Suppose your company needs $12 million to build a new assembly line. Your target debt−equity ratio is .5. The flotation cost for new equity is 12 percent, but the flotation cost for debt is only 9 percent. Your boss has decided to fund the project by borrowing money because the flotation costs are lower and the needed funds are relatively small.
a. What is your company’s weighted average flotation cost, assuming all equity is raised externally? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Weighed average flotation cost %
b. What is the true cost of building the new assembly line after taking flotation costs into account? (Enter your answer in dollars, not millions of dollars. Do not round intermediate calculations and round your answer to the nearest whole dollar, e.g. 1,234,567.)
True cost $
Answers
Answer: Weighted average floatation curve is 11.00%
True cost is $14,483,146.
Explanation:
Weighted average floatation cost is equal to weighted average of the floatation costs for debt and equity.
Let the equity be 1%
Given that debt to equity ratio is equal to 0.5%
Debt/Equity is 0.5
Debt/1= 0.5
Debt= 0.50 × 1.00 = 0.50
Assumed value:
For debt= 0.50
For equity = 1.00
Totals= 1.50
For weight (a):
Debt= 0.33
Equity= 0.67
Totals= 1.00
For costs(b)
Debt= 9%
Equity= 12%
Weighted cost (a) × (b)
Debt= 0.33 × 9= 2.97 appr= 3.00
Equity= 0.67 ×12= 8.04 appr= 8.00
Totals = 3. 00 + 8.00= 11.00%
B.
True cost is the defined as the difference between the market price of a product and the comprehensive cost of that product to society. The term is normally used to draw attention to missing or hidden or minute costs that are not found in the market price, even though it could theoretically apply to hidden benefits as well.
True cost is equal to total cost of new assembly line including floatation cost.
True cost × (1 - 11%) = $12,000,000
True cost × (1- 0.11)= $12,000,000
True cost × (0.89) = $12,000,000
True cost = $12,000,000/ 0.89
True cost= $13,483,146.
Final answer:
The weighted average flotation cost would be 12%, which is the flotation cost for new equity, since all funds are being raised through equity. The true cost of building the new assembly line, after accounting for flotation costs, is $13,636,364.
Explanation:
To calculate the weighted average flotation cost when all equity is raised externally, we first need to understand the proportion of funding that would come from equity and from debt based on the target debt-equity ratio of 0.5. This ratio indicates that for every dollar of equity, there is $0.5 of debt. However, because the company has decided to raise all of the $12 million through equity, the weight of the debt is 0 and the weight of the equity is 1. Therefore, the weighted average flotation cost would be the flotation cost for equity, which is 12%, since no debt will be issued.
Next, to calculate the true cost of building the new assembly line after taking into account flotation costs, we can use the following formula: True Cost = Required funds / (1 - Flotation Cost). Since the company is using only equity financing and the flotation cost is 12%, the true cost would be $12 million / (1 - 0.12) = $13.63636364 million. We need to round this to the nearest whole dollar, resulting in a true cost of $13,636,364.
Related Questions
"A small company wishes to set up a fund" that can be used for technology purchases over the next 6 years. Their forecast is for $12,000 to be needed at the end of year 1, decreasing by $2,000 each year thereafter. The fund earns 8% per year. How much money must be deposited to the fund now to just deplete the fund after the last withdrawal?
Answers
Answer:
The money that must be deposited to the fund now to just deplete the fund after the last withdrawal is $34,428.
Explanation:
This is a case of decreasing annuity, in which every year is decreased a fixed ammount. In this case, the decrease does not have a constant rate, so the formula for a increasing (or decreasing) annuity is not applicable.
We have to calculate the present value in a traditional way:
[tex]PV=\sum_{k=1}^6CF_i/(1+i)^k\\\\PV=12,000/(1.08)+10,000/(1.08)^2+8,000/(1,08)^3+6,000/(1.08)^4+4,000/(1.08)^5+2,000/(1.08)^6\\\\PV= 11,111+ 8,573 +6,351+ 4,410+ 2,722+1,260\\\\PV=34,428[/tex]
Answer:
$34,438.11
Explanation:
The explanation is given in the picture below
Deluxe Ezra Company purchases equipment on January 1, Year 1, at a cost of $469,000. The asset is expected to have a service life of 12 years and a salvage value of $40,000.
Compute the amount of depreciation for each of Years 1 through 3 using the sum-of-the-years'-digits method.
Compute the amount of depreciation for each of Years 1 through 3 using the double-declining-balance method. (Round depreciation rate to 2 decimal places, e.g. 15.84%. Round answers to 0 decimal places, e.g. 45,892.)
Answers
Answer:
to calculate depreciation using the sum-of-the-years'-digits method:
n(n+1) divided by 2 = [12(13)] / 2 = 78
depreciable value = cost - salvage value = $469,000 - $40,000 = $429,000
depreciation year 1 = 12/78 x $429,000 = $66,000depreciation year 2 = 11/78 x $429,000 = $60,500depreciation year 3 = 10/78 x $429,000 = $55,000the formula used to calculate depreciation using the double-declining-balance method is:
2 x cost of the asset x depreciation rate
depreciation year 1 = 2 x $469,000 x 1/12 = $78,167depreciation year 2 = 2 x ($469,000 - $78,167) x 1/12 = $65,139depreciation year 3 = 2 x ($390,833 - $65,139) x 1/12 = $54,282Using the sum-of-the-year digits method, the depreciation expense in:
Year 1 = $66,000
Year 2 = $60,500
Year 3 = $55,000
Using the double-declining balance method, the depreciation expense in:
Year 1 = 78,166.67
Year 2 = $65,138.89
Year 3 = $54,282.41
Sum-of-the-year digits = (remaining useful life / sum of the years ) x (Cost of asset - Salvage value)
Sum of the years = 1 +2 +3 +4 + 5 + 6 + 7 + 8 + 9 + 10 + 12 + 11 = 78
Year 1 deprecation
(12 / 78) x ($469,000 - $40,000) = $66,000
Year 2 deprecation
(11 / 78) x ($469,000 - $40,000) = $60,500
Year 3 deprecation
(10 / 78) x ($469,000 - $40,000) = $55,000
Depreciation expense using the double declining method = Depreciation factor x cost of the asset
Depreciation factor = 2 x (1/useful life)
Year 1 deprecation
2/12 x $469,000 = 78,166.67
Book value in year 2 = $469,000 - 78,166.67 = $390,833.33
Year 2 deprecation
2/12 x $390,833.33 = $65,138.89
Book value in year 3 =$390,833.33 - $65,138.89 = $325,694.44
Year 3 deprecation
2/12 x $325,694.44 = $54,282.41
A similar question was solved here: https://brainly.com/question/18273958
Blake and Matthew are partners who agree that Blake will receive a $103,000 salary allowance and that any remaining income or loss will be shared equally. If Matthew’s capital account is credited for $3,000 as his share of the net income, how much net income did the partnership earn?
Answers
Answer:
total net income = $109,000
Explanation:
given data
Blake receive = $103,000
Matthew capital account is credited = $3,000
solution
we know that both partner get equal part in remaining loss or income
so here Blake get $3,000 as share of the net income
so that here net income for the period, that will Blake's salary allowance + amount shared in both persons of net income
as that
total net income = $103,000 + $3,000 +$3,000
total net income = $109,000
Hagos Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.84 direct labor-hours. The direct labor rate is $9.40 per direct labor-hour. The production budget calls for producing 2,100 units in June and 1,900 units in July. If the direct labor work force is fully adjusted to the total direct labor hours needed each month, what would be the total combined direct labor cost for the two months
Answers
Answer:
$31584
Explanation:
Solution
The first step is to compute the total direct labor hours required for production:
Now for the month of June,
The total direct cost of labor = The produced Unit * The Hours per unit
= 2100 * 84 hours per unit
It gives us
=1,764 Hours
For the month of July,
The total direct cost of labor = The produced Unit * The Hours per unit
= 1900 * 84 Hours per unit
= 1,596 Hours
Next is to calculate the direct labor cost.
For the month of June
Direct labor cost = Direct labor hours * The rate per direct labor hour.
= 1,764 Hours * $9.40 per hour
= $16581.6
For the month of July
Direct labor cost = Direct labor hours * The rate per direct labor hour.
= 1,596 Hours * $9.40 per hour
= $15002.4
Now,
We will compute pr find the combined direct labor cost for the two months
The combined direct labor * Direct labor cost (June) + Direct labor cost (July)
Which is now,
= $16581.6 + $15002.4 = $31584
Therefore the combined direct labor cost for the two months is $31584
Inventory records for Dunbar Incorporated revealed the following:
Date Transaction Number
of Units Unit
Cost
Apr. 1 Beginning inventory 550 $2.33
Apr. 20 Purchase 310 2.68
Dunbar sold 560 units of inventory during the month. Ending inventory assuming weighted-average cost would be (Do not round your intermediate calculations. Round weighted-average unit cost to four decimals if necessary. Round your answer to the nearest dollar amount):
$737.
$694.
$817.
$752.
Answers
Ending inventory assuming weighted-average cost would be $694
Solution:
Given,
Dunbar sold 560 units of inventory
Apr. 1 Beginning inventory 550 $2.33
Apr. 20 Purchase 310 2.68
Now,
Ending inventory = 560 -550 = 10
= 310 -10 = 300
Ending inventory = 300 × $2.33 = $694
The ending inventory for Dunbar Incorporated, calculated using the Weighted-Average method, would be $737.
Explanation:To calculate the ending inventory using the weighted-average cost method, you first need to calculate the total cost of the inventory and the total number of units. Then, divide the total cost by the total number of units to get the weighted-average unit cost.
First, calculate the total cost of inventory: (550 units * $2.33) + (310 units * $2.68) = $1281.5 + $830.8 = $2112.3. Then, calculate the total units: 550 units + 310 units = 860 units. Divide total cost by total units for the weighted-average unit cost: $2112.3 / 860 units = $2.456.
After selling 560 units, there are 300 units left in ending inventory (860-560=300). Multiply these remaining units by the weighted-average unit cost to get the ending inventory value: 300 units * $2.456 = $737.
Learn more about Weighted Average Inventory here:https://brainly.com/question/19338848
#SPJ3
Which statement below is FALSE? A. Mintzberg's notion of "crafting" strategies embodies the artistic model, which suggests that strategic decision making be based primarily on holistic thinking, intuition, creativity, and imagination. B. This textbook is framed primarily on the fact that strategic planning is an art rather than a science. C. This textbook is consistent with most of the strategy literature in advocating that strategic management be viewed more as a science than an art. D. The Mintzberg strategic-planning approach insists on informality, whereas strategy scientists (and this text) insist on more formality. E. Firms need to systematically assess their external and internal environments, conduct research, carefully evaluate the pros and cons of various alternatives, perform analyses, and then decide on a particular course of action.
Answers
Answer:
D
Explanation:
Income statements and balance sheets data for Virtual Gaming Systems are provided below.
VIRTUAL GAMING SYSTEMS
Income Statements
For the year ended December 31
2019 2018
Net sales $3,500,000 $3,026,000
Cost of goods sold 2,478,000 1,948,000
Gross profit 1,022,000 1,078,000
Expenses:
Operating expenses 953,000 856,000
Depreciation expense 28,000 26,000
Loss on sale of land 0 7,800
Interest expense 17,000 14,000
Income tax expense 7,800 47,000
Total expenses 1,005,800 950,800
Net income $ 16,200 $ 127,200
VIRTUAL GAMING SYSTEMS
Balance Sheets
December 31
2019 2018 2017
Assets
Current assets:
Cash $ 200,000 $184,000 $142,000
Accounts receivable 74,000 79,000 58,000
Inventory 124,000 103,000 133,000
Prepaid rent 13,800 11,800 5,760
Long-term assets:
Investment in bonds 103,000 103,000 0
Land 298,000 208,000 238,000
Equipment 298,000 268,000 208,000
Less: Accumulated depreciation (94,000) (66,000) (40,000)
Total assets $1,016,800 $890,800 $744,760
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 203,400 $ 64,000 $108,160
Interest payable 8,400 5,600 2,800
Income tax payable 11,800 14,000 13,800
Long-term liabilities:
Notes payable 380,000 283,000 223,000
Stockholders' equity:
Common stock 298,000 298,000 298,000
Retained earnings 115,200 226,200 99,000
Total liabilities and stockholders’ equity $1,016,800 $890,800 $744,760
Questions:
2018 2019
Receivables turnover ratio times times
Inventory turnover ratio times times
Current ratio to 1 to 1
Debt to equity ratio % %
2018 2019
Gross profit ratio % %
Return on assets % %
Profit margin % %
Asset turnover times times
Answers
Answer:
Receivables turnover ratio = net credit sales during the year / average accounts receivable
2018 = $3,026,000 / [($58,000 + $79,000)/2] = 44.2 2019 = $3,500,000 / [($79,000 + $74,000)/2] = 45.8Inventory turnover ratio = cost of goods sold / average inventory
2018 = $1,948,000 / [($133,000 + $103,000)/2] = 16.52019 = $2,478,000 / [($103,000 + $124,000)/2] = 21.8
Current ratio = current assets / current liabilities
2018 = ($184,000 + $79,000 + $103,000 + $11,800) / ($64,000 + $5,600 + $14,000) = 4.52019 = ($200,000 + $74,000 + $124,000 + $13,800) / ($203,400 + $8,400 + $11,800) = 1.8Debt to equity ratio = total liabilities / total shareholder equity
2018 = $366,600 / $524,200 = 0.7 = 70%2019 = $603,600 / $413,200 = 1.5 = 146%Gross profit ratio = gross profit / net sales
2018 = $1,078,000 / $3,026,000 = 36%2019 = $1,022,000 / $3,500,000 = 29%Return on assets = net income / average total assets
2018 = $127,200 / [($890,800 + $744,760)/2] = 15.6%2019 = $16,200 / [($1,016,800 + $890,800)/2] = 1.7%Profit margin = net income / net sales
2018 = $127,200 / $3,026,000 = 4.2%2019 = $16,200 / $3,500,000 = 0.5%Asset turnover = net sales / average total assets
2018 = $3,026,000 / [($890,800 + $744,760)/2] = 3.72019 = $3,500,000 / [($1,016,800 + $890,800)/2] = 3.7Answer:
Receivables turnover ratio = net credit sales during the year / average accounts receivable
2018 = $3,026,000 / [($58,000 + $79,000)/2] = 44.2 2019 = $3,500,000 / [($79,000 + $74,000)/2] = 45.8
Inventory turnover ratio = cost of goods sold / average inventory
2018 = $1,948,000 / [($133,000 + $103,000)/2] = 16.5 2019 = $2,478,000 / [($103,000 + $124,000)/2] = 21.8
Current ratio = current assets / current liabilities
2018 = ($184,000 + $79,000 + $103,000 + $11,800) / ($64,000 + $5,600 + $14,000) = 4.5 2019 = ($200,000 + $74,000 + $124,000 + $13,800) / ($203,400 + $8,400 + $11,800) = 1.8
Debt to equity ratio = total liabilities / total shareholder equity
2018 = $366,600 / $524,200 = 0.7 = 70% 2019 = $603,600 / $413,200 = 1.5 = 146%
Gross profit ratio = gross profit / net sales
2018 = $1,078,000 / $3,026,000 = 36% 2019 = $1,022,000 / $3,500,000 = 29%
Return on assets = net income / average total assets
2018 = $127,200 / [($890,800 + $744,760)/2] = 15.6% 2019 = $16,200 / [($1,016,800 + $890,800)/2] = 1.7%
Profit margin = net income / net sales
2018 = $127,200 / $3,026,000 = 4.2% 2019 = $16,200 / $3,500,000 = 0.5%
Asset turnover = net sales / average total assets
2018 $3,026,000 / [($890,800 + $744,760)/2] = 3.7 2019 $3,500,000 / [($1,016,800 + $890,800)/2] = 3.7
learn more :
https://brainly.com/question/16092473
BurgerMan and Jeffrey’s are fast food chains providing similar items. BurgerMan offers food from a standard menu, while Jeffrey’s positions itself as providing more customized products. Consider two franchises, one of each chain. You have just conducted an analysis of the two franchises, and your conclusion is that both places have similar capacities and average demand. You also find out that in BurgerMan standard hamburgers are prepared and stored in a holding bin while there is no finished good inventory held in Jeffery’s. Which store is more likely using the manufacturing strategy "Make-to-Stock". and why?
Answers
Answer:
BurgerMan is using the manufacturing strategy "Make-to-Stock".
Explanation:
From analysis of the two franchises, BurgerMan standard hamburgers are prepared and stored in a holding bin while there is no finished good inventory held in Jeffery’s fast food.
Answer:
The correct answer is: BurgerMan.
Explanation:
The Make-to-Stock manufacturing inventory is implemented by businesses based on historical sales. The company produces goods to keep them stored to satisfy the demand of consumers before they actually place orders for the products. This inventory strategy implies higher warehouse costs and needs the sales forecast to be accurate otherwise the business will fall into a surplus.
Therefore, as BurgerMan's standard hamburgers are stored in a holding bin, it must be following a make-to-stock manufacturing inventory.
rguments for adopting a policy rule include A. discretion avoids the straitjacket that would lock in the wrong policy if the model that was used to derive the policy rule proved to be incorrect. B. discretion enables policy makers to change policy settings when an economy undergoes structural changes. C. discretionary policies pursue overly expansionary monetary policies to boost employment in the short run but generate higher inflation in the long run. D. all of the above.
Answers
Answer:
C. discretionary policies pursue overly expansionary monetary policies to boost employment in the short run but generate higher inflation in the long run.
Explanation:
Arguments for adopting a policy rule include;
- discretionary policies pursue overly expansionary monetary policies to boost employment in the short run but generate higher inflation in the long run.
- discretion enables policymakers to change policy settings when an economy undergoes structural changes.
- discretion avoids the straightjacket that would lock in the wrong policy if the model that was used to derive the policy rule proved to be incorrect.
- policy rules can be too rigid because they cannot foresee every contingency.
- policy rules do not easily incorporate the use of judgment.
Refer to Exhibit 26-3. If Firms J, K, and L were to merge, the four-firm concentration ratio would ____________________ and the Herfindahl Index would _____________________.
a. rise to 59 percent; rise to 1,212
b. rise to 28 percent; rise to 10,000
c. rise to 50 percent; rise to 1,062
d. not be affected; not be affected
e. rise to 60 percent; fall to 986
Answers
Answer:
A
Explanation:
See attached file
Cycle Sporting Goods sells bicycles throughout the northeastern United States. The following data were taken from the most recent quarterly sales forecast: Expected Sales End-of Month Target Inventory July 1,990 units 400 units August 2,140 units 490 units September 2,070 units 460 units On the basis of the information presented, how many bicycles should the company purchase in August?
Answers
Answer: 1250 units
Explanation:
GIVEN the following ;
JULY :
Expected sales = 1,990 units
Ending of month target inventory =400 units
AUGUST:
Expected sales = 2,140 units
Ending of month target inventory =490 units
SEPTEMBER:
Expected sales = 2,070 units
Ending of month target inventory =460 units
Ending of month target inventory in July = August beginning inventory = 400units
Expected August unit sales = 2,140 units
AUGUST ending inventory = 490 units
Expected sales = beginning inventory + purchased inventory - ending inventory
2140 = 400 + purchased inventory - 490
2140 = 890 + purchased inventory
Purchased inventory = 2140 - 890
August purchased inventory should be = 1250 units
Imagine that you are a manager and your company has been realigning to be more competitive. The company just downsized, so everyone is doing more work while missing their former colleagues, and no raises or bonuses will be given out this year. How can you help your employees manage stress? Check all that apply.
a.Work longer hours than anyone else to emphasize the seriousness of the situation and show your commitment.
b.Discourage employees from using all their vacation time or from ever calling in sick to communicate that they are needed at work.
c.Provide opportunities to learn new skills and knowledge.
d.Model an attitude of lighthearted play, telling jokes and bringing toys to work.
Answers
To help employees manage stress during company changes, provide learning opportunities, encourage a positive atmosphere, and ensure clear expectations. The correct answer is C
Managing employee stress during company realignment and downsizing is crucial for maintaining productivity and morale. To help employees cope:
Provide opportunities to learn new skills and knowledge to empower employees.
Model an attitude of lighthearted play to promote a positive workplace atmosphere.
Make expectations clear regarding roles, tasks, and support to reduce ambiguity and stress.
Organic Laboratories allocates research and development costs to its three research facilities based on each facility's total annual revenue from new product developments: Facility location Kentucky Arizona Illinois Total New product revenue $ 56,000,000 $ 100,000,000 $ 84,000,000 $ 240,000,000 Research & Development $ 60,000,000 Using revenue as an allocation base, the amount of costs allocated to the Illinois research facility is calculated to be: Multiple Choice $14,000,000. $28,000,000. $33,000,000. $17,000,000. $21,000,000.
Answers
Answer:
$21,000,000
Explanation:
Ratio is used in allocating the research and development cost
This is the expression of relationship between two or more data showing the number of times one data contains or is contained in another data
Total research and development cost = $60,000,000
Revenue
Kentucky = $56,000,000
Arizona -= $ 100,000,000
Illinois = $84,000,000
Total = $240,000,000
Illinois allocation of research and development cost=
84,000,000/240,000,000*60,000,000 =$21,000,000
In its consolidated cash flow statement for the year ended December 31, 20X2, Plant Corporation reported operating cash inflows of $282,000, financing cash outflows of $240,000, investing cash outflows of $88,000 and an ending cash balance of $52,000. Plant purchased 70 percent of Stem Company’s common stock on March 12, 20X1, at book value. Stem reported net income of $35,000, paid dividends of $14,000 in 20X2, and is included in Plant’s consolidated statements. Plant paid dividends of $55,000 in 20X2. The indirect method is used in computing cash flow from operations.
Answers
Answer:
to and n = 23 for the 95% confidence interval for the mean
2
Explanation:
Kanye Company is evaluating the purchase of a rebuilt spot-welding machine to be used in the manufacture of a new product. The machine will cost $165,000, has an estimated useful life of 7 years, a salvage value of zero, and will increase net annual cash flows by $31,692. Click here to view PV table. What is its approximate internal rate of return? (Round answer to O decimal place, e.g. 13%.) Internal rate of return %
Answers
Answer:
8%
Explanation:
The internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested.
The IRR can be calculated using a financial calculator.
Cash flow in year zero = $-165,000
Cash flow each year from year one to seven = $31,692
IRR = 8%
To find the IRR using a financial calacutor:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. After inputting all the cash flows, press the IRR button and then press the compute button.
I hope my answer helps you
To calculate the Internal Rate of Return (IRR) for a spot-welding machine that costs $165,000 with annual cash flows of $31,692 over 7 years, we compare the initial investment to the present value of the annuity. The IRR is the discount rate that equates the PV of the cash inflows to the cost of the machine. An annuity table is needed to find the precise IRR.
Explanation:The question concerns evaluating the Internal Rate of Return (IRR) for the purchase of a rebuilt spot-welding machine. The machine has a cost of $165,000, a lifespan of 7 years, no salvage value, and it increases net annual cash flows by $31,692.
To approximate the IRR, we need to find the discount rate that makes the net present value (NPV) of the cash inflows equal to the initial investment. This can be done by using the present value (PV) of an annuity table or a financial calculator. Since the machine's cost is $165,000 and it generates uniform annual cash inflows of $31,692, we divide the initial investment by the annual cash flow, which equals approximately 5.21. This factor can then be used to estimate the IRR by matching it against a PV annuity factor for seven years.
Without the exact PV table, we can't find the precise IRR, but it will be the discount rate that corresponds to a factor where the PV of $31,692 annuity over 7 years equals $165,000. If we had the PV table, we would look for the factor closest to 5.21 in the 7-year row and find the corresponding interest rate, which would be our IRR.
Learn more about Internal Rate of Return (IRR) here:https://brainly.com/question/36924454
#SPJ3
The company budgeted for production of 3,900 units in April, but actual production was 4,000 units. The company used 33,300 liters of direct material to produce this output. The company purchased 20,200 liters of the direct material at $2.7 per liter. The direct materials purchases variance is computed when the materials are purchased. The materials quantity variance for April is: Multiple Choice $2,430 U $2,340 U $2,430 F $2,340 F
Answers
Answer:
$2,340 Unfavorable
Explanation:
Data provided
Selling price = $2.6
Actual quantity = 33,300
Actual production = 4,000
Standard quantity liters per unit = 8.1
The computation of materials quantity variance for April is shown below:-
Materials quantity variance for April = Selling price × (Actual quantity - Selling quantity)
= $2.6 × (33,300 - 4,000 × 8.1)
= $2.6 × (33,300 - 32,400)
= $2,340 Unfavorable
Mary Willis is the advertising manager for Sheffield Shoe Store. She is currently working on a major promotional campaign. Her ideas include the installation of a new lighting system and increased display space that will add $24,600 in fixed costs to the $128,000 currently spent. In addition, Mary is proposing that a 5% price decrease ($20 to $19) will produce a 20% increase in sales volume (20,000 to 24,000). Variable costs will remain at $12 per pair of shoes. Management is impressed with Mary’s ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety. Collapse question part (a) Compute the current break-even point in units, and compare it to the break-even point in units if Mary’s ideas are used. (Round answers to 0 decimal places, e.g. 1,225.) Current break-even point pairs of shoes New break-even point pairs of shoes
Answers
Answer:
If Mary's idea is implemented the break-even point would increase from 16,000 units to 21,800 units
Explanation:
The break-even point is the level of activity where a business makes no profit or loss. At this level of activity, the total contribution equals the total fixed costs.
To calculate the break even point in units, we use the formula below:
Break-even point = Fixed cost for the period / selling price - variable cost
Current break-even point = 128,000/(20-12)
= 16,000 units
With Mary's idea, the break-even point will be
New break-even point = ( 128,000+ 24600)/(19-12)
= 21,800 units
If Mary's idea is implemented the break-even point would increase from 16,000 units to 21,800 units
Grove Inc. is a publicly traded chemical company that reported the following financial statements for the most recent year. $1,000.00 $750.00 Income Statement: Most Recent Year (in $ millions) Revenues - Operating Expenses (includes $150 million in depreciation) EBIT - Interest Expenses Taxable income - Taxes Net Income $250.00 $50.00 $200.00 $60.00 $140.00 Balance Sheet: Start of year Cash $- Current liabilities Other Current Assets $1,000 Debt Fixed Assets $1,250 Equity Total $2,250 $500 $250 $1,500 $2,250 Assuming that this company will maintain its existing after-tax return on capital next year and that it expects operating income to grow 6% over the year, estimate the expected free cash flow to the firm next year. (The company's effective tax rate this year is not expected to change next year)
Answers
Answer:
FCFF = $335.50
Explanation:
Formula of Free Cash Flow to the firm ( FCFF) :
FCFF= Net Income+ Interest(1- tax rate)+ Depreciation+ working capital changes- capital investment
Now let us note some critical points and assumptions which are necessary to solve the question.
As the question says that the company will maintain its existing after tax return on capital invested next year, hence that means that the net income for the next year remains the same, which is $140.
It is also that the company expects it's Operating Income(EBIT) to increase by 6% every year, hence it's operating income(EBIT) for the next year will be $250*(1.06)= $265
Tax rate remains the same, that is, (60/200*100)= 30%
As there is no details with respect to working capital changes and any capital investment made, hence it is assumed to zero changes and no additional investment.
It is assumed that the depreciation method being followed is straight line method, hence depreciation value next year would be the same, that is, 150
Now let's finalise our income statement:
EBIT = $265 given in the question
Interest = ( $65) backward calculation
Taxable Income = $200
Taxes (30%) = ($60)
Net income = $140 given in question.
Hence our FCFF will be :
$ 140 + $65*(1-0.30) + $150 = $335.50
There are seven main instruments used in trade policy with _____ being the oldest and the simplest. local content requirements tariffs subsidies voluntary export restraints import quotas
Answers
There are seven main instruments used in trade policy with tariffs being the oldest and the simplest. local content requirements tariffs subsidies voluntary export restraints import quotas.
Explanation:
Trade policy incorporates seven principal tools: tariffs, subsidies, import quotas, voluntary restrictions on exports, local content needs, administrative policies and anti-dumping duties. Tariffs are the easiest and earliest type of the tools of trade policy.
They have historically been utilized as a reservoir of government revenue but are primarily employed nowadays to shield particular home industries from foreign competition by artificially hiking the local cost of the foreign good.These are also the mechanism most effective in restricting by the GATT and WTO.
After compiling a list of potential customers, a salesperson must a. determine whether or not each prospect is really in his target market. b. contact each of the prospects to get an initial feel for how likely they are to purchase his products. c. evaluate whether each prospect is able, willing, and authorized to buy the product. d. find and analyze information about each prospect's specific needs and current brand choices. e. develop a presentation for each of the potential customers on his list.
Answers
Answer:
Evaluate whether each prospect is able, willing and authorized to buy the product.
Explanation:
A sales person can be defined as an individual that sells goods and services to a variety of customers. A sales person utilizes different mediums inorder to persuade the customers to purchase their product.
A sales person must possess the following characteristics:
1) He/she must be a good listener that must be able to get information about the various needs and requirements of the customers.
2) He/she must be able to effectively compete with other competitors in the market.
3) The sales person must be able to build a strong relationship with the customers.
Samantha just won a settlement with an insurance company, which entitles her to receive payments of $20,000 at the beginning of each year for the next 20 years. Her financial advisor recommended to her that she consider accepting a lump-sum payment now, using a discount rate of 7%. What is the amount that she should accept in this scenario? Identify the following variables: N, I/Y, PV, PMT, FV
Please show how the answer is computed (steps, a formula used, etc.)
Please try to avoid mathematical shorthand or please explain the answer to help me understand.
Answers
Answer:
$226,711.90
Explanation:
See attached file
Financial analysts forecast Limited Brands (LTD) growth rate for the future to be 13.5 percent. LTD’s recent dividend was $0.65. What is the value of Limited Brands stock when the required return is 15.5 percent?
Answers
Answer:
When the required return is 15.5%, the Limited Brands stock will be at $36.8875
Explanation:
Required return i = 15.5% = 0.155
Future Growth Rate g = 13.5% = 0.135
Dividend D₀ = $ 0.65
so let say the value of stock at that time = X
X = D₀ (1 + g) / (i - g)
X = 0.65 * (1 + 0.135) / (0.155 - 0.135)
= (0.65 * 1.135) / (0.155 - 0.135)
= 0.73775 / 0.02
= $36.8875
Therefore, when the required return is 15.5%, the Limited Brands stock will be at $36.8875
Using the Gordon Growth Model with a dividend of $0.65, a required return of 15.5%, and a growth rate of 13.5%, the value of Limited Brands stock is calculated to be $32.50.
To determine the value of Limited Brands (LTD) stock using the provided financial analysts' growth rate and recent dividends, we can use the Gordon Growth Model (also known as the Dividend Discount Model). This model assumes that dividends will grow at a constant rate indefinitely. The formula for the model is:
P = D / (r - g)
Where:
P is the price of the stockD is the dividendr is the required rate of returng is the growth rate of the dividendIn this case:
D = $0.65 (recent dividend)r = 15.5% (required return)g = 13.5% (growth rate)Using the Gordon Growth Model:
P = $0.65 / (0.155 - 0.135) = $0.65 / 0.02 = $32.50
Therefore, the value of Limited Brands stock when the required return is 15.5 percent is $32.50.
Addison Co. budgets production of 2,790 units during the second quarter. Other information is as follows: Direct labor Each finished unit requires 5 direct labor hours, at a cost of $10 per hour. Variable overhead Applied at the rate of $12 per direct labor hour. Fixed overhead Budgeted at $580,000 per quarter. 1. Prepare a direct labor budget. 2. Prepare a factory overhead budget.
Answers
Answer and Explanation:
1. The preparation of direct labor budget is given below:-
Direct labor budget
Units to be produced 2,790
Hours required per unit 5
Total labor hours needed 13,950
(2,790 × 5)
Labor rate per hour $10
Direct labor budget $139,500
(13,950 × $10)
2. The preparation of factory overhead budget is given below:-
Total labor hours needed 13,950
Variable overhead rate per hour $12
Budgeted variable overheads $167,400
(13,950 × $12)
Budgeted Fixed overheads $580,000
Budgeted total overheads $747,400
You are evaluating a project that will cost $ 546 comma 000, but is expected to produce cash flows of $ 127 comma 000 per year for 10 years, with the first cash flow in one year. Your cost of capital is 11.1 % and your company's preferred payback period is three years or less. a. What is the payback period of this project? b. Should you take the project if you want to increase the value of the company?
Answers
Answer:
A 4.3 years
B. The company shouldn't carry out the project because the payback period is greater than the preferred payback period.
Explanation:
Payback period calculates the amount of time it takes to recover the amount invested in a project from its cumulative cash flows.
Payback period = amount invested / cash flows
$546,000 / $127,000 = 4.3 years
The company shouldn't carry out the project because the payback period is greater than the preferred payback period.
I hope my answer helps you
Bustillo Inc. is working on its cash budget for March. The budgeted beginning cash balance is $40,000. Budgeted cash receipts total $121,000 and budgeted cash disbursements total $115,000. The desired ending cash balance is $61,500. To attain its desired ending cash balance for March, the company needs to borrow:
Answers
Answer:
Cash borrow = $15,500.
Explanation:
Given,
The company budgeted ending cash balance is $61,500.
We know,
Budgeted ending cash balance = Budgeted beginning cash balance + Budgeted cash receipts - Budgeted cash disbursements + Budgeted cash borrow
Given,
Budgeted ending cash balance = $61,500.
Budgeted beginning cash balance = $40,000.
Budgeted cash receipts = $121,000
Budgeted cash disbursements = $115,000.
Budgeted cash borrow = ?
Putting the values into the formula, we can get
$61,500 = $40,000 + $121,000 - $115,000 + Cash borrow
Or, $61,500 - ($40,000 + $121,000 - $115,000) = Cash borrow
Or, $61,500 - $40,000 - $121,000 + $115,000 = Cash borrow
Or, $176,500 - $161,000
Or, $15,500 = Cash borrow
Or, Cash borrow = $15,500.
Therefore, cash borrow for March is $15,500.
The W3C advisory committee must review every proposal for a(n) ______ made up of representatives of the W3C membership group, invite experts, and W3C team members to work on the ________, which may involve writing one or more ______. These go through an extensive review process that includes Requests For Comments (RFC). At any point in the process, a(n) _______ may be terminated.
Answers
Answer:
The W3C advisory committee must review every proposal for a meeting made up of representatives of the W3C membership group, invite experts, and W3C team members to work on the activity , which may involve writing one or more proposals . These go through an extensive review process that includes requests for comments(RFC). At any point in the process, a request may be terminated.
Good luck buddy.
Brad, Scott, and Jake each contribute property to form BSJ Corporation. Brad contributes a building with a fair market value of $450,000 and a basis of $100,000 and receives 45% of the stock of BSJ. Scott contributes $100,000 cash and equipment with a fair market value and tax basis of $350,000, receiving 45% of the stock of BSJ. Jake contributes a collection of vintage automobiles with a fair market value of $150,000 and tax basis of $130,000 in exchange for 10% of the stock of BSJ and $50,000 cash. What tax basis will each take in their respective BSJ stock
Answers
Answer:
The answer is $700,000
Explanation:
From the example given, we find the tax basis will each take in their respective BSJ stock
Contributions done partner wise (All values in $)
Partner Contribution Tax Share in Stock % of Tax Base Tax base in stock
Name Base
Brad 450000 100000 45% 17% 120689.7
Scott 100000 350000 45% 60% 422413.8
Jake 150000 130000 10% 22% 156896.6
700000 580000 100% 700000
Therefore, The Total Assets contributed will be equivalent to stock of BSJ issued = $ 700,000
A firm has $820 in inventory, $3,200 in fixed assets, $670 in accounts receivable, $390 in accounts payable, $500 in long-term debt, and $360 in cash. What is the amount of the net working capital
Answers
Answer:
Look it up
Explanation:
Many demographers predict that the United States will have zero population growth in the twenty-first century, in contrast to average population growth of about 1 percent per year in the twentieth century. Use the Solow model to graphically explain what happens to the steady-state output per person when population growth slows down.
Answers
Answer and Explanation:
Different things being constant, a slowdown in population growth will lead to an increase in the availability of capital per worker and output per worker.
At the steady state, output per worker will grow at the rate of g while. Thus, steady state per person output growth will be same, however total output will increase at the rate n+g.
In case of transition between steady states, during the transition phase, output per worker will grow at a rate greater than g. Overtime in the long run with a fall in population growth, total output will fall while output per worker will increase.
Final answer:
According to the Solow model, a slowdown in population growth, such as the projected zero population growth in the United States for the twenty-first century, leads to capital deepening (more capital per worker) resulting in higher output per capita at the new steady state. This implies an increase in economic well-being per person in the long run.
Explanation:
Many demographers predict that the United States will have zero population growth in the twenty-first century, in contrast to average population growth of about 1 percent per year in the twentieth century. According to the Solow model, the slowdown in population growth has significant implications for steady-state output per person, which is a measure of economic well-being on a per capita basis. The Solow model, a fundamental framework in economic growth theory, uses a production function that incorporates labor, capital, and technology to determine the output of an economy.
Graphically, in the Solow model, a decrease in population growth shifts the steady-state condition. Since the model assumes savings, capital accumulation, and output are proportionate to the size of the population, a lower growth rate means that less new capital is needed to equip new workers. Consequently, with a slowing population growth rate, capital deepening occurs (more capital per worker), leading to an increase in output per capita at the new steady state. This suggests that if the United States experiences zero population growth, the Solow model predicts an increase in output per person, assuming other factors remain constant. This outcome reflects improved economic well-being on a per capita basis in the long run due to higher productivity per worker attributed to greater capital intensity.
You are thinking about a project to expand your business. In order to start the project, you have to invest $200,000 in new equipment and $50,000 in working capital. You have to spend $15,000 for installation and $5,000 for shipping of the equipment. A few months ago, you spend $7,000 on consulting. The marginal tax rate of your company is 34%. What is the initial outlay of this project
Answers
Answer:
The initial outlay of this project is $270,000
Explanation:
According to the given data we have the following:
cost of new machine= $200,000
shipping cost=$5,000
installation cost=$15,000
working capital=$50,000
Therefore, in order to calculate the initial outlay of this project we would have to make the following calculation:
initial outlay of this project=cost of new machine+shipping cost+installation cost+working capital
initial outlay of this project= $200,000+$5,000+$15,000+$50,000
initial outlay of this project= $270,000