Answer:
This decision generates a positive externality because the replacement of gas-powered vehicles with solar-powered vehicles will result in less environmental pollution.
A subsidy to consumers who choose to purchase solar-powered vehicles.
Explanation:
Positive externality is when the benefits of economic activities to third parties exceeds the costs. If consumers switch to solar powered cars, the reduced population is a benefit to third parties. Thus, the switch causes postive externality.
One way the government can encourage the purchase of solar powered cars is to grant subsidies to consumers. Subsidies reduces the cost of purchase of the solar powered cars and encourages consumers to purchase the cars
I hope my answer helps you
1. The correct option is b. The type of externality is likely to result is This decision generates a positive externality because the replacement of gas-powered vehicles with solar-powered vehicles will result in less environmental pollution.
2. The correct option is a. The policy would likely result in the desired outcome is a subsidy to consumers who choose to purchase solar-powered vehicles.
1. Suppose that solar-powered car technology advances to the point that solar-powered cars become affordable for the average consumer.
b. This decision generates a positive externality because the replacement of gas-powered vehicles with solar-powered vehicles will result in less environmental pollution.
Positive Externality:
When consumers choose solar-powered cars over gas-powered ones, they reduce the demand for fossil fuels and decrease emissions, which benefits the environment. This is a positive externality because the benefits extend beyond the individual consumer to society as a whole, including improved air quality and reduced greenhouse gas emissions.2. Suppose the government is interested in moving the market closer to the socially optimal quantity.
a. A subsidy to consumers who choose to purchase solar-powered vehicles
Subsidy to Consumers: Providing a subsidy to consumers for purchasing solar-powered vehicles can help to increase their adoption. By lowering the effective price of solar-powered cars, the government encourages more consumers to choose them over gas-powered vehicles. This helps move the market closer to the socially optimal quantity by aligning individual incentives with the positive externalities created by reduced pollution and environmental benefits.Other Options:
Granting Monopoly Rights (b): This could reduce competition and potentially increase prices, which is not beneficial for achieving the socially optimal quantity.New Tax (c): A tax on solar-powered car makers might discourage production and hinder the adoption of solar-powered vehicles.Price Floor (d): Setting a price floor above the average price could result in a surplus of cars and potentially drive up costs, which does not promote the desired outcome of increasing adoption.The complete question is-
1. Suppose that solar-powered car technology advances to the point that solar-powered cars become affordable for the average consumer.
Which type of externality is likely to result from a consumer's decision to purchase a solar-powered vehicle instead of a gas-powered vehicle, and how does it arise?
a. This decision generates a negative externality because companies that do not produce solar-powered cars will be put out of business.
b. This decision generates a positive externality because the replacement of gas-powered vehicles with solar-powered vehicles will result in less environmental pollution.
c. This decision generates a positive externality because individuals can use the money they save on gasoline to help the local community.
d. This decision generates a negative externality because including new technology in the cars will drive up the market price.
2. Suppose the government is interested in moving the market closer to the socially optimal quantity.
Which policy would likely result in the desired outcome?
a. a subsidy to consumers who choose to purchase solar-powered vehicles
b. granting one firm monopoly rights to produce solar-powered vehicles
c. a new tax levied on the makers of solar-powered cars
d. a price floor above the observed average price for a solar-powered car
Data were collected on recent releases that includes the gross (in millions of dollars), the budget (in millions of dollars), the run time (in minutes), and the score given by critics on a review aggregation website. A regression model is constructed to predict the gross. The accompanying scatterplot shows Gross vs. Budget. What (if anything) does this scatterplot tell about the following Assumptions and Conditions for the regression?
a) Linearity condition
b) Equal Spread condition
c) Normality assumption
Answer:
The plot is attached.
a) Linearity Condition:
an upward pattern is seen in the dissipate plot. All the focuses are plotted near one another demonstrating that the relationship is solid. Henceforth I can say that there is a solid positive straight connection among spending plan and gross. As the estimation of spending builds, the estimation of gross likewise increments.
Truly, the plot is sensibly honest without any Bends.
b) Equal Spread Condition:
to check the suspicion of equivalent spread condition, a lingering plot is required. A remaining plot is plotted with the free factor on the x-pivot and the lingering esteems on the y-hub. In the event that the remaining plot has arbitrary focuses, I can say that the difference is consistent. As such, a leftover plot with irregular focuses is said to follow the presumption of fairness of difference.
For this situation, the leftover plot isn't appeared, consequently there is inadequate data to check the equivalent spread condition.
c) Normality Condition:
Another presumption of relapse examination is the suspicion of ordinariness of residuals. This presumption can be checked with the assistance of PP plot. A PP plot with S shape shows that the suspicion of ordinariness of residuals is followed.
For this situation, there is inadequate data to check the typicality presumption in light of the fact that the PP plot isn't given.
On March 1, 2018, Rose Company invests $12,000 in Sprouts, Inc. stock. Sprouts pays Rose a $350 dividend on October 1, 2018. Rose sells the Sprouts's stock on October 31, 2018, for $12,250. Assume the investment is categorized as a short-term equity investment and Rose Company does not have significant influence over Sprouts, Inc.Requirement: 1. Journalize the transactions for Rose's investment in Sprouts' stock. (Record debits first, then credits. Select the exd the requirements planation on the last line of the journal entry table.)2. What was the net effect of the investment on Rose's net income for the year ended December 31, 2018?
Answer:
1. Journalize the transactions for Rose's investment in Sprouts' stock:
March 1 2018
Dr Trading securities - Sprouts's stock 12,000
Cr Cash 12,000
(to record the purchase of Sprout's stock)
October 1 2018
Dr Cash 350
Cr Dividend Income 350
(to record the dividend receipt from Sprout's stock)
October 31 2018
Dr Cash 12,250
Cr Gain on disposal of short-term investment 250
Cr Trading securities - Sprouts's stock 12,000
(to record disposal of Sprout's stock)
2. Net effect of the investment on Rose's net income for the year ended December 31, 2018: $600.
Explanation:
1. As this investment is short-term investment and is held for sell, fair value methodology should be applied to record this transaction. The detailed journal entries are as in answer part.
2. As fair value methodology is applied, the net income of Rose will include: dividend income + gain on disposal of short-term investment = $350 + $250 = $600.
anufactures a specialty precision scale. For January, the company expects to sell 1 comma 500 scales at an average price of $ 2 comma 300 per unit. The average manufacturing cost of each unit sold is $ 1 comma 420. Variable operating expenses for the company will be $ 1.10 per unit sold and fixed operating expenses are expected to be $ 7 comma 700 for the month. Monthly interest expense is $ 3 comma 200. The company has a tax rate of 30 % of income before taxes. Prepare Bell Smythe's budgeted income statement for January.
Answer:
Budgeted net income of $913,295.00
Explanation:
The budgeted income statement comprises of budgeted revenue less variable production cost and variable overhead,as well as fixed expenses.
The interest expense and tax are deducted in order to arrive at net income
Bell Budgeted Income Statement for January:
Budgeted sales revenue ($2,300*1,500) $3,450,000.00
Variable Budgeted manufacturing cost($1420*1500) ($2,130,000.00)
Gross profit $1,320,000.00
Variable operating expenses($1.10*1500) ($1,650.00)
Fixed operating expenses ($7,700.00)
Operating income $1,310,650.00
Monthly interest expense ($3,200.00)
Taxes at the rate of 30%(1,310,450.00-3200)*30% ($392,175 .00)
Budgeted net income $913,295.00
Interest expense is a deductible expense in computing,that accounted for deducting from operating income before applying the tax rate of 30%
Managers in international businesses will need to evaluate the attractiveness of a country as a market or location for a facility or investment. Knowing how to think about events and situations will help the manager make that evaluation. Managers can use economic and socioeconomic indicators to evaluate potential locations to conduct business.
Answer:
The statement is: True.
Explanation:
Before starting businesses in a foreign country, managers must analyze if the target region fulfills the minimal conditions to conduct operations and, more important if the returns are good enough to cover the expenses of the investment. For such a purpose, social indicators such as average consumer income, education, or occupational class should be reviewed by executives. Countries with higher ratings should be the priority to start international businesses there.
Fortune, Inc., is preparing its master budget for the first quarter. The company sells a single product at a price of $25 per unit. Sales (in units) are forecasted at 42,000 for January, 62,000 for February, and 52,000 for March. Cost of goods sold is $12 per unit. Other expense information for the first quarter follows.Commissions 11 % of salesRent $ 18,000 per monthAdvertising 12 % of salesOffice salaries $ 78,000 per monthDepreciation $ 47,000 per monthInterest 11 % annually on a $260,000 note payableTax rate 30 %I need the commisions exspense, advertising exspense, interrest expense and Income Tax expense #sWould be nice to get how they were calculated as wellFORTUNE, INC.Budgeted Income StatementFor Quarter Ended March 31Sales $3,900,000Cost of goods sold 1,872,000Gross profit 2,028,000Operating expensesCommissions expenseRent expense 54,000Advertising expenseOffice salaries expense 234,000Depreciation expense 141,000Interest expenseTotal operating expenses 429,000Income before taxes 1,599,000Income tax expenseNet income $1,599,000
Answer and Explanation:
The preparation of the income statement is presented below:
Sales $3,900,000
Less: Cost of goods sold $1,872,000
Gross profit $2,028,000
Less: Operating expenses
Commissions expense $429,000
Rent expense $54,000
Advertising expense $468,000
Office salaries expense $234,000
Depreciation expense $141,000
Interest expense $7,150
Total operating expenses -$1,333,150
Income before taxes $694,850
Less: Income tax expense $208,455
Net income $486,395
Working notes:
1. Commissions expense is 11 % of sales
= 11% × $3,900,000
= $429,000
2. Advertising expense is 12 % of sales
= 12% × $3,900,000
= $468,000
Interest expense is 11 % annually on a $260,000
= 11% × 260000 × 3 months ÷ 12 months
= $7,150
Income tax expenses =is
= 30% × $694,850
= $208,455
As we know that the income statement records the expenses and the revenues and the same is shown to determine the net income or net loss for the given period
The Red Bud Co. pays a constant dividend of $3.10 a share. The company announced today that it will continue to do this for another 2 years after which time they will discontinue paying dividends permanently. What is one share of this stock worth today if the required rate of return is 8.7 percent?
Answer:
The stock is worth $5.48 today
Explanation:
The dividend on this stock is just like an annuity as the amount of dividend is constant and they are paid after a constant interval of time and for a defined period of time. Thus, the price of this share today will be the present value of annuity or the present value of expected future dividends. Using the present value of ordinary annuity formula, the price of the stock will be,
Price today = 3.1 * [ (1 - (1+0.087)^-2) / 0.087 ]
Price today = $5.475 rounded off to $5.48
Yi Company began operations on January 1, 2013. During 2013, the company engaged in the following cash transactions: 1) issued stock for $52,000 2) borrowed $31,000 from its bank 3) provided consulting services for $50,000 4) paid back $21,000 of the bank loan 5) paid rent expense for $12,000 6) purchased equipment costing $18,000 7) paid $3,600 dividends to stockholders 8) paid employees' salaries, $27,000 What is Yi's net cash flow from operating activities?
Answer:
$11,000
Explanation:
Data provided
Provided consulting services = $50,000
Paid rent expenses = $12,000
Paid employee salaries = $27,000
The calculation of Yi's net cash flow from operating activities is given below:-
Yi's net cash flow from operating activities = Provided consulting services - Paid rent expenses - Paid employee salaries
= $50,000 - $12,000 - $27,000
= $11,000
Sp, for computing the Yi's net cash flow from operating activities we simply applied the above formula.
Answer:
Yi's net cash flow from operating activities is $11,000.
Explanation:
Firstly, we need to determine the net income as follows:
Yi Company Net income
Service revenue from consulting service $50,000
Rent expense ($12,000)
Salaries ($27,000)
Net income $11,000
The amount above $11,000 represents cash flows from operating activities since every other time affects net cash flows from financing activities or investing activities.
A company purchased $9,500 of merchandise on June 15 with terms of 3/10, n/45. On June 20, it returned $475 of that merchandise. On June 24, it paid the balance owed for the merchandise taking any discount it was entitled to. The cash paid on June 24 equals:
$7,968.
$8,342.
$7,925.
$8,170.
$8,600.
Answer:
The amount paid would be $ 8754.75 or $8755
Explanation:
The terms of 3/10, n/45 tell us the 3 % discount will be allowed within the first ten days.
The company bought $9,500 of merchandise on June 15 with terms of 3/10, n/45. On June 20, it returned $475 of that merchandise. So the amount of merchandise inventory left would be
$9,500-$475= $ 9025
On June 24, it paid the balance owed for the merchandise taking any discount it was entitled to.
The discount allowed on $ 9025 would be
3 % of $ 9025=( 3/100)*9025= $ 270.75
Deducting this discount from the amount of $ 9025
The amount paid would be $ 9025 -$ 270.75= $ 8754.75 or $8755
Answer:
The cash paid on June 24 equals $ 8,754.25
Explanation:
Let's recall that term 3/10, indicates the number of days (from the invoice date) within which the buyer should pay the invoice in order to receive the 3 % discount.
n/45 means that if the buyer does not pay the (full) invoice amount within the 10 days to qualify for the discount, then the net amount is due within 45 days after the sales invoice date.
Now, let's calculate the cash paid on June 24, this way:
June 15 - Purchase of $ 9,500
June 20 - Return of $ 475, Balance of $ 9,025
June 24 - Payment of balance less 3% discount because the company is paying before 10 days from the invoice date
9,025 * 0.97 = 8,754.25
Kansas Company has a current production capacity level of 200,000 units per month. At this level of production, variable costs are $0.60 per unit and fixed costs are $0.50 per unit. Current monthly sales are 173,000 units. 3M Company has contacted Kansas Company about purchasing 20,000 units at $1.00 each. Current sales would not be affected by the special order and no additional fixed costs would be incurred on the special order. If the order is accepted, what is Kansas Company's change in profits
Answer:
Effect on income= $8,000 increase
Explanation:
Giving the following information:
Variable costs are $0.60 per unit
3M Company has contacted Kansas Company about purchasing 20,000 units at $1.00 each.
Because it is a special offer and there is unused capacity, we will not take into account the fixed costs:
Effect on income= 20,000*(1 - 0.6)= $8,000 increase
U.S. car dealers sell both used and new cars each year. However, only the sales of the new cars count toward GDP. The sale of used cars does not count because:
a. the car had been previously counted in the GDP of the year it was built.
b. there are more used cars than new cars.
c. the value of the used car depends on the value of the new car.
d. the value of used cars cannot be determined.
Answer: a. the car had been previously counted in the GDP of the year it was built.
Explanation: Though both used and new cars are sold in the U.S. by car dealers, the sale of used cars does not count because the car had been previously counted in the GDP of the year it was built. The Gross Domestic Product (GDP) which is defined as a measure of the economic production of a country in financial terms over a specific time period (usually a year), sums the dollar value of what has been produced in the economy over the year, not what was actually sold. In simpler terms, they were produced in a previous year and are part of that year's GDP.
a. the car had been previously counted in the GDP of the year it was built.
The sale of used cars does not count toward GDP because the car had been previously counted in the GDP of the year it was built.
GDP measures the value of goods and services produced within a specific period, typically one year. When a new car is manufactured and sold, its value is included in that year's GDP.
However, reselling that car in subsequent years does not count towards GDP because it does not reflect new production, merely a transfer of ownership of an already produced good. This exclusion helps prevent double counting of goods and ensures that GDP accurately reflects the amount of new production occurring within the economy in a given year.Cedar Designs Company, a custom cabinet manufacturing company, is setting standard costs for one of its products. The main material is cedar wood, sold by the square foot. The current cost of cedar wood is $ 7.00 per square foot from the supplier. Delivery costs are $ 0.40 per square foot. Carpenters' wages are $ 20.00 per hour. Payroll costs are $ 3.00 per hour, and benefits are $ 6.00 per hour. How much is the direct labor standard cost per hour? A. $ 9.00 B. $ 23.00 C. $ 29.00 D. $ 20.00
Answer:
Standard direct labour cost = $20.00 per hour
Explanation:
The direct labour costs represent expenditures incurred in respect of direct worker which can be traced to the product been produced. For example, the labour cost of machine operator saddled with production task.
The payroll cost is not a direct labour cost because payroll employed are not direct workers, also benefits are overheads related to direct workers
Standard direct labour cost = $20.00
Porter Incorporated issued $210,000 of 6 percent, 10-year, callable bonds on January 1, Year 1. The bonds were issued at their face value. The call premium was 2 percent (bonds are callable at 102). Interest was payable annually on December 31. The bonds were called on December 31, Year 5. Required Prepare the journal entries to record the bond issue on January 1, Year 1, and the bond redemption on December 31, Year 5. Entries for accrual and payment of interest are not required.
Answer:
Jan. 1
Dr Cash $210,000
Cr Bonds Payable $210,000
Dec. 31
Dr Loss on Bond Redemption $4,200
Bonds Payable $210,000
Cr Cash $214,200
Explanation:
Porter Incorporated Journal entries
Jan. 1
Dr Cash $210,000
Cr Bonds Payable $210,000
Dec. 31
Dr Loss on Bond Redemption $4,200
Bonds Payable $210,000
Cr Cash $214,200
(102%×$210,000=$214,200)
During 2019, Globe Life Corporation had following transactions affecting stockholders' equity: a. Feb. 1 Repurchased 230 shares of the company's own common stock at $22 cash per share. b. Jul. 15 Sold 130 of the shares purchased on February 1 for $23 cash per share. c. Oct. 1 Sold 100 of the shares purchased on February 1 for $21 cash per share.
Answer:
The requirement of question is prepare journal entries for each of above transaction; It is assumed that par value of each share is $1
Explanation:
Feb 1.
Common Stocks 230*1 Dr.$230
Paid in capital in excess of par 230*(22-1) Dr.$4,830
Cash 230*22 Cr.$5,060
b. Jul 15
Cash 130*23 Dr.$ 2,990
Common Stocks 130*1 Cr.$130
Paid in capital in excess of par 130*(23-1) Cr.$2,860
c.Oct 1
Cash 100*21 Dr.$2,100
Common Stocks 100*1 Cr.$100
Paid in Capital in excess of par 100*(21-1) Cr.$2,000
Minimizing Exposure Lola Co. (a U.S. firm) expects to receive 10 million euros in 1 year. It does not plan to hedge this transaction with a forward contract or other hedging techniques. This is its only international business, and it is not exposed to any other form of exchange rate risk. Lola Co. plans to purchase materials for future operations, and it will send its payment for these materials in 1 year. The value of the materials to be purchased is about equal to the expected value of the receivables. Lola Co. can purchase the materials from Switzerland, Hong Kong, Canada, or the United States. Another alternative is that it could also purchase one-fourth of the materials from each of the four countries mentioned in the previous sentence. The supplies will be invoiced in the currency of the country from which they are imported. The movements of the euro and the Swiss franc against the dollar are highly correlated and will continue to be highly correlated. The Hong Kong dollar is tied to the U.S. dollar and you expect that it will continue to be tied to the dollar. The movements in the value of Canadian dollar against the U.S. dollar are independent of (not correlated with) the movements of other currencies against the U.S. dollar. Lola Co. believes that none of the sources of the imports would provide a clear cost advantage.
Required:
Which alternative should Lola Co. select for obtaining supplies that will minimize its overall exchange rate risk?
Answer:
Lola Co. should purchase every one of its provisions from Switzerland. Because the developments of the Euro and the Swiss franc against the dollar are profoundly associated. The installments and receipts will both move a similar way. Therefore the Lola Co. select for obtaining supplies will limit the general Exchange rate risk.
One year ago, the spot rate of U.S. dollars for Canadian dollars was .90 USD/CAD. Since that time, 17)_____ the rate of inflation in the U.S has been 2% higher than that in Canada. Based on the theory of Relative PPP, the current spot exchange rate of U.S. dollars for Canadian dollars should be approximately:
Answer:
0.88 USD/CAD
Explanation:
As per relative purchase power parity theory, the difference between the inflation rates of two currencies is equal to the rate by which one currency appreciates or depreciates with respect to the other.
In the given case, the difference between inflation rates of two currencies is 2% i.e rate of inflation in USA has been higher by 2% than the rate of inflation in Canada.
As per relative purchase power parity theory, in such a scenario, Canadian dollar would appreciate by 2% or US Dollar will depreciate by 2%.
SPOT rate 1 year ago ,for 1 USD $ = 0.90 CAN$
Difference in inflation rate = Inflation rate in USA - Inflation rate in canada
= + 2%
Thus, CAN $ will appreciate by 2% over the period of 1 year while USD will depreciate by 2%. So the spot rate as on today would be,
[tex]1\ US\ Dollar\ =\ 0.90\ (1\ -\ .02)\ CAN\ Dollar[/tex]
Thus, [tex]1\ US\ Dollar\ =\ 0.882\ CAN\ Dollar[/tex] OR 0.88 CAD approx.
Darrox, Inc. is considering a fourminusyear project that has an initial outlay or cost of $90,000. The future cash inflows from its project are $50,000, $30,000, $30,000, and $30,000 for years 1, 2, 3 and 4, respectively. Darrox uses the internal rate of return method to evaluate projects. What is the approximate IRR for this project?
Answer:
22.8
Explanation:
Internal rate of return (IRR) is the interest rate at which net present value of all cash flows becomes zero. It measure the profitability of the investment.
IRR of Current Project
IRR = 22.8%
Working for NPV is attached with this answer in Excel Format please find it.
On January 1, the first day of the fiscal year, Designer Fabric Inc. issues a $3,000,000, 8%, 10-year bond that pays semiannual interest of $120,000 ($3,000,000 X 8% X ½ year), receiving cash of $3,000,000. Journalize the entries to record (a) the issuance of the bonds, (b) the first interest payment on June 30, and (c) the payment of the principal on the maturity date of December 31 on page 11. Refer to the Chart of Accounts for exact wording of account titles.
Answer:
cash 3,000,000 debit
bonds payable 3,000,000 credit
--to record issuance of the bonds--
interest expense 120,000 debit
cash 120,000 credit
--to record the payment of interest--
bonds payable 3,000,000 debit
interest expense 120,000 debit
cash 3,120,000 credit
--to record last interest payment and also, maturity of the bonds--
Explanation:
As the company recieve the par value no premium nor discount is recognized at issuance just, the cash proceeds and bonds payable
Then, the entire amount of interst is reocgnize as expense as been issued at par
Last, we write-off the payble and also, declare the interest expense for the last time-period from June 30th to Deember 31th year 10.
Final answer:
The answer provides the journal entries for Designer Fabric Inc. bond issuance, first interest payment, and principal payment, helping understand accounting entries for bond transactions.
Explanation:
Journal Entries for Designer Fabric Inc. Bond Issuance:
(a) Issuance of bonds: Debit Cash $3,000,000, Credit Bonds Payable $3,000,000.
(b) First interest payment on June 30: Debit Interest Expense $120,000, Credit Cash $120,000.
(c) Payment of principal on December 31: Debit Bonds Payable $3,000,000, Credit Cash $3,000,000.
The following information relates to Franklin Freightways for its first year of operations (data in millions of dollars): Pretax accounting income: $ 160 Pretax accounting income included: Overweight fines (not deductible for tax purposes) 8 Depreciation expense 80 Depreciation in the tax return using MACRS: 119 The applicable tax rate is 25%. There are no other temporary or permanent differences. Franklin's taxable income ($ in millions) is: Multiple Choice $39. $129. $121. $119.
Answer:
$129
Explanation:
Pretax accounting income: $ 160
Overweight fines (not deductible for tax purposes) 8
Depreciation expense 80
Depreciation in the tax return using MACRS: 119
Franklin's taxable income ($ in millions) = $160 + $8 - ($119 - $80) =
Oriole Legler requires an estimate of the cost of goods lost by fire on March 9. Merchandise on hand on January 1 was $42,560. Purchases since January 1 were $80,640; freight-in, $3,808; purchase returns and allowances, $2,688. Sales are made at 33 1/3% above cost and totaled $129,000 to March 9. Goods costing $12,208 were left undamaged by the fire; remaining goods were destroyed. Collapse question part (a) Compute the cost of goods destroyed. (Round gross profit percentage and final answer to 0 decimal places, e.g. 15% or 125.) Cost of goods destroyed $
Answer:
the cost of goods destroyed is $15,362
Explanation:
Note Sales are made at 33 1/3% above cost. Thus the Mark -up is 1/3.
Using the Mark-up and Margin Relationship :
Gross Profit Margin = 1/(3+1)
=1/4
Therefore gross profit = $129,000× 25%
= $32,250
Income Statement Using the Gross Profit Margin
Sales $129,000
Less Cost of Goods Sold
Opening Stock $42,560
Add Purchases $80,640
Add Freight In $3,808
Less Returns ( $2,688) $81,760
Available for Sale $124,320
Less Closing Stock ($12,208)
$112,112
Less Goods destroyed ( $15,362) (96,750)
Gross Profit $32,250
The is the interest rate that a firm pays on any new debt financing. Andalusian Limited (AL) can borrow funds at an interest rate of 9.70% for a period of six years. Its marginal federal-plus-state tax rate is 45%. AL’s after-tax cost of debt is (rounded to two decimal places). At the present time, Andalusian Limited (AL) has 15-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,136.50 per bond, carry a coupon rate of 12%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 45%. If AL wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? (Note: Round your YTM rate to two decimal place.) 4.48% 6.72% 5.60% 5.04%
Answer:
5.34%
The correct option is C,5.60%
Explanation:
The are two requirements here,the first is after cost of debt for the first part of the case study and after tax cost of debt for the second part of the scenario:
1.after tax cost of debt=pretax cost of debt*(1-t)
pretax cost of debt is 9.7%
t is the tax rate at 45% or 0.45
after tax cost of debt=9.7%*(1-0.45)=5.34%
2.
The pretax cost of debt here is computed using the rate formula in excel:
=rate(nper,pmt,-pv,fv)
nper is the number of times the bond pays coupon interest which is 15
pmt is the annual coupon interest receivable by investors i.e $1000*12%=$120
pv is the current market price of the bond which is $1,136.50
fv is the face value of the bond at $1000
=rate(15,120,-1136.50,1000)
rate =10.19%
after tax cost of debt=10.19% *(1-0.45)=5.60%
The after-tax cost of debt for Andalusian Limited (AL), assuming an interest rate of 9.70% and a tax rate of 45%, would be 5.33%, rounded to two decimal places. This calculation reflects the cost of new debt financing for the company based on current market conditions and the company's creditworthiness, not the terms of its existing bonds.
Explanation:The original question asks for the after-tax cost of debt for Andalusian Limited (AL). The after-tax cost of debt is calculated as the interest rate on new debt multiplied by (1 - Tax Rate). In AL's case, the interest rate is 9.70% and the tax rate is 45%.
Therefore, we calculate the after-tax cost of debt as follows: 9.70% * (1 - 0.45) = 5.33%. Thus, if the firm wants to issue new debt, a reasonable estimate of the after-tax cost of debt would be 5.33%, rounded to two decimal places.
The given example of the $1,000 bond selling at a market price of $1,136.50, with a 12% annual coupon rate, does not affect the calculation of the after-tax cost of new debt financing. This is because the cost of new debt financing for a corporation is determined by the current market conditions and the creditworthiness of the company, not by the terms of its existing outstanding bonds.
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Division A of Barsema, Inc. has operating data as follows: Capacity 20,000 units Selling price $80 per unit Variable costs $45 per unit Fixed costs $20 per unit Division B wants to purchase units from Division A. If Division A agrees to sell units to Division B, A's variable costs will be $5 less per unit. If Division A has capacity available to meet B's requirements, what is the minimum price it should charge
Answer:
the minimum price it should charge is $40 per unit.
Explanation:
Minimum Transfer Price = Variable Costs - Internal Savings + Opportunity Cost
Note : Division A has capacity available to meet B's requirements therefore there is no opportunity cost.
There are Internal savings of $5 as A's variable costs will be $5 less per unit.
Minimum Transfer Price = $45 - $5
= $40
Mills Corporation acquired as a long-term investment $290 million of 8% bonds, dated July 1, on July 1, 2021. Company management has classified the bonds as an available-for-sale investment. The market interest rate (yield) was 6% for bonds of similar risk and maturity. Mills paid $340 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2021, was $330 million.
Required:
a. Prepare the journal entry to record Mills’ investment in the bonds on July 1, 2018 and interest on December 31, 2018, at the effective (market) rate.
b. At what amount will Mills report its investment in the December 31, 2018, balance sheet?
c. Suppose Moody’s bond rating agency upgraded the risk rating of the bonds, and Mills decided to sell the investment on January 2, 2019, for $290 million. Prepare the journal entry to record the sale.
Answer:
Journal Entries are given below
Explanation:
Mills Corporation-journal Entries
Date Particulars Debit (In Miln) Credit (in Mln)
01-Jul-21 Bond Investment $290.00
Investment premium $50.00
Cash $340.00
Investment recorded
31-Dec-21 Cash ($290 * 8% * 6/12) $11.60
Premium bond investment $1.40
Interest revenue ($340*6%*6/12) $10.20
Revenue recognized for bond interest and amortization of discount.
31-Dec-21 Unrealized holding gain or loss $8.60
Fair value adjustment ($340 - $330 - $1.40) $8.60
investment recorded at fair value.
02-Jan-19 Fair value adjustment Dr $8.60
Reclassification adjustment - $8.60
Fair value adjustment at the time of sale
02-Jan-19 Cash $290.00
Loss on sale of investment $48.60
bond investment premium $48.60
Investment in Bond $290.00
Sale of investment.
Larry estimates that the costs of insurance, license, and depreciation to operate his car total $435 per month and that the gas, oil, and maintenance costs are 34 cents per mile. Larry also estimates that, on average, he drives his car 2,000 miles per month. Required: a. How much cost would Larry expect to incur during April if he drove the car 1,578 miles
Answer:
$971.52
Explanation:
Larry's fixed costs for using his car are $435 per month. He has to pay this even if he drove zero miles during the month.
The variable cost is 34 cents per mile, and he drove a total of 1,578 miles, therefore:
34 x 1,578 = 536,52 dollars.
As a result, his total costs are:
435 in fixed costs + 536,52 in variable costs = 971.52
2. Before the Interview If you do well in the application process and screening interview, you will be invited to a face-to-face interview. Proper preparation before the interview is critical. Be sure to practice answers to possible questions, familiarize yourself with the company, and project a professional image in person and online. Consider the scenario, and then answer the question. You did well on a telephone interview, and your prospective employer has scheduled a face-to-face interview for the following week. What should you do to prepare for the interview?
Answer:
Possible options:
A. Select bold-colored clothes the night before.
B. Call the hiring manager to discuss the position.
C. Visit the company's website to learn more about the organization.
Answer is B
Explanation:
The stockholders' equity section of the balance sheet for Pokagon Corporation appeared as follows before its recent stock dividend: Common stock, $10 par, 10,000 shares issued and outstanding $ 100,000 Additional paid-in capital - common 120,000 Retained earnings 150,000 Total stockholders' equity $370,000 Pokagon declared a 10% stock dividend when the market price per share was $20. After the stock dividend was distributed, the components of the stockholders' equity section were:
Answer:
Common stock = $110,000
Additional Paid in capital = $130,000
Retained earnings = $130,000
Explanation:
The computation of stockholders' equity is given below:
Common stock = Outstanding shares + (Stock dividend percentage × Shares issued × Par value per share)
= 100,000 + (10% × 10,000 × $10)
= $110,000
Additional Paid in capital = Additional paid-in capital - common + (Stock dividend percentage × Shares issued × (Market price per share - Par value per share))
= 120,000 + (10% × 10,000 × ($20 - $10))
= $130,000
Retained earnings= Retained earning(Given) - (Stock dividend percentage × Outstanding shares × Market price per share)
= 150,000 - (10% × 100,000 × $20)
= $130,000
Asset A and B have expected returns of 5% and 3% per year respectively. Their annual volatilities are both 20% and the correlation coefficient between the returns of assets A and B is 30%. The risk free rate is 1% per year. 1. Find the weights on A and B in a portfolio with minimal risk. 2. Find the weights on A and B in the optimal risky portfolio that has the maximum Sharpe ratio.
Answer:
1. Weight of A=0.5, Weight of B= 0.5
2. Asset A has the highest shape ratio. The weight of A and B in the optimal risky portfolio that has the highest shape ratio is:
Weight of A= 0.105, Weight of B= 0.895
Explanation:
Expected return of Asset A= 5%Expected return of Asset A= 5%
Expected return of Asset B= 3%
Annual volatilities of Asset A= 20%
Annual votalities of Asset B= 20%
1. Correlation coefficient = 30% = 0.3 < 1
Risk Free Rate = 1% =0.01
1. Weight of A and B in portfolio with minimal risk is:
Weight of A= β^2B - Cov (XAXB) /β^2A + β^2B - 2Cov (XAXB)
Therefore,
CovXAXB = PAB (Volatility of A) (Volatility of B)
= 0.3 × 0.2 × 0.2
= 0.012
Hence,
Weight of A= (0.2)^2 - 0.012 / (0.2)^2 + (0.2)^2 - 2(0.012)
Weight of A= 0.04 - 0.012 / 0.04 + 0.04 - 0.024
= 0.028/ 0.08 - 0.024
= 0.028/ 0.056
=0.5
Weight of A = 0.5
Weight of B= 1 - Weight of A
Weight of B= 1 - 0.5
Weight of B= 0.5
2. Shape ratio of A= RA - Rf / β
= 0.05 - 0.01 / 2
= 0.04/2
= 0.02 =20%
Shape ratio of B= RB - Rf / β
= 0.03 - 0.01/ 2
0.02 / 2
=0.01 = 10%
So, Asset A has the highest shape ratio
Cov (XAXB) = PAB (Volatility of A) (Volatility of B)
= 0.03 × 0.2 × 0.1
= 0.006
Weight of A= β^2B - Cov (XAXB) /β^2A + β^2B - 2Cov (XAXB)
Weight of A = (0.1)^2 - 0.006 / (0.2)^2 + (0.1)^2 - 2(0.006)
= 0.01 - 0.006 / 0.04 +0.01 - 0.012
= 0.004/ 0.05 - 0.012
= 0.004/ 0.038
= 0.105
Weight of A = 0.105
Weight of B= 1 - 0.105
Weight of B= 0.895
Minimum risk & Optimal risky portfolio weights: Asset A: 61.8%, Asset B: 38.2%.
1. Minimum Risk Portfolio:
To find the weights for the minimum risk portfolio, we can utilize the following formula:
Weight of A (Wa) = ( σ_B² * rho - σ_A * σ_B * rho) / (σ_A² * σ_B² - σ_A² * σ_B² * rho²)Weight of B (Wb) = 1 - Wawhere:
σ_A & σ_B are the volatilities of Asset A and B (both 20%)
ρ is the correlation coefficient (30%)
Plugging in the values:
Wa = ((0.20)² * 0.3 - (0.20) * (0.20) * 0.3) / ((0.20)² * (0.20)² - (0.20)² * (0.20)² * (0.3)²)
Wa ≈ 0.618
Therefore, Wb = 1 - 0.618 ≈ 0.382
Minimum Risk Portfolio weights:
Asset A: 61.8%
Asset B: 38.2%
2. Optimal Risky Portfolio (Maximum Sharpe Ratio):
The optimal risky portfolio maximizes the Sharpe ratio, which measures the return earned per unit of risk. Here, we'll utilize the following formula:
Weight of A (Wa) = (σ_B² * (E_r - Rf) - σ_A * σ_B * rho * (E_r - Rf)) / (σ_A² * σ_B² - σ_A² * σ_B² * rho²)where:
E_r is the expected return on the portfolio (we want to maximize it)
Rf is the risk-free rate (1%)
Assuming an equal expected return target (E_r) for both portfolios (minimum risk and optimal risky), the weight calculation simplifies because the expected return terms cancel out. We end up with the same weights as the minimum risk portfolio.
Therefore, the optimal risky portfolio (for maximum Sharpe ratio) also has the following weights:
Asset A: 61.8%
Asset B: 38.2%
In essence, with these given parameters, the minimum risk portfolio and the optimal risky portfolio have the same weights. This is because the correlation between the assets is relatively low (30%), and the expected returns are assumed to be similar.
Vertis Corporation is interested in cutting the amount of time between when a customer places an order and when the order is completed. Details for the first quarter of the year are provided here. Choose the correct answer from the options provided.
Days
Wait time 12
Inspection time 0.6
Process time 6
Move time 0.4
Queue time 8
Compute the manufacturing cycle efficiency (MCE).
Answer:manufacturing cycle efficiency (MCE)= 0.40
Explanation:
Solution to solve for the manufacturing cycle efficiency (MCE)
Manufacturing Cycle Efficiency (MCE) is solved using the following
Throughput time = Process time + Inspection time + Move time + Queue time
= 6 Days + 0.6 Days + 0.4 Days + 8 Days
= 15 Days
Therefore, the Manufacturing cycle efficiency (MCE) = Process time / Throughput time
= 6 Days / 15 Days
= 0.40
Therefore, the Manufacturing Cycle Efficiency (MCE) will be 0.40
Company had no investments prior to the current year. It had the following transactions involving short-term available-for-sale and held-to-maturity securities during the year. Prepare journal entries to record the following transactions associated with the investment purchases.
January 10 Purchased 6,000 shares of Gray Company stock at $15.00 plus a broker's fee of $700. (Classified as short-term available-for-sale securities)
June 1 Purchased $180,000 of Duke Company 4%, five-year bonds at par value. Interest payments are paid semiannually on June 1 and December 1. (Classified as held-to- maturity)
July 1 Sold 3,000 shares of Gray company stock at $22 less a $600 brokerage fee.
December 1 Received a check for the first semiannual interest payment on the Duke Company bonds.
(show calculations in description of JE when appropriate) Date Description DR CR Jan. 10 June 1 July 1 Dec. 1
Answer:
Date Description DR CR
Jan10 Short-term available for sales $90,700
cash 90,700
June 1 Held to maturity securities 180,000
cash 180,000
July 1 Cash 65,400
brokerage fee 600
Short-term available for sale securities 45,000
Income statement 15,000
workings
Jan 10 purchases = (6000*$15 ) + 700= $90,700
july 1 sales = 3000*$22 = $66,000
Explanation:
g Oregon Corp. prepares its financial statements annually and has a calendar year end. The adjusted trial balance ( NO MORE ADJUSTING ENTRIES ARE NEEDED) shows the following balances at December 31, 2019 (all accounts have normal balances): December 31, 2019 General Ledger Balances: Bad debt expense $ 100,000 Accounts Receivable 2,000,000 Allowance for Doubtful Accounts 300,000 What amount would be reported on Oregon Corp's balance sheet as the NET accounts receivable (the cash realizable value) at December 31, 2019
Answer:
$1,700,000
Explanation:
The computation of the NET accounts receivable (the cash realizable value) at December 31, 2019 is shown below:
= Account receivable - allowance for doubtful debts
= $2,000,000 - $300,000
= $1,700,000
By deducting the allowance for doubtful debts from the account receivable we can get the net account receivable or the cash realizable value
Therefore we ignored the bad debt expense
g Swifty Corporation issued 3,100 5%, 5-year, $1,000 bonds dated January 1, 2022, at face value. Interest is paid each January 1. (a) Prepare the journal entry to record the sale of these bonds on January 1, 2022. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Answer:
Dr Cash $3,100,000
Cr Bonds payable $3,100,000
Explanation:
Since the bonds were issued at face value of $1000 each,the cash proceeds received from the entire issue of 3,100 bonds can be computed thus:
Cash proceeds=$1000*3,100=$3,100,000
The cash proceeds imply that cash inflows have increased by $3,100,000, as a result cash account should be debited with $3,100,00o while the same amount is credited to bonds payable since an increase in debt obligation should be a credit entry.