answer:
Stockholders' equity at December 31, Year 3 is determined to be $197,500. This is calculated by adding the initial equity to the net increase in assets and decrease in liabilities over the year.
Explanation:
The calculation of stockholders' equity at the end of Year 3 can be determined using the basic accounting equation: Assets = Liabilities + Stockholders' Equity. We know that at the start of the year, Wayfarer Co. had assets of $365,000 and stockholders' equity of $153,000. During the year, assets increased by $21,500 and liabilities decreased by $23,000.
To find the stockholders' equity at the end of the year, we adjust the initial equity balance by the change in assets and liabilities. The new value of assets at year-end is $365,000 (beginning assets) + $21,500 (increase in assets) = $386,500. Given that liabilities decreased, this change will directly increase stockholders' equity. So, the change in equity is the increase in assets of $21,500 plus the decrease in liabilities of $23,000, totaling $44,500.
The new stockholders' equity is $153,000 (initial equity) + $44,500 (change in equity) = $197,500 at December 31, Year 3.
Narchie sells a single product for $50. Variable costs are 60% of the selling price, and the company has fixed costs that amount to $400,000. Current sales total 16,000 units. Narchie: _ _ _ _A) will break-even by selling 20,000 units.B) will break-even by selling 13,333 units.C) will break-even by selling 8,000 units.D) will break-even by selling 1,000,000 units.E) cannot break-even because it loses money on every unit sold.
D) will break-even by selling 1,000,000 units.
E) cannot break-even because it loses money on every unit sold.
Explanation:
Two of the statements are applicable
Narchie:
Will break-even by selling 1,000,000 units.Cannot break-even because it loses money on every unit sold.The break-even point shall be calculated by dividing the gross fixed production costs by the product price per unit less the variable cost of production. Fixed costs are those that stay the same, irrespective of how many units are delivered.
The following is not a category of facts that provide verification of the level of control and independence in determining whether the person is an employee or an independent contractor for the managing broker.
a. Length of relationship
b. Type of relationship
c. Financial Behavioral
Final answer:
The question pertains to distinguishing an employee from an independent contractor using various factors. Option 'c' in the question, 'Financial Behavioral,' is incorrect as the recognized categories are Behavioral Control, Financial Control, and Type of Relationship, which includes consideration of the length of the relationship.
Explanation:
The question addresses the determination of employment status, specifically the criteria used to distinguish between an employee and an independent contractor in the context of property management or real estate business. According to the Internal Revenue Service (IRS) and various employment laws, there are several factors to consider when determining whether a worker is an employee or independent contractor. These factors are generally categorized under three main headings:
Behavioral control (how much control the business has over the work done)Financial control (how the business aspects of the worker’s job are handled)Type of relationship (how the worker and business perceive their interaction)However, option 'c' in the given question mentions 'Financial Behavioral' which is not a recognized category. The correct categories are Behavioral Control, Financial Control, and Type of Relationship. The length of the relationship may also be considered, but it falls under the broader 'type of relationship' category.
ash Flows from Investing Activities During the year, Murray Company sold equipment with a book value of $125,000 for $175,000 (original purchase cost of $225,000). New equipment was purchased. Murray provided the following comparative balance sheets: Murray Company Comparative Balance Sheets At December 31, 20X1 and 20X2 20X1 20X2 Long-Term Assets Plant and equipment $1,000,000 $1,025,000 Accumulated depreciation (500,000) (525,000) Land 500,000 725,750 Required: Calculate the investing cash flows for the current year. Use a minus sign to indicate a cash outflow.
To calculate the cash flows from investing activities for Murray Company, we calculate the gain from the sale of equipment and the cash spent on new equipment purchases. The net cash inflow from investing activities is $150,000, resulting from a $175,000 inflow from the sale and a $25,000 outflow for purchases.
Calculating Investing Cash Flows
Calculating the cash flows from investing activities involves determining the cash spent on new investments and the proceeds from the sale of existing assets. The book value and sale price of the equipment provide a gain, influencing net cash flow. Moreover, changes in balance sheet items point to the purchase of new assets.
Sale of Equipment
Murray Company sold equipment with a book value of $125,000 for $175,000, which would result in a gain of $50,000 ($175,000 - $125,000). This gain impacts the net cash provided by investing activities.
Purchase of New Equipment
Comparing the balance sheets for two consecutive years, we see an increase in plant and equipment from $1,000,000 to $1,025,000, indicating a purchase of $25,000 ($1,025,000 - $1,000,000). Additionally, the accumulated depreciation increased by $25,000 ($525,000 - $500,000), which does not impact cash flows.
Investing Cash Flow Summary
The net cash used for investing activities is therefore calculated as the cash outflow for new equipment purchases minus the cash inflow from the sale of equipment. This is $25,000 (purchase) - $175,000 (sale proceeds), resulting in a net cash inflow from investing activities of $150,000.
Rockville Corporation is going to borrow $250,000 from its bank at an APR of 8.5 percent. The bank requires its customers to maintain a 10 percent compensating balance. What is the effective interest rate on this bank loan? Round to 4 decimal places and enter percentages as a decimal
Answer: 0.0944 ( 4 dp)
Explanation:
To calculate the effective interest rate we will go in stages.
First we calculate the compensated balance deposit of 10%,
= 250,000*10%
= $,25,000
Subtracting it from the loan amount will give us the effective borrowing.
Effective borrowing = 250,000-25,000
= $225,000
Then we find out the interest expense on the original amount which is,
Interest expense = Amount borrowed * Interest rate
= 250,000*8.5%
= $21,250
The reason we calculated the above is because we need that figure in the effective interest rate formula which goes like,
Effective interest rate = Interest expense / Effective borrowing amount
= 21,250/225,000
= 0.094444444
= 0.0944
Effective interest rate is 0.0944 ( 4 dp)
Answer:
9.4%
Explanation:
Compensating balance amount = $250,000 * 10% = $25,000
Interest expenses = $250,000 * 8.5% = 21,250
Effective interest rate = $21,250/($250,000 - $25,000) = 0.0944, or 9.4%
Therefor, the effective interest rate is 9.4%.
Note: The effective interest rate of 9.4% is higher than the APR of 8.5% because of the compensating balance.
Gomez Corp. uses the allowance method to account for uncollectibles. On January 31, it wrote off an $1,100 account of a customer, C. Green. On March 9, it receives a $600 payment from Green. 1. Prepare the journal entry for January 31 2. Prepare the journal entries for March 9; assume no additional money is expected from Green.
Answer:
1.
January 31
Dr. Allowance for uncollectible accounts $1,100
Cr. Account Receivable $1,100
2.
March 9
Dr. Cash $600
Cr. Account Receivable $600
Dr. Account Receivable $600
Cr. Allowance for uncollectible accounts $600
Explanation:
A receivable is written off on January, 31, it reduces the account receivable balance and record this amount in Allowance for uncollectible account to adjust the value in the expense for the period by making adjusting entry later on.
When the amount recovered from the written off receivable the entry reversed by passing through the receivable account to again settle that receivable amount in the Allowance for uncollectible account. It effect will be adjusted in the period end adjusting entries.
Allison's is expected to have annual free cash flow of $62,000, $65,400, and $68,900 for the next three years, respectively. After that, the free cash flow is expected to increase at a constant rate of 2 percent per year. At a discount rate of 14.5 percent, what is the present value of this firm?
Answer:
Present value of the firm = $ 524,467.50
Explanation:
Using the free cash flow, the value of a firm is the the present value of the free cash discounted at the appropriate cost of capital.
Year PV
1 62,000× (1.145)^(-1) = 54,148.47162
2 65,400 × (1.145)^(-2) = 49,884.63225
3 68,900 × (1,145)^(-3) = 45, 898.95119
4 to infinity ( see working below) $374,535.44
Workings
Present value from Year 4 to infinity (this will be done in two steps)
Step 1
PV in year 3 = FCF × (1+g)/(WACC- g)
FCF -68,900, g =2%, WACC - 14.5%
= ( 68,900 × 1.02(/0.145-0.02)
= $562,224.00
Step 2
PV in year 0 = PV in year 3 × (1+r)^(-3)
= $562,224.00 × (1.145^(-3)
= $374,535.44
The present value of Allison =
54,148.47 + 49,884.63 +45,898.95 +374,535.44
= $ 524,467.50
Present value of the firm = $ 524,467.50
Henry Quincy wants to withdraw $30,000 each year for 10 years from a fund that earns 8% interest. How much must he invest today if the first withdrawal is at year-end? How much must he invest today if the first withdrawal takes place immediately?
Answer:
Amount invested today when first withdrawal end year $201302
Amount invested today when first withdrawal immediately $217407
Explanation:
given data
Annuity = $30,000
Rate r = 8% = 0.08
time Period NPER = 10 years
solution
we get here first present value of ordinary annuity that is
Annuity(PV, NPER, r)
= $30,000 (PV,10,8%)
= 6.71008
Present value = $30,000 × 6.71008
Present value = $201302.44
and
when he invest today if the first withdrawal takes place immediately is
Present value = $30,000 × 6.71008 × 1.08
Present value = $217406.64
Final answer:
Henry Quincy must invest approximately $196,114.32 if the first withdrawal from an annuity earning 8% interest is at year-end, or $211,803.47 if the first withdrawal is immediate. The difference is due to the nature of the annuity, with the immediate withdrawal requiring a higher initial investment.
Explanation:
To determine how much Henry Quincy must invest today to withdraw $30,000 each year for 10 years from a fund that earns 8% interest, we need to calculate the present value of an annuity. The calculation differs depending on whether the first withdrawal is at year-end (ordinary annuity) or immediately (annuity due).
Ordinary Annuity (First Withdrawal at Year-End)
The formula for the present value of an ordinary annuity is PVA = PMT \\times [1 - [tex](1 + r)^{-n}[/tex]] / r, where PMT is the annual payment ($30,000), r is the interest rate (0.08), and n is the number of years (10). After computing, Henry Quincy's initial investment should be approximately $196,114.32.
Annuity Due (First Withdrawal Takes Place Immediately)
For an annuity due, the calculation is slightly different since payments are made at the beginning of each period. The present value is calculated using the same formula as an ordinary annuity but then multiplying the result by (1 + r). Thus, the initial investment for an annuity due would be approximately $211,803.47.
These calculations allow Henry to understand how much to invest today to achieve his financial goals, whether the withdrawal is immediate or deferred to the end of the year.
Vulcan Company’s contribution format income statement for June is as follows: Vulcan Company Income Statement For the Month Ended June 30 Sales $ 800,000 Variable expenses 300,000 Contribution margin 500,000 Fixed expenses 450,000 Net operating income $ 50,000 Management is disappointed with the company’s performance and is wondering what can be done to improve profits. By examining sales and cost records, you have determined the following: The company is divided into two sales territories—Northern and Southern. The Northern Territory recorded $300,000 in sales and $150,000 in variable expenses during June; the remaining sales and variable expenses were recorded in the Southern Territory. Fixed expenses of $123,000 and $100,000 are traceable to the Northern and Southern Territories, respectively. The rest of the fixed expenses are common to the two territories. The company is the exclusive distributor for two products—Paks and Tibs. Sales of Paks and Tibs totaled $105,000 and $195,000, respectively, in the Northern territory during June. Variable expenses are 24% of the selling price for Paks and 64% for Tibs. Cost records show that $52,500 of the Northern Territory’s fixed expenses are traceable to Paks and $40,950 to Tibs, with the remainder common to the two products. Required: 1-a. Prepare contribution format segmented income statements for the total company broken down between sales territories. 1-b. Prepare contribution format segmented income statements for the Northern Territory broken down by product line.
Answer:
Vulcan Company Income Statement For the Month Ended June 30:
1-a) Income Statement between sales territories:
i) Northern territory income statement (see attachment)
Sales = $300,000
Variable cost = $150,000
Contribution = $150,000
Fixed cost = $236,500
Net Income = $(86,500)
ii) Southern Territory income statement (see attachment):
Sales = $500,000
Variable cost = $150,000
Contribution = $350,000
Fixed Cost = $213,500
Net Income = $136,500
1-B) Contribution format segmented income statements for the North:
Paks (see attachment):
Sales = $105,000
Variable cost = $25,200
Contribution = $79,800
Fixed cost = $124,025
Net Income = ($44,225)
Tibs (see attachment):
Sales = $195,000
Variable cost = $124,800
Contribution = $70,200
Fixed cost = $112,475
Net Income = ($42,275)
Explanation:
a) Fixed cost is determined as follows:
Northern Territory:
Traceable fixed cost = $123,000
Common fixed cost = $113,500 (450,000 - 123,000 - 100,000) /2
Total = $236,500 ($123,000 + $113,500)
Southern Territory:
Traceable fixed = $100,000
Common fixed cost = $113,500 (as above_
Total = $213,500 ($100,000 + $113,500)
b) Variable cost for Northern Paks and Tibs:
Paks = 24% of $105,000 = $25,200
Tibs = 64% of $195,000 = $124,800
c) Fixed cost for Northern Paks and Tibs:
Paks:
Traceable = $52,500
Common = $71,525 ($235,500 - 52,500 - 40,950) / 2
Total = $124,025
Tibs:
Traceable = $40,950
Common = $71,525 ($235,500 - 52,500 - 40,950) / 2
Total = $112,475
The income statement for Vulcan Company when segmented by sales territory reveals a segment margin of $27,000 for the Northern Territory and $250,000 for the Southern Territory. When further segmented by product line for the Northern Territory, Paks has a segment margin of $27,300 and Tibs is $29,250.
Explanation:To provide the Vulcan Company with accurate insights into its operations, contribution format segmented income statements are useful tools. A segmented income statement separates the company’s costs and profits by area of responsibility, whether that’s geographical (like Northern and Southern territories) or by product lines (like Paks and Tibs).
1-a. Segmented Income Statement by Sales Territories:
Northern Territory: Sales: $300,000, Variable Expenses: $150,000, Contribution Margin: $150,000, Traceable Fixed Expenses: $123,000, Segment Margin: $27,000
Southern Territory: Sales: $500,000, Variable Expenses: $150,000, Contribution Margin: $350,000, Traceable Fixed Expenses: $100,000, Segment Margin: $250,000
1-b. Segmented Income Statement for Northern Territory by Product Line:
Paks: Sales: $105,000, Variable Expenses: $25,200 (24% of Sales), Contribution Margin: $79,800, Traceable Fixed Expenses: $52,500, Segment Margin: $27,300
Tibs: Sales: $195,000, Variable Expenses: $124,800 (64% of Sales), Contribution Margin: $70,200, Traceable Fixed Expenses: $40,950, Segment Margin: $29,250
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An insurance company must make payments to a customer of $8 million in one year and $4 million in four years. The yield curve is flat at 9%. a. If it wants to fully fund and immunize its obligation to this customer with a single issue of a zero-coupon bond, what maturity bond must it purchase?
Answer:
1.8356 years
Explanation:
The computation of the purchase of maturity bond is shown below:
Years (A) Payment PVF at 9% PV Weight (B) Duration (A × B)
1 $8,000,000 0.9174 $7,339,449.54 0.7215 0.7215
4 $4,000,000 0.7084 $2,833,700.84 0.2785 1.1142
$101,731,503.39 1 1.8356
Sunland Company expects to have a cash balance of $62,450 on January 1, 2017. These are the relevant monthly budget data for the first two months of 2017.
1. Collections from customers: January $87,450, February $162,450.
2. Payments to suppliers: January $56,450, February $91,450.
3. Wages: January $31,370, February $41,370. Wages are paid in the month they are incurred.
4. Administrative expenses: January $22,370, February $25,370. These costs include depreciation of $1,000 per month. All other costs are paid as incurred.
5. Selling expenses: January $16,370, February $21,370. These costs are exclusive of depreciation. They are paid as incurred.
6. Sales of short-term investments in January are expected to realize $13,370 in cash. Sunland Company has a line of credit at a local bank that enables it to borrow up to $25,000. The company wants to maintain a minimum monthly cash balance of $36,450.
Prepare a cash budget for January and February.
Answer:
Borrowing Amount required (to make ending balance =$36,450) for January is 0 and February is $14.850. Cash Budget prepared in explanation below.
Explanation:
Cash Budget for the month of January and February
Particulars January February
Opening Cash Balance 62,450 37,710
Add: Collections from Customers 87,450 162,450
Add: Sale of Short term Investments 13,370 0
Total Cash Available 163,270 200,160
Less: Payment to Suppliers (56,450) (91,450)
Less: Wages (31,370) (41,370)
Less: Administrative Expenses (21,370) (24,370)
Less: Selling Expenses (16,370) (21,370)
Total Payments Made (125,560) (178,560)
Total Cash after Payments 37,710 21,600
Add: Borrowings 0 14,850
Ending Cash Balance $37,710 $36,450
Please Note the Following:
1. Administrative Expenses have been reduced by $1,000 (as this was depreciation which is non-cash expense)
2. Borrowings in February has been added by $14,850 (in order to maintain company's minimum monthly cash balance of $36,450
3. All the totaling has been marked in Bold Letters
Answer:
CASH BUDGET FOR JANUARY FEBRUARY
Receipts
Cash collected from customers $87,450 $162,450
Sale of short term investment $13,370
Loan Received $14,850
Total Receipts $100,820 $177,300
Payments
Cash Paid to Suppliers $56,450 $91,450
Wages $31,370 $41,370
Admin expenses $21,370 $24,370
Selling Expenses $16,370 $21,370
Total Payments $125,560 $178,560
Cash Surplus/ Deficit -$24,740 -$1,260
opening balance( 01 Jan) $62,450 $37,710
Closing balance (31 Jan) $37,710 $36,450
Explanation:
Cash Budget is a statement used to determine how much cash a business have at the end of a period and is it sufficient or not. Only Cash items are included in the Cash budget.
The Admin expenses include depreciation therefore we minus it as it is not a cash item.
In order to maintain the minimum monthly cash balance the company had to take out a loan in February of $14,850.
Molly decided to try and save money on her textbooks this semester. Instead of buying new books at the campus bookstore, Molly did the following: Molly and Pat signed a written contract that stated that "Pat will furnish the correct used business law book for use in Molly's business law class; and in return on January 15, 2017, Molly promises to pay Pat $50 for the book." Molly took the book and planned to pay Pat. Meanwhile, Pat properly assigned the contract to Jack because she owed him money. When Molly went to the first class session, however, she discovered that the book that she had received from Pat was no longer being used in that class. When Jack asked Molly for payment for the book, Molly refused to pay him. Molly told Jack that the book was useless to her and that she was not paying either him or Pat anything for it. Nor would she give him or Pat the book. Jack told Molly that he had an enforceable assignment in the form of a negotiable instrument and that he could collect regardless of whether the book was useless. Molly said she did not believe him, and ignored his requests for payment. Continuing with her attempt to save money on books, Molly agreed to buy Tim's U.S. history book for $40. She had an oral agreement with Tim that he would give her the book and that she would pay him in three days. This time Molly got the right book. Tim, in writing, properly assigned the right to the $40 payment to Richard. Three days later, Richard asked Molly for the money. Molly admitted she had agreed to pay Tim in three days, but told Richard that she was not going to pay him because he did not have a negotiable instrument. Nor did she pay Tim. Molly also purchased a communications book from Sam and in writing promised by the end of the week to give him a used DVD player she owned as payment. Two weeks have elapsed, and Molly still not given Sam the DVD player, even though he has made repeated requests. Does Jack have a negotiable instrument and can he collect from Molly? Why or why not? How about Richard? And Sam? Discuss and explain in detail the relevant law for each of the three scenarios set forth in this exam question.
Answer:
Does Jack have a negotiable instrument and can he collect from Molly? Why or why not?
Jack does not have a valid negotiable instrument and cannot collect from Molly because the book was not "correct" since it was no longer used in the business law class. Molly should return incorrect book to Pat though. In this contract, neither party performed.How about Richard?
Tim's oral agreement with Molly is valid since the amount is only $40 and Tim can assign it to Richard, but the assignment must be written. Without a written assignment of the debt, Richard cannot collect any money.And Sam?
Sam does have written agreement that can be legally enforceable. Although the costs and time of enforcing the contract are probably higher than the DVD (consideration).Precision Parts, Inc., and Quik Fix Auto stores enter into a contract for a sale of specific autoparts. Precision Parts ships parts that do not meet the specifications. With respect to the entireshipment, Quik Fix Auto
(A) cannot reject it.
(B) can reject it.
(C) must accept it.
(D) must reject It
Answer:
(B) can reject it.
Explanation:
Since the shipment does not fully meet the agreed upon specifications, Quik Fix Auto may elect to reject the shipment, however, they are not obligated to do so. If Quik Fix Auto feels that the parts shipped could suffice even if they do not meet the specifications, they can reach an agreement and keep the shipment. Therefore, the answer is (B) can reject it.
Cody Enterprises purchased equipment for $64,000. In addition, shipping charges of $800 were incurred to obtain the equipment. The company paid $5,000 to construct a foundation and install the equipment. The equipment is estimated to have a residual value of $6,000 at the end of its 5-year useful life. Use the information above to answer the following question. Using the straight-line method, what is the book value of the equipment at the end of the third full year of use
Answer:
$12,760
Explanation:
The calculation of book value of the equipment at the end is shown below:-
Depreciation expense each year = Cost - Salvage ÷ Life
= ($64,000 + $800 + 5,000) - $6,000 ÷ 5
= $69,800 - $6,000 ÷ 5
= $63,800 - $1,200
= $12,760
Therefore for computing the depreciation each year we simply applied the above formula.
If a bond is currently trading at its face (par) value, then it must be the case that: A. the bond's yield to maturity is equal to its coupon rate. B. the bond's yield to maturity is greater than its coupon rate.
Answer:
A) the bond's yield to maturity is equal to its coupon rate
Explanation:
If the bonds yield to maturity is equal to its coupon rate it means that the interest paid by the buyers on the face value of the bond is equal to the internal rate of return for the present value of future cash flow. Only in this scenario, a bond is traded at its face or par value.
Suppose a seven-year, $ 1 comma 000 bond with a 7.8 % coupon rate and semiannual coupons is trading with a yield to maturity of 6.50 %.If the yield to maturity of the bond rises to 7.20 % (APR with semiannual compounding), what price will the bond trade for?
Answer:
The price of the bond is 1,072.19
Explanation:
The price at which the bond trades for can be computed using the pv formula in excel which tries to discount to present value all the cash inflows receivable from the bond into today's present worth.
=-pv(rate,nper,pmt,fv)
rate is the yield to maturity of 6.50% divided by 2 since the bond pays interest semi-annually i.e 3.25%
nper is the number of coupon payments the bond would pay which is 7 years multiplied by 2 i.e 14
pmt is the semi-annual interest of the bond which is $1000*7.8%/2=$39
the fv is the face value of the bond of $1000
=-pv(6.5%/2,14,39,1000)=$1,072.19