Answer:
See the explanation below.
Explanation:
Multiplier = 1/(1-MPC)
a. For each value of the MPC, calculate the expenditure multiplier, or the impact of a one-dollar increase in government spending on GDP.
Multiplier for 0.82 = 1/(1-0.82) = 1/0.18 = 5.6
Multiplier for 0.75 = 1/(1-0.75) = 1/0.25 = 4.0
Multiplier for 0.55 = 1/(1-0.55) = 1/0.45 = 2.2
b. For each value of the MPC, calculate the impact on GDP of a $250 million increase in government spending.
For 0.82 MPC, Impact on GDP = 5.6 * 250,000,000 = $1,388,888,888.9
For 0.75 MPC, Impact on GDP = 4.0 *250,000,000 = $1,000,000,000.0
For 0.55 MPC, Impact on GDP = 2.2 *250,000,000 = $555,555,555.6
The Marginal Propensity to Consume (MPC) is used to calculate the expenditure multiplier and, in turn, the impact on GDP from a change in government spending. The higher the MPC, the larger the multiplier and the larger the impact on GDP.
Explanation:The Marginal Propensity to Consume (MPC) can be used to calculate the expenditure multiplier effect on the Gross Domestic Product (GDP) through an increase in government spending. For your listed values of MPC i.e., 0.82, 0.75, and 0.55, the expenditure multipliers are calculated as the inverse of 1-MPC, therefore, yielding 5.6, 4.0, and 2.2 respectively. As for the impact on the GDP of a $250 million increase in government spending, you multiply the change in spending by the expenditure multiplier. Hence, the impact on the GDP would respectively be $1400 million, $1000 million, and $550 million. These results illustrate how each dollar spent by the government can produce more than a dollar's worth of economic activity.
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A firm is considering purchasing two assets. Asset L will have a useful life of 15 years and cost $4 million; it will have installation costs of $750,000 but no salvage or residual value. Asset S will have a useful life of 5 years and cost $2 million; it will have installation costs of $500,000 and a salvage or residual value of $400,000. Which asset will have a greater annual straightminusline depreciation?
Answer:
D. Asset S has $103,333 more in depreciation per year.
Explanation:
For computing the greater annual straight minus line depreciation first we have to determine the each assets depreciation expense which is shown below:
For Asset L
= (Original cost + installation cost - salvage value) ÷ (useful life)
= ($4,000,000 million + $750,000 - $0) ÷ (15 years)
= $316,666.67
For Asset S
= (Original cost + installation cost - salvage value) ÷ (useful life)
= ($2,000,000 million + $500,000 - $400,000) ÷ (5 years)
= $420,000
As we can see that the Asset S has high annual straight-line depreciation
And, the amount exceed is $103,333.33
Final answer:
After calculating the straight-line depreciation for both assets, it was determined that Asset S has a higher annual depreciation amount of $420,000 compared to Asset L's $316,666.67.
Explanation:
To determine which asset will have a greater annual straight-line depreciation, we need to calculate the depreciation for both assets, Asset L and Asset S.
Asset L:
Cost: $4,000,000
Installation Costs: $750,000
Salvage Value: $0
Useful Life: 15 years
Depreciation for Asset L per year = (Cost + Installation Costs - Salvage Value) / Useful Life
= ($4,000,000 + $750,000 - $0) / 15
= $4,750,000 / 15
= $316,666.67 per year
Asset S:
Cost: $2,000,000
Installation Costs: $500,000
Salvage Value: $400,000
Useful Life: 5 years
Depreciation for Asset S per year = (Cost + Installation Costs - Salvage Value) / Useful Life
= ($2,000,000 + $500,000 - $400,000) / 5
= $2,100,000 / 5
= $420,000 per year
Comparing the two, Asset S has a higher annual depreciation amount of $420,000 compared to Asset L's $316,666.67.
Leona bought two different brands of wine from vineyards in Australia. When asked for her opinion about the wines, she said that one brand of wine tasted like alcoholic grape juice, but the other had a crisp taste that she really enjoyed.
1. These statements were most likely made during the ___________stage of the purchase decision.a. information searchb. alternative evaluationc. postpurchase behaviord. purchase decisione. situational analysis
Answer:
C. Post purchase behavior
Explanation:
Whenever a consumer buys a product, he/she undergoes various stages between the creation of need/want and the ultimate purchase decision.
5 stages have been stated under Consumer buying decision, namely,
Need recognition : the foremost stage wherein a need or desire arises.Information search: Here, the consumer searches for information w.r.t how the need or want can be satisfied. Evaluation of alternatives: The stage wherein a consumer weighs pros and cons of all available alternatives which can satisfy the need.Purchase: The stage wherein a consumer finally purchases a product.Post purchase behavior : Here, the consumer evaluates his purchase and reviews his purchase decision.In the given case, the customer already bought both the wines. Her opinion regarding superiority of quality and taste between the two, represents her post buying stage of purchase decision and her review of the viability of purchase decision.
You purchased 1,350 shares of stock in Natural Chicken Wings, Inc., at a price of $43.58 per share. Since you purchased the stock, you have received dividends of $1.09 per share. Today, you sold your stock at a price of $47.76 per share. What was your total percentage return on this investment
Answer:
12.09%
Explanation:
The computation of the total percentage return on this investment is shown below:
= {(Sale price of the stock - purchase price of stock + dividend received per share) ÷ purchase price of stock) × 100
= {($47.76 - $43.58 + $1.09 ) ÷ $43.58} × 100
= ($5.27 ÷ $43.58 ) × 100
= 12.09%
We simply applied the above formula so that the total percentage return on this investment could come
Bethany incurred $20,000 in research and experimental costs for developing a specialized product during July of year 1. Bethany went through a lot of trouble and spent $10,000 in legal fees to receive a patent for the product in August of year 3. Bethany expects the patent to have a remaining useful life of 10 years. (Do not round intermediate calculations.) a. What amount of research and experimental expenses for year 1, year 2, and year 3 may Bethany deduct if she elects to amortize the expenses over 60 months? (Round your final an
Final answer:
Bethany can deduct $3,999.96 for research and experimental expenses for year 1, year 2, and year 3 if she elects to amortize the expenses over 60 months.
Explanation:
To amortize the research and experimental costs over 60 months, we need to determine the annual amortization expense by dividing the total cost by the number of months. In this case, we divide $20,000 by 60 to get $333.33 per month. Multiplying this by 12, we find that the annual amortization expense for year 1 is $3,999.96 (rounded to the nearest cent).
For year 2, the remaining balance is $20,000 - $3,999.96 = $16,000. We divide this by 48 months (60 months - 12 months) to get a monthly amortization expense of $333.33. Multiplying this by 12, we find that the annual amortization expense for year 2 is $3,999.96 (rounded to the nearest cent).
For year 3, the remaining balance is $16,000 - $3,999.96 = $12,000. We divide this by 36 months (60 months - 24 months) to get a monthly amortization expense of $333.33. Multiplying this by 12, we find that the annual amortization expense for year 3 is $3,999.96 (rounded to the nearest cent).
A statement of basic principles and positions on various public policy issues put forth by a national political party, worked on at every national party convention level which is adopted by its candidates in the election campaign, is known as the party Group of answer choices
A) plank.
B) political action committee.
C) platform.
D) proposal.
E) policy contract.
Answer:
The correct answer is letter "C": platform.
Explanation:
A political party platform represents the set of ideas supported by a group of people united by a political purpose. This set of ideas is usually related to controversial topics that catch the attention of voters during election campaigns. The political party platform aims to satisfy the voters' needs without necessarily implying to have a well-structured and feasible plan to develop the plans alleged in the platform.
john Hayes and Lynn Magosian, auditors for a public accounting firm, went to lunch at the Bay View Restaurant in San Francisco. John left his raincoat with a coatroom attendant, but Lynn took her new raincoat with her to the dining room, where she hung it on a coat hook near her booth. When leaving the restaurant, Lynn discovered that someone had taken her raincoat. When John sought to claim his raincoat at the coatroom, it could not be found. The attendant advised that it might have been taken while he was on his break. John and Lynn sued the restaurant, claiming that the restaurant was a bailee of the raincoats and had a duty to return them. Are both John and Lynn correct
Answer:
John is correct but Lynn isn't
Explanation:
John is correct because he left his coat with the coatroom attendant under the premise that it would be properly looked after and returned to him when he was done having lunch at the restaurant. However, Lynn just left her coat lying around under no ones care or supervision, there wasn't a predetermined agreement that anyone would be responsible for watching it on her behalf, therefore I don't think she is has the right to sue.
On January 2, 2015, Pharoah Corporation issued $1,700,000 of 10% bonds at 97 due December 31, 2024. Interest on the bonds is payable annually each December 31. The discount on the bonds is also being amortized on a straight-line basis over the 10 years. (Straight-line is not materially different in effect from the preferable "interest method.") The bonds are callable at 102 (i.e., at 102% of face amount), and on January 2, 2020, Pharoah called $1,020,000 face amount of the bonds and redeemed them. Ignoring income taxes, compute the amount of loss, if any, to be recognized by Pharoah as a result of retiring the $1,020,000 of bonds in 2020. (Round answer to 0 decimal places, e.g. 38,548.)
Answer:
The loss on redemption will be for 35,700
Explanation:
bonds value at issuance:
1,700,000 x 97% = 1,649,000
discount: 51,000
amortized over straight line: 5,100 per year
5,100 x 5 = 25,500
discount at Jan 2020 51,000 - 25,500 = 25,500
book value at Jan 2020:
1,700,000 - 25,500 = 1,674,500
1,020,000/1,700,000 = 0.6
$1,674,500 x 60% = $1,004,700
redemption cost:
1,020,000 x 102/100 = 1,040,400
Loss (difference between book value and redemption) 35,700
Wolverine World Wide, Inc., manufactures military, work, sport, and casual footwear and leather accessories under a variety of brand names, such as Hush Puppies, Wolverine, Merrell, Stride Rite, and Bates, to a global market. The following transactions occurred during a recent year. Dollars are in thousands.
A. Issued common stock to investors for $14,084 cash (example).
B. Purchased $872,418 of additional inventory on account.
C. Borrowed $11,700.
D. Sold $1,346,068 of products to customers on account; cost of the products sold was $750,547.
E. Paid cash dividends of $21,258.
F. Purchased for cash $25,726 in additional property, plant, and equipment.
G. Incurred $345,584 in selling expenses, paying three-fourths in cash and owing the rest on account.
H. Earned $1,772 interest on investments, receiving 90 percent in cash.
I. Incurred $2,990 in interest expense to be paid at the beginning of next year.
Required:
For each of the transactions, complete the tabulation, indicating the effect (positive value for increase, negative value for decrease, and leave blank if no effect) of each transaction. (Remember that A = L + SE, R – E = NI, and NI affects SE through Retained Earnings). The first transaction is provided as an example.("Enter the revenue side and the cost of goods sold side of the transaction on separate lines in the table. Do not net the effects on Stockholders' Equity or Net Income.)
Answer:
A. Issued common stock to investors for $14,084 cash (example).
increased ASSETS (cash) and SE by $14,084 (common stock)B. Purchased $872,418 of additional inventory on account.
increased ASSETS (inventory) and LIABILITIES by $872,138 (accounts payable)C. Borrowed $11,700.
increased ASSETS (cash) and LIABILITIES by $11,700 (notes payable)D. Sold $1,346,068 of products to customers on account; cost of the products sold was $750,547.
increased REVENUE by $1,346,068 and COGS by $750,547increased ASSETS (accounts receivable) by $1,346,068 and decreased inventory by $750,547, net increase of assets is $595,521. Increased EQUITY by increasing retained earnings.E. Paid cash dividends of $21,258.
decreased ASSETS and EQUITY (retained earnings) by $21,258F. Purchased for cash $25,726 in additional property, plant, and equipment.
increased ASSETS (P, P & E) but also decreased ASSETS (cash) by the same amount, so no change at all.G. Incurred $345,584 in selling expenses, paying three-fourths in cash and owing the rest on account.
increased COGS by $345,584reduces ASSETS (cash) by $259,188, increases LIABILITIES (accounts payable) by $86,396, reduces EQUITYH. Earned $1,772 interest on investments, receiving 90 percent in cash.
increases ASSETS by $1,772 (cash $1,594.80 + investments $177.20) and increases EQUITY by $1,772increases REVENUE by $1,772I. Incurred $2,990 in interest expense to be paid at the beginning of next year.
increases COGS by $2,990increases LIABILITIES by $2,990 and reduces EQUITY by $2,990This question requires an understanding of business transactions related to assets, liabilities and stockholder's equity, such as issuing common stock, purchasing inventory, borrowing money, selling products, paying dividends, purchasing property, incurring selling expenses, earning interest, and incurring interest expenses. By analyzing each transaction, we can determine how it impacts the company's financial position.
Explanation:The question is basically asking for an analysis of Wolverine World Wide, Inc.'s financial transactions for a year. Let's go through these transactions one by one:
A: The company issued common stock and received $14,084 in cash. This results in an increase in Assets (Cash) and Stockholder's Equity.
B: The company purchased additional inventory amounting to $872,418 on account. This increases Assets (Inventory) and Liabilities.
C: The company borrowed $11,700. This raises Assets (Cash) and Liabilities.
D: The company sold products worth $1,346,068 to customers. This raises Assets (Accounts Receivable) and Stockholder's Equity (Revenue). The cost of the products sold was $750,547 which causes a decrease in Inventory and an increase in Expenses.
E: The company paid cash dividends of $21,258. This reduces Assets (Cash) and reduces Stockholder's Equity (Dividends).
F: The company purchased additional property, plant, and equipment for $25,726, paid in cash. This increases Assets (Property, Plant and Equipment) and decreases Assets (Cash).
G: Selling expenses were $345,584, with three-fourths being paid in cash. This raises Expenses and lowers Assets (Cash). The balance is a liability (Accounts Payable).
H: The company earned $1,772 in interest on its investments, with 90% received in cash. This raises both Assets (Cash) and Stockholder's Equity (Revenue).
I: The company incurred $2,990 in interest expense. This raises Expenses and Liabilities.
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These selected condensed data are taken from a recent balance sheet of Bob Evans Farms (in millions of dollars).
Cash $ 29.3
Accounts receivable 20.5
Inventory 28.7
Other current assets
24.0
Total current assets $102.5
Total current liabilities $201.2
Compute working capital and the current ratio. (If answer is negative enter it with a negative sign preceding the number e.g. -15,000 or in parenthesis e.g. (15,000). Round Current Ratio to 2 decimal places, e.g. 0.78 : 1.)
Answer:
The working capital is -$98.7 while the current ratio is 0.51 : 1
Explanation:
The working capital is the amount of capital that is available for the day to day operations of the business. The working capital represents the liquidity situation of the business. The working capital is calculated as follows,
Working Capital = Current Assets - Current liabilities
Working Capital = 102.5 - 201.2 = - $98.7
The current ratio is a measure of the liquidity of a firm that measures its capacity to pay its short term obligations. The current ratio tells us the amount of current assets available for every 4! of current liability.
Current ratio = Current Assets / Current Liabilities
Current ratio = 102.5 / 201.2
Current ratio = 0.51 : 1
Final answer:
The working capital for Bob Evans Farms is calculated to be -$98.7 million, indicating more liabilities than assets in the short term. The current ratio is 0.51:1, showing that the company has 51 cents in assets for every dollar of liabilities, suggesting potential liquidity issues.
Explanation:
To calculate the working capital, we subtract total current liabilities from total current assets. Using the condensed data provided from the balance sheet of Bob Evans Farms, the working capital is calculated as follows:
Total current assets = $102.5 million
Total current liabilities = $201.2 million
Working Capital = Total current assets - Total current liabilities
Working Capital = $102.5 million - $201.2 million
Working Capital = -$98.7 million
The negative working capital means that the company has more short-term liabilities than short-term assets. To calculate the current ratio, divide the total current assets by the total current liabilities.
Current Ratio = Total current assets / Total current liabilities
Current Ratio = $102.5 million / $201.2 million
Current Ratio = 0.51:1
The current ratio, rounded to two decimal places, indicates liquidity and shows that for every dollar of liability, there is only $0.51 in assets, which could be indicative of potential liquidity problems.
A polisher costs $10,000 and will cost $20,000 a year to operate and maintain. If the discount rate is 10 percent and the polisher will last for 5 years, what is the equivalent annual cost of the tool?
Answer:
EAC $22,638
Explanation:
0 1 2 3 4 5
Cost (10,000)
Cashflows 20,000 20,000 20,000 20,000 20,000
PV factor 1/1.1 1/1.1^2 1/1.1^3 1/1.1^4 1/1.1^5
NPV=Cashflow*PV Factor 18,182 16,529 15,026 13,660 12,418
NPV=10,000+18,182+16529+15,026+13,660+12,418)=85,815
EAC=NPV*r/1-(1+r)^-n=85,815*.1/(1-(1+.1)^-5=$22,638
Final answer:
To find the equivalent annual cost of the polisher, calculate the present value of the annual operating costs over 5 years using a 10% discount rate, convert it to an annuity, and add the annual depreciation of the initial purchase cost.
Explanation:
To calculate the equivalent annual cost of the polisher, we need to take into account the initial purchase cost, the annual operating and maintenance costs, and the discount rate over the lifespan of the polisher. The given discount rate is 10 percent. Firstly, we calculate the present value of the operating and maintenance costs for each year and then convert this into an annuity equivalent over the 5-year lifespan using the formula for the present value of an annuity. Let's denote the annual operating cost as AOC, which is $20,000. The initial purchase cost is PC, which is $10,000. Using the discount rate of 10% or 0.10, we can calculate the present value (PV) of these AOC over the 5-year period and then determine the equivalent annual annuity (EAA). Once we've determined the EAA, we can add this to the annual depreciation of the initial purchase cost (which is simply PC divided by the number of years, in this case, $10,000/5 years). The sum of the EAA and the annual depreciation of PC will give us the equivalent annual cost of the polisher.
Patriot Co. manufactures and sells three products: red, white, and blue. Their unit selling prices are red, $64; white, $94; and blue, $119. The per unit variable costs to manufacture and sell these products are red, $49; white, $69; and blue, $89. Their sales mix is reflected in a ratio of 5:4:2 (red:white:blue). Annual fixed costs shared by all three products are $159,000. One type of raw material has been used to manufacture all three products. The company has developed a new material of equal quality for less cost. The new material would reduce variable costs per unit as follows: red, by $6; white, by $16; and blue, by $6. However, the new material requires new equipment, which will increase annual fixed costs by $29,000. Required: 1. Assume if the company continues to use the old material, determine its break-even point in both sales units and sales dollars of each individual product. 2. Assume if the company uses the new material, determine its new break-even point in both sales units and sales dollars of each individual product.
Answer:
1. PATRIOT CO.
Red White Blue
Selling price $64 $94 $119
varaible cost $49 $69 $89
Contribution 15 29 30
ratio 5 4 2
weighted average contribution = (15*5) + ( 29*4) + (30*2)
5+ 4+2
= 75 + 116 +60
11
= 251/11 = $22.82
Weighted average contribution ratio = (15*5) + ( 29*4) + (30*2)
5*64+ 4*94+2*119
= 251/934 = 26.87%
Break-even unit = fixed cost / weighted average contribution
= $159,000/$22.82 = 6,968unit
Red = 5/11* 6,968 = 3,167
White = 4/11* 6,968 = 2,534
Blue = 2/11 * 6,968 = 1,267
Break-even in sales dollar = fixed cost / weighted average contribution ratio
= $159,000/26.87% = $591,738
Red = 5/11* $591,738 = $268,972
White = 4/11* $591,738 = $215,177
Blue = 2/11 * $591,738 = $107,589
2.
Red White Blue
Selling price $64 $94 $119
variable cost $43 $53 $83
Contribution 21 45 36
ratio 5 4 2
weighted average contribution = (21*5) + ( 45*4) + (36*2)
5+ 4+2
= 105 + 180 +72
11
= 357/11 = $32.54
Weighted average contribution ratio = (21*5) + ( 45*4) + (36*2)
5*64+ 4*94+2*119
= 357/934 = 38.22%
Break-even unit = fixed cost / weighted average contribution
= $188,000/$32.45= 5,794unit
Red = 5/11* 5,794 = 2,634
White = 4/11* 5,794 = 2,107
Blue = 2/11 * 5,794 = 1,53
Break-even in sales dollar = fixed cost / weighted average contribution ratio
= $188,000/38.22% = $491,889
Red = 5/11* $491,889 = $223,586
White = 4/11* $491,889 = $178,869
Blue = 2/11 * $491,889 = $89,434
Explanation:
Nina has a part-time job as she finishes her degree in fashion design. After obtaining her degree she decides to quit her part-time job to search for a job that better fits her now-improved skill set. Nina has a few interviews, but it is taking time to find the job that suits her best. Nina would be considered cyclically unemployed. a discouraged worker tructura uneoveremployed. frictionally unemployed.
Answer:
The correct answer is letter "D": frictionally unemployed.
Explanation:
Frictional unemployment is one component of what economists call natural unemployment triggered by factors other than a poorly performing economy. Temporary job transfers caution frictional unemployment. This involves cases such as new employees joining the workforce, people moving to another city in search of a job, or people quitting to look for a better one.
On January 1, 2021, Warren Corporation had 1,000,000 shares of common stock outstanding. On March 1, the corporation issued 200,000 new shares to raise additional capital. On July 1, the corporation declared and issued a 2-for-1 stock split. On October 1, the corporation purchased on the market 600,000 of its own outstanding shares and retired them. Compute the weighted average number of shares to be used in computing earnings per share for 2021.
Answer:
1,616,667
Explanation:
January-February 28 1,000,000*2/12=166,667
March-June 30 1,200,000*4/12= 400,000
July-September 30 1,200,000*2*3/12=600,000
October-December 31 (2,400,000-600,000)*3/12=450,000
Weighted Average Shares for EPS for 2021=1,616,667
Final answer:
The weighted average number of shares for Warren Corporation for 2021 is calculated based on different periods during which the number of shares outstanding changed. The final weighted average for the year is 1,616,667 shares.
Explanation:
To compute the weighted average number of shares for Warren Corporation in the year 2021, we consider the shares outstanding throughout the year and any changes that occur due to issuance of new shares, stock splits, and retirement of shares. Here is the breakdown:
From January 1 to February 28 (2 months), there were 1,000,000 shares outstanding.
On March 1, 200,000 new shares were issued, making it 1,200,000 shares outstanding from March 1 to June 30 (4 months).
On July 1, a 2-for-1 stock split occurred, doubling the number of shares to 2,400,000 outstanding from July 1 to September 30 (3 months).
On October 1, 600,000 shares were retired, leaving 1,800,000 shares outstanding from October 1 to December 31 (3 months).
We calculate the weighted average by multiplying the number of shares outstanding by the time period they were outstanding and then sum those amounts:
(1,000,000 shares x 2/12) = 166,667 shares for Jan-Feb
(1,200,000 shares x 4/12) = 400,000 shares for Mar-Jun
(2,400,000 shares x 3/12) = 600,000 shares for Jul-Sep
(1,800,000 shares x 3/12) = 450,000 shares for Oct-Dec
The sum of these weighted shares is:
166,667 + 400,000 + 600,000 + 450,000 = 1,616,667 shares.
Therefore, the weighted average number of shares for Warren Corporation in the year 2021 is 1,616,667 shares.
XYZ has a current market price of $30.00 per share with earnings last year of $2.50 per share, a beta of 1.1 and a dividend of $1.25. Using the price/earnings multiplier, what price do you expect the stock to trade at if earnings per share next year are $3.00
Answer:
The expected price for the stock is $36
Explanation:
The price earning multiple is a measure that provides the information regarding how much are the investors willing to pay for each $1 of earnings per share. The formula for price earnings multiple is,
P/E = Price per share / Earnings per share
Based on the information, the P/E multiple for XYZ is,
P/E = 30 / 2.5 = 12
Using this price / earnings multiplier, we calculate the price at which the stock will trade as,
12 = Price per share / 3
12 * 3 = Price per share
Price per share = $36
Conner Corporation's December 31 post-closing trial balance contains the following normal account balances: Cash $10,000 Accounts payable 13,000 Building 260,000 Long-term notes payable 940,000 Common stock 420,000 Retained earnings 342,000 Accumulated depreciation-Equipment 130,000 Land 1,129,000 Accounts receivable 21,000 Accumulated depreciation-Building 70,000 Interest payable 24,000 Patent (net of amortization) 60,000 Notes payable (short term) 80,000 Inventory 137,000 Equipment 266,000 Allowance for doubtful accounts 1,000 Accumulated depreciation-Leasehold improvements 22,000 Leasehold improvements 140,000 Trademark (net of amortization) 19,000
Required Prepare a December 31 classified balance sheet for Dooley Company.
Answer:
Total Assets 1819,000
Total Liabilities and Owner's Equity: 1819,000
Explanation:
The Classified Balance sheet has the following format.
Conner Corporation
Classified Balance Sheet
December 31
Current Assets
Cash $10,000
Accounts receivable 21,000
Less Allowance for doubtful accounts 1,000
Net Accounts Receivable 20,000
Inventory 137,000
Total Current Assets 167,000
Property Plant Equipment
Land 1,129,000
Building 260,000
Less Accumulated depreciation-Building 70,000
Building 190,000
Equipment 266,000
Less Accumulated depreciation-Equipment 130,000
Equipment 136,000
Leasehold improvements 140,000
Less Accumulated depreciation-Leasehold improvements 22,000
Leasehold improvements 118,000
Total Fixed Assets 1573,000
Intangible Assets
Patent (net of amortization) 60,000
Trademark (net of amortization) 19,000
Total Intangible Assets: 79,000
Total Assets 1819,000
Current Liabilities
Accounts payable 13,000
Interest payable 24,000
Notes payable (short term) 80,000
Total current Assets 117,000
Long term Liabilities
Long-term notes payable 940,000
Total Long term Liabilities 940,00
Owner's Equity
Common stock 420,000
Retained earnings 342,000
Total Common stock and Owner's Equity 762,000
Total Liabilities and Owner's Equity: 1819,000
The Charade Corporation is preparing its Manufacturing Overhead budget for the fourth quarter of the year. The budgeted variable manufacturing overhead is $6 per direct labor-hour; the budgeted fixed manufacturing overhead is $91,000 per month, of which $16,600 is factory depreciation. If the budgeted direct labor time for November is 8,600 hours, then the total budgeted manufacturing overhead for November is:
Answer:
the total budgeted manufacturing overhead for November is: $142,600
Explanation:
Consider BOTH the variable and fixed manufacturing overheads
Calculation of total budgeted manufacturing overhead for November
variable manufacturing overhead ($6 × 8,600 hours) $51,600
fixed manufacturing overhead is $91,000
total $142,600
The SML helps determine the level of risk aversion among investors. The higher the level of risk aversion, the the slope of the SML. Which kind of stock is most affected by changes in risk aversion? (In other words, which stocks see the biggest change in their required returns?)
Answer: High-beta stocks.
Explanation:
Higher beta stocks are judged to be more volatile than lower beta stock. Essentially, they see the highest change in required returns as a result of risk aversion.
A beta that is greater than 1 shoes that the asset is more volatile than the market which has a beta of 1. If a stock has a beta of 3 for instance. That means it is 200% more volatile than the market.
This is why they are more affected by risk aversion.
If you need any clarification do comment.
Suppose an institution has purchased a $250,000 mortgage loan from the loan originator and wishes to create a mortgage pass-through security. In doing so, this institution will generate revenue by charging a servicing fee of 35 basis points. If the monthly mortgage payment on the loan is $1,250, how much income is passed through to the investor in the mortgage pass through each month (rounded to the nearest dollar)
Answer: $1,177
Explanation:
First we calculate the Monthly service fee by the formula,
Monthly servicing fee = Monthly servicing fee rate * Outstanding loan balance,
The service fee is 35 basis points which translates to 0.35 % and is an annual figure so we will adjust it to a monthly one,
= (0.35%/12) * $250,000
= $72.92
To calculate amount that passes through to the mortgage pass we do,
Mortgage pass-through amount = Monthly mortgage payment - Monthly servicing fee
= $1,250 - $72.92
= $1,177.08,
= $1,177
$1,177 is the income that will pass through to the investor in the mortgage pass through each month
Gianpiero and Zach have pooled their money together to buy real estate but have filed no formal papers to form a business. Gianpiero, a lawyer, handles all the legal matters and Zach, a real estate broker, finds buyers for the property they have subdivided. Gianpiero and Zach are engaged in a:
Answer: Partnership
Explanation:
Partnership is an arrangement whereby two or more people oversee a business operations and then share the profits and liabilities made. Gianpiero and Zach pooling their money together shows that they are into partnership.
Advantages of partnership include easy formation, large resources, balanced judgement and combined skill, risk sharing and prompt decisions.
Ramirez Corporation sells two types of computer hard drives. The sales mix in terms of units is 30% (Q-Drive) and 70% (Q-Drive Plus). Q-Drive has variable costs per unit of $90 and a selling price of $150. Q-Drive Plus has variable costs per unit of $105 and a selling price of $195. The weighted-average unit contribution margin for Ramirez is
Answer:
The weighted average unit contribution is $81 per unit.
Explanation:
The contribution per unit is the amount each unit contributes to covering the fixed costs. It is calculated by deducting the variable cost per unit from the selling price per unit.
The weighted average unit contribution is used when there are more than one product that a company produces and is used in calculating the overall or composite break even point. The weighted average unit contribution is the overall unit contribution for all of the products of the company according to their weights in the sales mix.
For a company that produces two products,
Weighted average unit contribution = Contribution per unit of Product A * Weight of Product A in sales mix + Contribution per unit of Product B * Weight of Product B is sales mix
Weighted average unit contribution = (150 - 90) * 0.3 + (195 - 105) * 0.7
Weighted average unit contribution = $81 per unit
The controller of Sunland Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs. Month Total Maintenance Costs Total Machine Hours January $2,590 330 February 2,890 380 March 3,490 530 April 4,390 660 May 3,090 530 June 5,470 730 (a1) Determine the variable cost components using the high-low method. (Round answer to 2 decimal places e.g. 2.25.) Variable cost per machine hour $
Answer:
Variable cost per unit= $7.2 per unit
Explanation:
Giving the following information:
Month Total Maintenance Costs Total Machine Hours
January: $2,590 - 330
February: $2,890 - 380
March: $3,490 - 530
April: $4,390 - 660
May: $3,090 - 530
June: $5,470 - 730
To calculate the variable cost under the high-low method, we need to use the following formula:
Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)
Variable cost per unit= (5,470 - 2,590) / (730 - 330)
Variable cost per unit= $7.2 per unit
In 2006, Evo Morales assumed the presidency in Bolivia, a South American country in which official commerce is done in Spanish. Morales was the first Bolivian president of indigenous descent. As president, he quickly instituted reforms that were designed to reduce discrimination against indigenous populations with the aim of eventually reducing inequality. Suppose discrimination before Morales took two forms–discrimination in education by not providing state funds to educate all children (and particularly not educating indigenous children in their native language or in Spanish), and discrimination in the job market by firms not willingly hiring indigenous workers.
(a) In terms of education, which policy would be better at combating discrimination and inequality:
(1) Providing state funds to educate all people in their native languages or (2) providing state funds for a public education system that requires all people to learn Spanish and a second, indigenous lanuguage? Why?
Answer:
Education is vital part of each ones' life. The more you get more you will acquire and more learning you get. In order to reduce the segregation or imbalance government need to spend its reserve so as to diminish disparity by giving appropriate education. Here so in order to reduce disparity the two languages are essential as government need to spend with the goal that one can study Spanish and one indigenous language so they can investigate themselves in various languages and investigate themselves that further discriminate among the two.
Suppose the risk-free rate is 3.5%; on average, an AAA-rated corporate bond carries a credit spread of 0.3%, an A-rated corporate bond carries a credit spread of 1.1%, and a B-rated corporate bond carries a credit spread of 3.9%. Company XYZ’s outstanding debt is rated BBB by rating agencies. What would be the cost of debt for XYZ based on prevailing market rates?
Answer:
The cost of BBB rated bond will be more than 4.6% and lesser than 7.4%.
Explanation:
In order to calculate the cost of debt for XYZ based on prevailing market rates, we need to calculate first the following steps:
First, we have to calculate the cost of A rated bond using the following formula:
cost of A rated bond= Risk free rate+credit spread on A rated bond
=3.5%+1.1%
=4.6%
Next, we have to calculate the cost of A rated bond using the following formula:
cost of B rated bond= Risk free rate+credit spread on B rated bond
=3.5%+3.9%
=7.4%
Therefore, after having calculated the cost of A rated bond and the cost of B rated bond, we can conclude that the cost of BBB rated bond will be more than 4.6% and lesser than 7.4%.
Answer:
The multiple choices are:
A: 6.5%
B: 7.4%
C: 3.8%
D: 4.6%
The correct option is A,6.5%
Explanation:
The hierarchy of bonds in terms of credit rating quality is given below from the highest rating to the lowest rating below:
AAA
AA
A
BBB
BB
B
CCC
CC
C
D(default)
This above is based on Standard & Poor's and Fitch rating scales.
According to the question AAA bond cost can be computed thus:
AAA cost of debt=risk free rate+credit spread
risk free rate is 3.5%
credit spread on AAA is 0.3%
AAA cost of debt=3.5%+0.3%
=3.8%
A cost of debt =3.5%+1.1%
=4.6%
B cost of debt=3.5+3.9%
=7.4%
A BBB lies in between A and B bonds,in other words,BBB would have higher cost of debt compared to A bond but a lower cost of debt when compared with a B bond
Consequently,option B is wrong because that is the cost of B rated bond as well as option D as that is cost of A rated bond,since the correct is lesser than 7.4% but higher than 4.6%,option A 6.5% is perfect choice
Categories of expendituresGilberto and Juanita Ivanov live in Swarthmore, PA. Juanita's father, Lorenzo, lives in SwedenFor each of the following transactions that occur in their lives, identify whether it is included in the calculation of U.S. GDP as part of consumption, investment, government purchases, exports, or imports.a. The state of Pennsylvania repaves highway PA 320, which goes through the center of Swarthmore.b. Lorenzo in Sweden orders a bottle of Vermont maple syrup from the producer's website.c. Gilberto's employer upgrades all of its computer systems using U.S.-made products.d. Juanita gets a new video camera made in the United States.e. Gilberto buys a sweater made in Guatemala
Answer:
A. The state of Pennsylvania repaves highway PA 320, which goes through the center of Swarthmore.
The repaving of the highway is part of the U.S. GDP, and the category is government pruchases, or G, because it is the state that is spending the money on repaving the road.
B. Lorenzo in Sweden orders a bottle of Vermont maple syrup from the producer's website.
The bottle of maple syrup is part of the U.S. GDP, in the category of net exports, or XN. Exports are included in GDP because they correspond to goods that were produced domestically, and later sold abroad.
C. Gilberto's employer upgrades all of its computer systems using U.S.-made products.
The U.S. made products to upgrade the computer are part of the U.S. GDP, in the category of consumption, or C. The products were made in the United States, and were purchased by a citizen, not by a government agency, for this reason, the transaction is classified as private consumption.
D. Juanita gets a new video camera made in the United States.
The camera is part of the U.S. GDP, in the category of consumption. This example is the same as above: the camera was made in the United States, and purchased by an American citizen, who lives in the United States.
E. Gilberto buys a sweater made in Guatemala.
The sweater is not part of U.S. GDP because it was not made domestically, it is an import, and imports are not part of GDP.
Having just returned from the war in Afghanistan, David has $25,000 in his savings account. His girlfriend suggests that he talk with an investment advisor and let his money "make more money." David has his eye on a new Ford truck, but realistically he knows that his old Jeep Cherokee will probably last another four years, at which time he will definitely need this money as a down payment on the purchase of something new. He knows he may have other needs as well. David should buy high-growth stock with his funds because even though they are risky, they also have the greatest potential of bringing in a better return on his investment. True False
Answer:
The correct answer is FALSE.
First it's not sound investment advice to put all his savings into an investment because as the narrative rightly points out, he may have other needs.Second, high growth stock are also high riskthey only pay in the long term only if the company is successful because dividends are re-invested which is one of the reasons the companies grow quickly.Although they are high risk, they also have great advantages such as:
High growth rate: this means if all goes well David will enjoy a good return on his investment;It's also a way to protect his money from erosion by inflationWhat can David do?
Subject to the advise of a professional investment professional
David needs to take into consideration his immediate needs, set aside some funds to take care of that.Invest the balance into a mix of high growth rate stock which are high yielding but risky and low growth rate but secure investment like government bonds.Start a small business by the side or get a job in the interim as he continues with his new life.Cheers!
Again, please consider the closed economy of Economia, which has the following information:
$6500 consumption
$7500 government spending (NOT including transfer payments)
$10,000 overall taxes
$2000 transfer payments
$18,000 total income (output)
Carefully following all instructions, calculate (total) national savings for this economy.
Answer:
$4,000
Explanation:
The computation of the total national saving is shown below:
As we know that
National savings = Total income - consumption - government spending
= $18,000 - $6,500 - $7,500
= $4,000
By deducting the consumption and the government spending from the total income we can get the national savings and the same is applied
At the beginning of the tax year, Barnaby's basis in the BBB Partnership was $151,800, including his $15,180 share of partnership debt. At the end of the tax year, his share of debt was $22,770. His share of the partnership's income for the year was $60,720, and he received cash distributions totaling $37,950. In addition, his share of the partnership's nontaxable income was $3,036. How much is Barnaby's basis at the end of the tax year
Answer: $185,196
Explanation:
To calculate Barnaby's basis at the end of the tax year, we do the following.
First we find out the Initial basis after excluding debt in this manner,
= Initial basis including debt - debt
= $151,800 - $15,180
= $136,620
Now that we have done that we then add the following,
= Initial basis after excluding debt + share of the partnership's income + share of debt + share of the partnership's nontaxable income
= $136,620 + $60,720 + $22,770 + $3,036
= $223,146
From this figure we will then subtract cash distributions received to find out his tax basis for the year.
= $223,146 - $37,950
= $185,196
Barnaby's basis at the end of the tax year is $185,196
ABC has 1 million shares outstanding, each of which has a price of $ 18. It has made a takeover offer of XYZ Corporation which has 1 million shares outstanding, and a price per share of $ 2.66. Assume that the takeover will occur with certainty and all market participants know this. Furthermore, there are no synergies to merging the two firms. a. Assume ABC made a cash offer to purchase XYZ for $ 3.42 million. What happens to the price of ABC and XYZ on the announcement? What premium over the current market price does this offer represent? b. Assume ABC makes a stock offer with an exchange ratio of 0.19. What happens to the price of ABC and XYZ this time? What premium over the current market price does this offer represent? c. At current market prices, both offers are offers to purchase XYZ for $ 3.42 million. Does that mean that your answers to parts (a) and (b) must be identical? Explain.
Answer:
(a) New Price of ABC = $17.24. New Price of XYZ = 3.42. Premium = 28.57%
(b) New Price of ABC = $17.36. New Price of XYZ = 3.30. Premium = 24.06%
(c) No since the prices would change relative to the premium offered. In part (b), the premium depends on the new price of ABC. Refer to the explanation below for an in-depth answer
Explanation:
(a) ABC is making a cash offer of $ 3.42 million to completely buyout XYZ Corporation i.e to acquire 100% shareholding which is 1 million shares. To find out the new price of XYZ, all you need to do is divide the amount offered by the number of shares. This is 3.42 Mn/1 Mn. Therefore, ABC is essentially offering $ 3.42 per share and so the new price of XYZ would change to reflect this.
Currently the price of XYZ is $2.66 while the price offered is $3.42. This means that ABC is paying a premium of 28.57% to buy the company (New Price/Old Price - 1). The price of ABC in this case will decrease to reflect this expenditure. The formula to calculate the new price of ABC is simple; Old price of ABC share - (Premium on XYZ share x Old Price of XYZ share) = $18 - (0.2857 x 2.66) = $17.24. Hence, the new price of ABC would be $17.24.
(b) Now, in this scenario, ABC is making a stock offer so to calculate the value of ABC's stock, we will need to look at the combined value of both these entities keeping in mind that the exchange ratio is 0.19. So, the formula is combined value of ABC= (Old Price of ABC + Old Price of XYZ)/ (1+Exchange ratio). Therefore, combined value = (18+2.66)/1.19 which is $17.36. New price of ABC is $17.36.
Similar to part (a), the new price of XYZ would be equal to the amount received by the shareholders per share. This would be calculated as the new price of ABC (since stock offer is announced instead of cash) x exchange ratio = 17.36 x 0.19 = $3.30. The premium in this case would be (using the formula mentioned in part a), 3.30/2.66 - 1 = 24.06%
(c) No, the answers to each part may not be identical. The market will react differently to the stock offer relative to the cash offer. In the stock offer, the market knows that ABC is paying a premium due to which the price of ABC will go down while the price of XYZ will go up. This will lower the amount of premium being offered (as demonstrated in each part above). The premium offered in part b will be lower because the premium depends on the new (lower) price of ABC. This is not the case with the cash offer since in the cash offer, the premium offered does not depend on the new price of XYZ.
a. The price of ABC is likely to decrease and the price of XYZ is likely to increase. The premium over the current market price of the cash offer can be calculated. b. The price of ABC is likely to decrease and the price of XYZ is likely to increase. The premium over the current market price of the stock offer can be calculated. c. The answers to parts (a) and (b) do not have to be identical because the method of payment and perceived value can impact market reaction.
Explanation:a. When ABC makes a cash offer to purchase XYZ for $3.42 million, the price of the ABC stock is likely to decrease because the company is spending a substantial amount of money to acquire XYZ. On the other hand, the price of the XYZ stock is likely to increase as investors anticipate the takeover and the potential gain from the transaction. The premium over the current market price of the offer can be calculated by subtracting the market price of XYZ before the offer from the offer price and dividing it by the market price of XYZ before the offer. In this case, the premium would be ($3.42 million - ($2.66 × 1 million)) / ($2.66 × 1 million).
b. When ABC makes a stock offer with an exchange ratio of 0.19, the price of ABC is likely to decrease as investors perceive the stock offer to be less valuable than cash. The price of XYZ is likely to increase as investors anticipate the takeover and the potential gain from the transaction. The premium over the current market price of the offer can be calculated by subtracting the market price of XYZ before the offer from the offer price and dividing it by the market price of XYZ before the offer. In this case, the premium would be (0.19 × $18 × 1 million - ($2.66 × 1 million)) / ($2.66 × 1 million).
c. The answers to parts (a) and (b) do not have to be identical because the method of payment and the perceived value of cash versus stock can impact the market reaction. In the cash offer, the stock price of ABC is likely to decrease due to the spending of a substantial amount of money, while in the stock offer, the stock price of ABC is likely to decrease due to the perceived lower value of stock as a method of payment.
Average Annual Rates Standard Deviation
T-Bills Inflation Real T-Bill T-Bills Inflation Real T-Bill
All months 3.46 2.35 0.56 3.12 4.07 3.81
First half 1.04 1.68 − 0.29 1.29 5.95 6.27
Recent half 4.45 3.53 0.90 3.11 2.89 2.13
(1926-2016) Market Index Big Growth Big Value Small Growth Small Value
Mean excess return (annualized) 0.83 7.98 11.67 8.79 15.56
Standard deviation (annualized) 18.64 18.50 24.62 26.21 28.36
Required:
1. Suppose that the inflation rate is expected to be 2.35% in the near future using the data provided above, what would be your predictions for the following? (Round your answers to 2 decimal places.).
a. The T-bill rate? _________%
b. The expected rate of return on the Big/Value portfolio? __________%
c. The risk premium on th stock market?
Answer:
1. 2.92%
2. 14.59%
3. The risk premium on the stock market does not change.
Explanation:
1. The T-bill rate: real rate + inflation = 0.56% real rate + 2.36 % inflation = 2.92%
The T-bill rate is 2.92%
2. Expected return on Big/Value: T-bill rate + historical risk premium
Expected return on Big/Value: 2.92% T-bill rate + 11.67% historical risk premium = 14.59%
The expected rate of return on the Big/Value portfolio is 14.59%
3. A risk premium is a return on investment above the risk-free rate that an investor needs to be compensated for investing in higher-risk investments. Since the systematic risk i.e the market risk, is expected to remain the same, the risk premium on the stock market is also not expected to experience any change.
To predict the T-bill rate, use the historical average rate. Predict the rate of return on the Big/Value portfolio by subtracting inflation from the mean excess return. Calculate the risk premium on the stock market by subtracting the T-bill rate from the mean excess return for the Market Index.
Explanation:To predict the T-bill rate, we can use the historical average rate of 3.46% annually. So, the predicted T-bill rate would be 3.46%.<\/p>
To predict the expected rate of return on the Big/Value portfolio, we can subtract the inflation rate from the mean excess return for Big Value, giving us a predicted rate of return of 11.67% - 2.35% = 9.32%.<\/p>
The risk premium on the stock market can be calculated by subtracting the T-bill rate from the mean excess return for the Market Index. Therefore, the risk premium on the stock market would be 0.83% - 3.46% = -2.63%.<\/p>
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Anne-Marie and Yancy calculate their current living expenditures to be ?$64,000 a year. During retirement they plan to take one cruise a year that will cost ?$5,000 in? today's dollars.? Anne-Marie estimated that their average tax rate in retirement would be 11 percent. Yancy estimated their Social Security income to be about ?$18,236 and their retirement benefits are approximately ?$28,044. Use this information to answer the following? questions: a. How much? income, in? today's dollars, will? Anne-Marie and Yancy need in retirement assuming 70 percent replacement and an additional ?$5,000 for the? cruise? b. Calculate their projected annual income shortfall in? today's dollars. c.? Determine, in? dollars, the future value of the shortfall 29 years from? now, assuming an inflation rate of 3 percent. d. Assuming a nominal rate of return of 8 percent and 22 years in?
Answer:
a. $49,800.00
b. $9,675.06
c. $8,545.65
Explanation:
a. Net need = (current living expenses x replacement ratio) + additional annual needs
Net need = ($64,000 x 0.70) + $5,000 = $ 44,800 + $5,000
Net need = $49,800.00
Gross need = net need / (1 – average tax rate)= $49,800.00 / (1 – 0.11)= $49,800.00/ 0.89= $55,955.06
b.
Present value shortfall = projected income need – projected income available
Present value short fall =$55,955.06 – ( $18,236 + $28,044 )
= $9,675.06
c
Calculator solutionPV-$1,977.27PMT$0I/YR5%N30CPT FV$8,545.65
Final answer:
a. Anne-Marie and Yancy will need $49,800 in today's dollars for retirement, taking into account a 70% replacement rate and an additional $5,000 for an annual cruise. b. Their projected annual income shortfall is $3,520. c. The future value of the shortfall 29 years from now, with a 3% inflation rate, is $9,314.4. d. Assuming an 8% nominal rate of return and 22 years in retirement, the future value of their accumulated retirement savings would be $27,564.36.
Explanation:
a. To calculate the income needed in today's dollars for retirement, we can use the concept of replacement rate. The replacement rate is the percentage of pre-retirement income that is needed in retirement. In this case, Anne-Marie and Yancy need 70% replacement rate. If their current living expenditures are $64,000 a year, then their needed income in retirement would be 70% of $64,000, which is $44,800.
Additionally, they want an additional $5,000 a year for the cruise. Therefore, their total income needed in retirement would be $44,800 + $5,000 = $49,800.
b. Calculating the projected annual income shortfall involves subtracting the expected retirement income from the needed income. The retirement income consists of Social Security income and retirement benefits, which is $18,236 + $28,044 = $46,280. The projected annual income shortfall would be $49,800 - $46,280 = $3,520.
c. To determine the future value of the shortfall 29 years from now, we can use the formula for compound interest. Assuming an inflation rate of 3%, the future value would be $3,520 multiplied by (1 + 0.03)^29 = $3,520 multiplied by 2.645 = $9,314.4.
d. Assuming a nominal rate of return of 8% and 22 years in retirement, we can calculate the future value of the accumulated retirement savings. Using the formula for compound interest, the future value would be ($49,800 - $46,280) multiplied by (1 + 0.08)^22 = $3,520 multiplied by 7.823 = $27,564.36.