Answer:
The price per ticket should be $37.5
Explanation:
First we need to determine the change in demand (attendance) as a result of every $1 increase in the price of ticket.
The ticket price increased by $4 (from 50 to 54) and the demand fell by 400 (from 2500 to 2100). The change per dollar is, 400 / 4 = 100.
So, for every $1 increase in price, demand falls by 100.
The revenue is calculated by multiplying price by quantity demanded. Revenue equation will be,
Let x be the change in price from $50.
Revenue = (50 + x) * (2500 - 100x)
Revenue = 125000 - 5000x + 2500x - 100x²
Revenue = 125000 - 2500x - 100x²
To calculate the price that maximizes the revenue, we need to take the derivative of this equation.
d/dx = 0 - 1 * 2500x° - 2 * 100x
0 = -2500 - 200x
2500 = -200x
2500 / -200 = x
-12.5 = x
Price should be 50 - 12.5 = 37.5
At price $37.5 the revenue of the Opera House is maximized.
Extracts from cost information of Hebar Corp.:Simple L3 Pack Complex L7 Pack TotalSetup cost allocated using direct labor-hours $19,250 $5,750 $25,000Setup cost allocated using setup-hours $13,400 $11,600 $25,000Assuming that setup-hours is considered a more effective cost drive for allocating setup costs than direct labor-hours.
1. Which of the following statements is true of Hebar's setup costs under traditional costing?A. L7 pack is undercosted by $5,750B. L3 pack is overcosted by $5,850C. L3 pack is undercosted by $5,850D. L7 pack is overcosted by $5,850
Answer:
The correct answer is option (B).
Explanation:
According to the scenario, computation of the given data are as follows:
First we calculate for L3 pack.
Setup cost = cost allocated using direct labor-hours - Setup cost allocated using setup-hours
By putting the value in the formula, we get
Setup cost = $19,250 - $13,400
= $5,850 ( Positive shows over costed)
So, L3 pack is overcosted by $5,850
The L3 pack is overcosted by $5,850 under traditional costing using direct labor-hours compared to setup-hours, which is a more effective cost driver.
Regarding the question on whether the L3 pack is overcosted or undercosted and by how much in Hebar Corp's setup costs under traditional costing, we will analyze the difference in allocated costs when using direct labor-hours versus setup-hours. The allocated setup cost for L3 using direct labor-hours is $19,250 and using setup-hours is $13,400, leading to a difference of $19,250 - $13,400 = $5,850. Since setup-hours is considered a more effective cost driver, and the cost allocated using setup-hours is lower, we can deduce that the L3 pack is overcosted by $5,850 when using direct labor-hours. This corresponds to option B, making it the correct answer.
-Question was incomplete the complete question is
"Extracts from cost information of Hebar Corp.:
Simple L3 Pack Complex L7 Pack Total
Setup cost allocated using direct labor-hour$19,250 $5,750 $25,000
Setup cost allocated using setup-hours $13,400 $11,600 $25,000
Assuming that setup-hours is considered a more effective cost drive for allocating setup costs than direct labor-hours. Which of the following statements is true of Hebar's setup costs under traditional costing?
A. L7 pack is undercosted by $5,750
B. L3 pack is overcosted by $5,850
C. L3 pack is undercosted by $5,850
D. L7 pack is overcosted by $5,850
Tariffs can be thought of as indirect: Multiple Choice subsidies to foreign producers. special taxes on domestic producers. subsidies to domestic consumers. subsidies to domestic producers.
Answer:
The correct answer is letter "D": subsidies to domestic producers.
Explanation:
Tariffs are levies imposed on imports to promote domestic production and discourage the purchase of goods abroad. Imposing tariffs and quotas usually cause a trade war in which the country affected counterattacks by imposing taxes on the company that started passing tariffs.
Under such a scenario, tariffs could represent indirect subsidies to domestic producers because, at a certain level, the decrease in imports promotes domestic goods consumption.
Answer:
subsidies to domestic consumers
A decline in foreign demand for the US goods: Suppose the European and Japanese economies succumb to a recession and reduce their demand for the US goods for several years. Using the AS/AD framework, explain the macroeconomic consequences of this shock, both immediately and over time.
Answer:
A decline in foreign demand for the US goods will result in a reduction in the real GDP
Explanation:
The AD–AS or aggregate demand–aggregate supply model is a macroeconomic model that analyzes price level and output through the relationship between aggregate demand and aggregate supply.
he European and Japanese economies succumb to a recession and reduce their demand for the US goods for several years, the immediate macroeconomic consequence will be a change in the AD-AS slope reflecting a fall in the amount of goods demanded in the presence of surplus supply that was meant for export.
In the long run, it will escalate to a trade deficit and a decline in dollar value.
Answer:
It is important to note that the demand curve is shifted by both foreign and domestic demand. There will be a shift in the demand curve in the short run and a shift in the supply curve in the long run.
Explanation:
The market starts at equilibrium where the long run aggregate supply (LRAS), the short run aggregate supply (AS) and the aggregate demand are in equilibrium at point A.
The recession in both Japan and Europe causes the two countries to decrease their demand for American goods and therefore the AD curve shifts to the left (AD’) and in the short run there is a decrease in both the price and the output/income represented by point B. Consequence: The Us has to sell at a lower price at a lower output . Now in the long run the America market ( the producers, firms and workers) will adjust their expectations leading to a right shift of the AS curve to AS’ and the long run equilibrium is at point C, (consequence)where the output/income is the same at a lower price. Note that the LRAS is fixed because of the fixed supply of the factors of production.
at the end of the year dahir incorporated's balance of allowance for uncollectible accounts is $2700 (credit) before adjustment. the company estimates future uncollectible accounts to be $13500. what adjustment would dahir record for allowance for uncollectible accounts?
Answer:
Given that,
Credit balance of allowance for uncollectible accounts = $2,700
Future uncollectible = $13,500
We need to deduct the credit balance from the amount of future uncollectible.
Bad debt expense:
= Future uncollectible - Credit balance of allowance for uncollectible accounts
= $13,500 - $2,700
= $10,800
Therefore, the journal entry is as follows:
Bad debt expense A/c Dr. $10,800
To allowance for doubtful debts $10,800
(To record the allowance for uncollectible accounts)
Crane Company is contemplating the production and sale of a new widget. Projected sales are $375000 (or 75000 units) and desired profit is $30000. What is the target cost per unit?
Answer:
$0.1
Explanation:
Data provided
Projected Sales = $37,500
Desired profit = $30,000
Number of units sold = 75,000
The computation of target cost per unit is shown below:-
Targeted total cost = Projected Sales - Desired profit
= $37,500 - $30,000
= $7,500
Target cost per unit = Targeted total cost ÷ Number of units sold
= $7,500 ÷ 75,000
= $0.1
A dealer in British pounds who thinks that the pound is about to appreciate A. may want to lower his ask price while raising his bid. B. may want to widen his bid-ask spread by raising his ask price and lowering his bid. C. may want to lower both his bid price and his ask price D. may want to raise both his bid price and his ask price
In anticipation of an appreciation of the British pound, a dealer should raise both the bid and ask prices to align with the expected increase in the pound's value.
If a dealer in British pounds anticipates that the pound is about to appreciate, he or she should ideally want to raise both the bid price and the ask price. The bid price is the rate at which the dealer is willing to buy pounds, and the ask price is the rate at which the dealer is willing to sell pounds. Because an appreciation of the pound means that it will increase in value relative to other currencies, such as the dollar, the dealer would expect that the future supply of pounds might decrease (as British investors choose to keep their investments at home) and the future demand for pounds might increase (as U.S. investors want more pounds to purchase higher-yielding British assets). Therefore, by raising both bid and ask prices, the dealer prepares for the shift in the exchange rate, where the pound becomes more expensive in terms of other currencies, leading to pound appreciation and dollar depreciation.
You expect KT industries (KTI) will have earnings per share of $ 6 this year and expect that they will pay out $ 2.25 of these earnings to shareholders in the form of a dividend. KTI's return on new investments is 13% and their equity cost of capital is 15%. The value of a share of KTI's stock is closest to:
Answer:
Value of a share = $15
Explanation:
According to the dividend valuation model, the value of a share is the present value of expected dividend discounted at the required rate of return.
This model is expressed in the formula below;
Value of a share = D/Ke
D- dividend payable in year one
Ke- cost of equity
Value of a share = 2.25/0.15
Value of a share = $15
Value of a share = $15
James Corporation is planning to issue bonds with a face value of $500,000 and a coupon rate of 6 percent. The bonds mature in 10 years and pay interest semiannually every June 30 and December 31. All of the bonds will be sold on January 1 of this year. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your final answer to whole dollars.)
Required:
Compute the issue (sale) price on January 1 of this year for each of the following independent cases:
a. Case A: Market interest rate (annual): 4 percent.
b. Case B: Market interest rate (annual): 6 percent.
c. Case C: Market interest rate (annual): 8.5 percent.
Answer:
Bonds are the financial instruments used for the purpose of investing funds for safer returns in the future, along with the fixed rate of return earned each year.
Explanation:
The issue or sale price of the bonds as of January 1 for each of the independent cases is computed with the help of the following formula:
[tex]\begin{aligned}\text{Present Value}&=\text{Future Value}\times\frac{1}{(1+r)^n}\end{aligned}[/tex]
The issue price is computed below as given in the tables.
It can be calculated either by using the calculator or the excel sheet formula.
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The issue price of bonds is calculated based on the market interest rate. If the market interest rate is lower than the coupon rate, the bonds will be sold at a premium, if it matches with the coupon rate, the bonds will be at face value and if it's higher, the bonds will be sold at a discount.
Explanation:The question is about calculating the issue price of bonds for James Corporation under various market interest rates. The main formula to compute the bond price is the present value (PV) of its future cash flows which consists of semi-annual coupon payments and the face value (principal) repayable at the end of bond term (maturity).
(1) Case A: Market interest rate (annual): 4 percent
: The market interest rate is lower than the coupon rate so the bond will be sold at a premium. The issue price will be calculated as the present value of $15,000 semi-annual interest payments for 10 years plus the present value of the $500,000 face value repaid at the end of 10 years.
(2) Case B: Market interest rate (annual): 6 percent
: The market interest rate matches the coupon rate so the bonds will be sold at par, i.e., face value, which is $500,000. (3) Case C: Market interest rate (annual): 8.5 percent
: The market interest rate is higher than the coupon rate, so the bonds will be sold at a discount. The issue price is the present value of $15,000 interest payment for 10 years plus the present value of the $500,000 face value repaid at the end of 10 years.
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PowerBright must decide between two locations on which to build a new power station to provide 60 megawatt hours of electricity a month. Location A would have a variable cost of $1,000 per megawatt hour and Location B would have a variable cost of $1,500 per megawatt hour. A power station at Location A would also require a fixed cost of $70,000 a month, although an estimate of the monthly fixed cost at Location B has not been made available yet, due to ongoing negotiations with a land owner there. At what fixed cost for Location B would PowerBright be indifferent to the choice of either of these two locations?
Answer:
Fixed cost of B = $40000
Explanation:
To identify the indifference point,
Fixed cost of A + Variable cost of A = Fixed cost of B + Variable cost of B
$70000 + $1000 x = Fixed cost of B + $1500 X
The value of x is 60
$70000 +$1000(60) = Fixed cost of B +$1500(60)
$70000+$60000 = Fixed cost of B + $90000
Fixed cost of B = $130000 -$90000
Fixed cost of B = $40000
Eduardo goes to his mentor, Mateo, to get tips for improving his performance. Administrative While reviewing his goals for the year, Tyrell and his manager discuss what training Tyrell might require to accomplish next year’s goals. Developmental While reviewing performance evaluation reports, you notice that all of the employees have been rated "average." There are no outstanding performers and no poor performers. This is an example of a error. training will help the manager to evaluate performance more accurately.
Below is the correct outline of the question:
Eduardo goes to his mentor, Mateo, to get tips for improving his performance.
Type of training:________
While reviewing his goals for the year, Tyrell and his manager discuss what training Tyrell might require to accomplish next year's goals.
Type of training:________
Adriaan and Arie got off on the wrong foot. Arie messed up his first project for Adriaan, and now Adriaan gives him low performance ratings in every category of performance. This is an example of a ________ error. _______ training will help the manager to evaluate performance more accurately.
Answer:
1. Type of training: Developmental
2. Type of training: Developmental
3. Halo error
4. Frame of Reference (FOR) training
Explanation:
Eduardo goes to his mentor, Mateo, to get tips for improving his performance.
Type of training: Developmental
While reviewing his goals for the year, Tyrell and his manager discuss what training Tyrell might require to accomplish next year's goals.
Type of training: Developmental
Suzy is known for her highly rated employees. Everyone gets a performance rating of "outstanding," regardless of the work they have actually done. This is an example of a leniency error. Frame of Reference training will help the manager to evaluate performance more accurately.
Further Explanation:
For (1) and (2) A development training involves identifying areas employees need to improve on and organizing training programs to strengthen those skills that each employee needs to improve.
For (3), Leniency error is a rater's bias where the individual who does the rating has the tendency to rate people too positively.
For (4), Frame of Reference (FOR) training is a form of training that teaches how to produce accurate and reliable workplace-based ratings when assessing a performance It's aim is to improve the accuracy of the ratings of the individual responsible for the evaluation of employees.
In a small, closed economy, national income (GDP) is $ 600.00 million for the current quarter. Individuals have spent $ 250.00 million on the consumption of goods and services. They have paid a total of $ 100.00 million in taxes, and the government has spent $ 200.00 million on goods and services this quarter. Use this information and the national income identity to answer the questions. How much is spent on investment in this economy
Answer:
The answer is $150 million
Explanation:
A closed economy is also called autarky. A closed economy is an economy that trades only within its economy. There is no import and there is no export also. The economy (country) is self-sufficient.
The formula for GDP in a closed economy equals C + I + G
where C is the household/individual consumption.
I is the business or firm's investment
G is the government spending.
GDP is $600million
C is $ 250 million
G is $ 200 million
I = ($600 - $ 250 - $200) million
I= $150 million
Brandon Ramirez wants to set up a scholarship at his alma mater. He is willing to invest $320,000 in an account earning 11 percent. What will be the annual scholarship that can be given from this investment
Answer:
$35,200
Explanation:
Given that
Invested amount = $320,000
Rate of interest = 11%
So by considering the above information, the amount of annual scholarship that can be given from this investment is
= Invested amount × Rate of interest
= $110,000 × 11%
= $35,200
By multiplying the invested amount with the rate of interest we can find out the annual scholarship amount
the annual scholarship that can be given from this investment:
$35,200
Considering that $320,000 is the amount invested.
Interest rate: 11%
Thus, taking into account the data above, the yearly scholarship amount that can be awarded from this investment is
= Amount invested × Interest rate
$110,000 × 11%
$35,200
The annual scholarship amount can be calculated by multiplying the invested amount by the interest rate.
An insurance company wants to sell you an annuity which will pay you $750 per quarter for 30 years. You want to earn a minimum rate of return of 6.0 percent. What is the most you are willing to pay as a lump sum today to buy this annuity
Answer:
$41,623.84
Explanation:
[tex]\text{Present Lump\: Sum}, \:A_0=\dfrac{P[1-(1+i)^{-kt}]}{\frac{r}{k} }[/tex]
C=Payment Per Period
Yearly Interest Rate, =6%=0.06
Therefore, Periodic(Quaterly) Interest Rate, i= 0.06/4=0.015
Total number of Periods, n =4 X 30 =120 Quarters
Therefore, the maximum lump sum that the client will be willing to pay is:
[tex]=\dfrac{750[1-(1+0.015)^{-4X30}]}{0.015}=\$41,623.84[/tex]
When the ABC Corporation first opened their doors for business, they had no idea how much to allocate to promotional expenditures. They decided that if they wanted to be as successful as their leading competitors, they needed to invest in the brand to the same level. After tracking the marketing tactics of the competition, they were able to estimate the costs and develop a realistic budget that the marketing director was able to spend throughout the year to achieve their communications goals. This is an example of a(n) _____________, fill in the blank, approach to budgeting.
Answer:
Competitive parity
Explanation:
If the break-even exchange rate for the Currency Options Contract is 1.46 $/BP, and you believe the exchange rate at the time of the payment would be 1.43 $/BP, should you sign the contract?
Answer:
Yes, I will sign the contract.
Explanation:
The break-even exchange rate for the currency options contract is $1.46/BP and the exchange rate at the time of the payment will be $1.43/BP which means a reduction of $0.03 as future value. Since the contract was not signed with the inflationary rate, the receiver is at advantage while the lender is at a loss.
Answer:
Complete question
You are US company, 500,000 BP (British Pound) payable to UK in one year. Answer in terms of US$.
Information for Forward Contract:
Forward exchange rate (one yr): 1.54 $/BP
Information for Money Market Instruments (MMI):
Current exchange rate: 1.50 $/BP
Investment return at Aerion Fund Management (in UK): 4% annual
Interest rate of borrowing from Bank of America (in USA): 2% annual
Information you need for Currency Options Contract:
Options premium: 0.015 $/BP
Interest rate of borrowing from Bank of America (USA): 2% annual
Allowed to exercise options at 1.54 $/BP
If the break-even exchange rate for the Currency Options Contract is 1.46 $/BP, and you believe the exchange rate at the time of the payment would be 1.43 $/BP, should you sign the contract?
Explanation:
No, I will not sign the contract because the break-even exchange rate itself is 1.46 $/BP and it would mean that exchange rate below this price will give gains to the company and above this price would be a losing proposition. Since on the due date, exchange rate in the market will be lower than the options break-even price, company will buy the BP from the market and pay its obligation instead of exercising option at higher rate.
Adams Company makes fine jewelry that it sells to department stores throughout the United States. Adams is trying to decide which of the two bracelets to manufacture. Cost data pertaining to the two choices follow. Bracelet A Bracelet B Cost of materials per unit $ 29 $ 41 Cost of labor per unit 36 36 Advertising cost per year 8,800 6,900 Annual depreciation on existing equipment 6,200 5,500 Required Identify the fixed costs and determine the amount of fixed cost for each product. Identify the variable costs and determine the amount of variable cost per unit for each product. Identify the avoidable costs and determine the amount of avoidable cost for each product.
Answer:
Bracelet A, Bracelet B
Total fixed cost = $15,000 $12,400
Total variable cost = $65 $77
Total Avoidable cost = $8,829 $6,941
Explanation:
According to the scenario, the given data are as follows:
For Bracelet A
Cost of material = $29
Cost of labor = 36
Advertising cost = 8,800
Annual depreciation = 6,200
For Bracelet B
Cost of material = $41
Cost of labor = 36
Advertising cost = 6,900
Annual depreciation = 5,500
So, Fixed cost for each products = Advertising cost + Annual depreciation
For Bracelet A,
Fixed Cost = 8,800 + 6,200 = 15,000
For bracelet B,
Fixed cost = 6,900 + 5,500 = 12,400
Now, Variable cost = Cost of material + Cost of labor
For Bracelet A
Variable cost = 29 + 36 = 65
For Bracelet B
Variable cost = 41 + 36 = 77
And Avoidable cost = Cost of material + Advertising cost
For Bracelet A,
Avoidable cost = 29 + 8,800 = 8,829
For Bracelet B
Avoidable cost = 41 + 6,900 = 6,941
Which of the following generate the type of externality previously described? Check all that apply. Your roommate Crystal has bought a puppy that barks all day while you are trying to study economics. Tim has planted several trees in his backyard that increase the beauty of the neighborhood, especially during the fall foliage season. A microbiology lab has published its breakthrough in swine flu research. The local airport has doubled the number of runways, causing additional noise pollution for the surrounding residents.
The situations involving Tim's trees and the microbiology lab's research are examples of positive externalities, as they provide benefits to others. On the other hand, Crystal's barking puppy and the local airport's noise pollution are examples of negative externalities, as they impose costs on others without compensation. Externalities justify government intervention to correct market outcomes.
When analyzing various situations and determining whether they generate negative or positive externalities, we must consider how these situations affect third parties who are not directly involved in the initial activity or transaction. An externality is an effect on individuals that are neither the buyer nor the seller of the goods or services causing the effect. The potential externalities in the scenarios provided are as follows:
Positive externality: Tim has planted several trees in his backyard, which increase the beauty of the neighborhood. This has a beneficial effect on his neighbors by enhancing the local environment.
Negative externality: Your roommate Crystal's puppy that barks all day disrupts your study and can be considered a negative externality because it imposes a cost (distraction and potential stress) on you without compensation.
Positive externality: A microbiology lab's breakthrough in swine flu research benefits the entire society by potentially reducing the prevalence of the disease or its impact on public health.
Negative externality: The local airport's increase in runways leading to additional noise pollution is a negative externality as the surrounding residents are subjected to increased noise without a direct benefit or compensation.
Understanding these externalities is critical in economics because they often justify government intervention, such as regulation or taxes, to correct market outcomes.
Rita placed an order for 300 shares of each of four separate IPOs (Orders A, B, C, and D) with an offer price of $16 each. She received 100 shares of Order B, 200 shares of Order D, and 300 shares of the other orders. At the end of the first day, Order A was overpriced by $2 a share, Order B was underpriced by $4 a share, Order C was correctly priced, and Order D was overpriced by $1 a share. What was combined total profit or loss for the first day on these four orders
Complete question:
Rita placed an order for 300 shares of each of four separate IPOs (Orders A, B, C, and D) with an offer price of $16 each. She received 100 shares of Order B, 200 shares of Order D, and 300 shares of the other orders. At the end of the first day, Order A was overpriced by $2 a share, Order B was underpriced by $4 a share, Order C was correctly priced, and Order D was overpriced by $1 a share. What was combined total profit or loss for the first day on these four orders
Multiple Choice
−$400 $400 $100 −$100 −$300
Answer:
$400 was combined total profit or loss for the first day on these four orders
Solution:
Given,
Rita placed an order for 300 shares of each of four separate
Offer price of $16 each
She received 100 shares of Order B, 200 shares of Order D, and 300 shares of the other orders.
Now ,
Order No. of shares Profit/ (loss) per share Net profit/ (loss)
A 300 $ (2) $ (600)
B 100 $ 4 $ 400
C 300 $ - $ -
D 200 $ (1) $ (200)
Net profit/ (loss) $ (400)
Net loss for first day is $400.
Central Perk orders their organic coffee filters from a South American supplier that mails them as inexpensively (hence, as slowly) as possible. Central Perk uses 80 filters a day with a standard deviation of 5 filters per day. It would be disastrous if they ran out of these filters, years ago customers caught them using paper towels from the men's room and business suffered. They have set their service level at 99% in hopes of avoiding a similar situation. It takes a fortnight to receive a shipment and the standard deviation of the shipping time is two days. What is safety stock they need to carry to meet the 99% service level?
The safety stock they need to carry to meet the 99% service level is 395.
Safety stockFirst step is to find dL
dL = √ ( Lσ d2 + d 2σ L2 )
dL= √( 350 + 25600)
dL=√25,950
dL= 161
z-score at 99% SL=2.33
Second step
Safety stock = 2.33× 161
Safety stoc= 375
Inconclusion the safety stock they need to carry to meet the 99% service level is 395.
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Central Perk should keep approximately 285 filters in safety stock to maintain their 99% service level. This computation considers the average demand, the standard deviation of demand, and the lead time of the shipments.
Explanation:The number of coffee filters Central Perk requires each day is subject to variation, so safety stock is needed to ensure a 99% service level. Safety stock can be calculated using the formula Safety Stock = Z * SQRT(Avg. Lead Time * StdDev^2(Demand) + Avg. Demand^2 * StdDev^2(Lead Time)), where Z is the number of standard deviations corresponding to the desired service level.
In this case, assuming 'fortnight' means 14 days and using Z=2.33 for 99% service level, we plug the figures into the formula: Safety Stock = 2.33 * SQRT(14 * (5^2) + (80^2 * 2^2)), which equates to approximately 285 filters. Therefore, Central Perk should keep approximately 285 filters in safety stock to maintain their 99% service level.
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International Imports (I2) pays an annual dividend rate of 10.20% on its preferred stock that currently returns 13.67% and has a par value of $100.00 per share. What is the value of I2’s preferred stock?
Answer:
The market price/value of the share of preferred stock is $74.62
Explanation:
The preferred stock pay 10.2% return on $100 per share which comes out to be 100 * 10.2% = $10.2. This dividend will remain constant no matter what the price in the market is. The price in the market is calculated by dividing the ineterest payment by the current price of the share. The formula for the current return of the preferred stock is:
0.1367 = 10.2 / P
P = 10.2 / 0.1367
P = $74.615 rounded off to $74.62
What business structure automatically reinvests profits in the corporation?
Question 1 options:
An S corporation
A nonprofit corporation
A sole proprietorship
A limited partnership
Answer:
A sole proprietorship
Explanation:
Wesimann Co. issued 10-year bonds a year ago at a coupon rate of 8.2 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 6.5 percent, what is the current bond price?
Answer:
Current Bond Price = $1,114.46
Explanation:
Coupon rate = 8.2/ 2
= 4.1 %
YTM = 6.5 / 2
= 3.25%
Bond is issued one year ago,
Periods = (10 - 1) *2
= 18
Interest = $1,000 * 4.1%
= $41
Current Bond price = Present value of Bond
Present value of bond = $41 * PVIFA(3.25%, 18) + $1,000 * PVIF(3.25%, 18)
= $41 * 13.4673 + $1,000 * 0.5623
= $552.16 + $562.30
= $1,114.46
Current Bond Price = $1,114.46
Final answer:
To find the current price of Wesimann Co.'s bond, discount the semiannual coupon payments and the face value at maturity at the semiannual YTM rate of 3.25% and sum their present values. The bond makes $41 semiannual payments, has a $1,000 face value, and 19 periods remain until maturity. Use the present value formulas for the annuity of coupon payments and the single payment of the face value.
Explanation:
To calculate the current price of Wesimann Co.'s bond, we must discount the future cash flows of the bond (coupon payments and the face value at maturity) to the present value using the current yield to maturity (YTM) of 6.5 percent. As the bonds make semiannual payments, the coupon rate per period is 4.1 percent (half of 8.2 percent), and the YTM per period is 3.25 percent (half of 6.5 percent).
The bond has 19 periods remaining since it was issued a year ago and it is a 10-year bond. For each period, the investor will receive a semiannual coupon payment of $41 (4.1% of $1,000). At the end of the bond's term, the investor will also receive the face value of $1,000. These payments should be discounted at the semiannual YTM rate to calculate the present value, which is the current price of the bond.
Using the present value formula for annuities and a single payment, the bond's current price is the sum of the present value of the annuity of coupon payments and the present value of the face value received at maturity. The formula is expressed as:
Current Price = (C * [1 - (1 + r)^-n]/r) + (F / (1 + r)^n)
Where:
C is the semiannual coupon payment ($41)
r is the semiannual YTM rate (3.25%)
n is the total number of semiannual periods remaining (19)
F is the face value of the bond ($1,000)
By plugging in the numbers:
Current Price = ($41 * [1 - (1 + 0.0325)^-19]/0.0325) + ($1,000 / (1 + 0.0325)^19)
Once you carry out these calculations, you will get the current price of Wesimann Co.'s bonds.
When price = $16, quantity demanded = 200. When price = $14, quantity demanded = 225. When the firm lowered price from $16 to $14, it discovered that demand is __________ and total revenue __________ by ____________, Group of answer choices
inelastic; decreased; $50
elastic; decreased; $3,150
inelastic; increased; $50
elastic; increased; $3,200
inelastic; decreased; $3,150
Answer: Inelastic; decreased; $50
Explanation:
Demand is considered Inelastic when a change in price does not correspond to a substantial change in quantity demanded as was the situation in the scenario.
The total Revenue decreased because originally it was,
= 16 * 200
= $3,200
After the price dropped it became,
= 14* 225
= $3,150
It DECREASED by $50.
An income statement for Sam's Bookstore for the first quarter of the year is presented below: Sam's Bookstore Income Statement For Quarter Ended March 31 Sales $ 880,000 Cost of goods sold 550,000 Gross margin 330,000 Selling and administrative expenses Selling $ 117,000 Administration 138,000 255,000 Net operating income $ 75,000 On average, a book sells for $55. Variable selling expenses are $5 per book with the remaining selling expenses being fixed. The variable administrative expenses are 4% of sales with the remainder being fixed. The contribution margin for Sam's Bookstore for the first quarter is: Multiple Choice $665,200 $214,800 $250,000 $764,800
Answer:
Contribution= $214,800
Explanation:
Contribution margin ratio is the proportion of sales revenue that is earned as contribution.
Unit sold = revenue / selling price = 880,000/55 = 16,000 units
Contribution = Sales revenue - variable cost
Variable admin = 4% × 880,000= 35200
Variable selling = 5× 16,000 = 80,000
Contribution = Sales revenue - cost of goods sold - admin - selling
= 880,000 - 550,000- 35200 - 80,000=214,800
Contribution= $214,800
The contribution margin for Sam's Bookstore for the first quarter is $0.
Explanation:The contribution margin for Sam's Bookstore for the first quarter can be calculated by subtracting the total variable expenses from the sales revenue. The variable selling expenses are given as $5 per book, so for the 880,000 books sold in the quarter, the variable selling expenses would be 880,000 x $5 = $4,400,000. The variable administrative expenses are given as 4% of sales, so for the $880,000 sales revenue, the variable administrative expenses would be $880,000 x 0.04 = $35,200. Therefore, the total variable expenses for the quarter would be $4,400,000 + $35,200 = $4,435,200. Finally, the contribution margin can be calculated as the sales revenue minus the total variable expenses: $880,000 - $4,435,200 = -$3,555,200. However, since a contribution margin cannot be negative, the answer is $0.
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March 1, 2017, Alpha Company's beginning work in process inventory had 8,000 units. This is its only production department. Beginning WIP units were 50% complete as to conversion costs. Alpha introduces direct materials at the beginning of the production process. During March, a total of 15,000 units were started and a total of 20,000 units were completed. Alpha's ending WIP inventory had 3,000 units which were 70% complete as to conversion costs. Alpha uses the weighted average method. Use this information to determine for March 2017 the equivalent units of production for conversion costs. (Round & enter final answers to: the nearest whole dollar for total dollar answers, nearest penny for unit costs or nearest whole number for units)
Answer:see attached file
Explanation:
Answer:
Beginning units 8000 Transferred out 20,000
Started intro production 15000 Ending units 3,000
23000 23000
Equivalent units Material Conversion
Units transferred A 20000 20000
Ending Units 3,000 3,000
Completion 100% 70%
B 3000 2100
Total units 23000 22100
Iggies Ice Cream Company has taken a position in its tax return to claim a tax credit of $80 million (direct reduction in taxes payable) and has determined that its sustainability is "more likely than not," based on its technical merits. The tax credit would be a direct reduction in current taxes payable. Iggies believes the likelihood that a $80 million, $48 million, or $16 million tax benefit will be sustained is 25%, 35%, and 40%, respectively. Iggies' taxable income is $550 million for the year. Its effective tax rate is 40%. What is Iggies' income tax expense for the year
Answer:
Total income tax expense = $172
Explanation:
solution
we get here first tax Currently Payable that is
tax Currently Payable = $550 million × 40%
tax Currently Payable = $220 million
and Tax credit available = $80 million
so here Net Tax currently payable will be
Net Tax currently payable = $220 - $80
Net Tax currently payable = $140 million
and
Additional projected liability is = $80 - $48
Additional projected liability is = $32 million
so here Total income tax expense will be
Total income tax expense = $140 million + $32
Total income tax expense = $172
As indicated in the chapter, return on investment (ROI) is well entrenched in business practice. However, its use can have negative incentive effects on managerial behavior. For example, assume you are the manager of an investment center and that your annual bonus is a function of achieved ROI for your division. You have the opportunity to invest in a project that would cost $550,000 and that would increase annual operating income of your division by $50,000. (This level of return is considered acceptable from top management’s standpoint.) Currently, your division generates annual operating profits of approximately $625,000, on an asset base (i.e., level of investment) of $4,150,000.
Required:
1. What is the current return on investment (ROI) being realized by your division (i.e., before considering the new investment)?
2. What would happen to the near-term ROI of your division after adding the effect of the new investment?
3. As manager of this division, given your incentive compensation plan, would you be motivated to make the new investment?
Answer:
ROI = net profit / total investment
1. What is the current return on investment (ROI) being realized by your division
ROI = $625,000 / $4,150,000 = 15.06%2. What would happen to the near-term ROI of your division after adding the effect of the new investment?
ROI = ($625,000 + $50,000) / ($4,150,000 + $550,000) = 14.36%If you carry out the new project the ROI of your division will decrease.
3. As manager of this division, given your incentive compensation plan, would you be motivated to make the new investment?
Even though the new project's return (9.1%) is considered acceptable by upper management, you will probably reject it since it will decrease your division's total ROI. When managers are assigned bonuses based on certain achievements, reducing your profitability ratio will probably result in no bonus.Final answer:
The current ROI of the division is 15.06%. After considering the new investment, the near-term ROI would decrease to 14.36%. The manager's motivation to invest might be reduced due to the impact on their annual bonus linked to the ROI, despite the investment's acceptability to top management.
Explanation:
To calculate the current return on investment (ROI) for the division before considering the new investment, we use the formula:
ROI = (Operating Income / Asset Base) × 100
So, the current ROI = ($625,000 / $4,150,000) × 100 = 15.06%
Considering the new investment of $550,000 that increases operating income by $50,000, the new operating profit would be $675,000, and the new asset base would be $4,700,000. The new ROI would be ($675,000 / $4,700,000) × 100 = 14.36%. This indicates that the near-term ROI would decrease after making the investment.
Considering the incentive compensation based on ROI, as a manager, you would be less motivated to make the new investment as it would decrease the near-term ROI and potentially your annual bonus, even though the project's return is acceptable to top management.
Sally's Gift Baskets sells gift baskets, on average, for $125; each gift basket costs, on average, $60. Debby pays salaries each month of $1, 300 and her store rent is $1,000 per month. She also pays sales commissions of 5% of the sales price. In May, 140 gift baskets were sold.
a. Prepare a traditional income statement for the month of May.
b. Prepare a contribution margin income statement for the month of May.
Answer:
a. Traditional Income Statement
Sales ($125 x 140) $17,500
Cost of Sales ($60 x 140) ($8,400)
Gross Profit $9,100
Salaries ($1,300)
Rent ($1,000)
Sales Commission ($17,500 x 5%) ($875)
Net income $5,925
b. Contribution Margin Income Statement
Sales ($125 x 140) $17,500
Less: variable Costs
Cost of Sales ($60 x 140) ($8,400)
Sales Commission ($17,500 x 5%) ($875)
Contribution Margin $8,225
Less: Fixed Costs
Salaries ($1,300)
Rent ($1,000)
Net income $5,925
Explanation:
a.
Traditional Income statement calculates the gross profit after deducting the cost of goods sold from the revenue. After that it deduct all the operating expenses to calculate the Net Income.
b.
Contribution margin income statement consider all the variable expenses as cost of product cost and calculates the contribution margin, after that the fixed costs are deducted calculate the net income.
The International Disc Jockey's Union has a wage contract that stipulates a yearly wage increase based on the Consumer Price Index. If this year's wage is $ 28.00 , the current CPI is 180 , and the contract was first signed in the base year, what was the original salary the first year of the contract? Round your answer to two decimals. original salary: $
Answer:
Salary in base year = $15.56
Explanation:
Consumer Price Index(CPI ): This is the weighted average price of a basket of goods and services consumed by a typical consumer. It is used to measure the rate of inflation.
The increase in the CPI is taken to be the rate of inflation. For example, if the CPI rose to 110 from 100, this implies an inflation rate of 10% within the time period in focus.
To preserve the purchasing power of workers income, employment contracts usually allow for wages and salaries to be adjusted for inflation.
The wage or salary in the current year is $28, this figure can be adjusted for using the CPI to arrive at the wage in the base year (i.e salary before the inflation). This is done as follows:
Salary in the base year
= Salary in the current year× (CPI base year/ CP1 in current year)
The CPI in the base year is taken to be 100
Salary in base year = 100/180× 28
= $15.56
Final answer:
The original salary of the International Disc Jockey's Union member in the first year of the contract was $15.56, after adjusting the current wage for inflation using the CPI.
Explanation:
The question is asking to calculate the original salary of the International Disc Jockey's Union member at the start of their contract using the current salary, the current CPI, and knowing it was the base year. To do this, we will use the relationship between nominal wage, real wage, and the Consumer Price Index (CPI).
Given:
Current nominal wage = $28.00
Current CPI = 180
Since the contract was signed in the base year, the CPI at that time would be set to 100. Therefore, to find the original salary, also known as the nominal wage in the base year:
Original salary = Current salary \/ (Current CPI \/ Base year CPI) = $28.00 \/ (180 \/ 100) = $28.00 \/ 1.8 = $15.56
Rounded to two decimals, the original salary was $15.56.
Iron Works, Inc. purchased a metal casting machine on January 1, 2014. The cost of the machine was $32,000. Its estimated residual value was $7,000 at the end of an estimated 10-year life. The company expects to produce a total of 20,000 units. a. Calculate depreciation expense for 2014 and 2015 using the straight-line method. b. Calculate depreciation expense for 2014 and 2015 using the double-declining balance method. c. Calculate the depreciation expense for 2014 and 2015 using the units-of-production method. The company produced 1,200 units in 2014 and 1,650 units in 2015. (Round your final answer to nearest dollar value.)
Answer:
a. Depreciation expenses in 2014 and 2015 using straight-line method is the same for each year at $2,500
b. Depreciation expenses using double-declining balance method:
+ 2014: $6,400
+ 2015: $5,120
c. Depreciation expenses using units-of-production method:
+ 2014: $1,500
+ 2015: $2,062.5
Explanation:
a. Using straight-line method, the depreciation expenses will be the same for the 10 useful life of the asset which is calculated as: (Historical asset cost - estimated residual value) / useful life = (32,000 - 7,000) /10 = $2,500
b. Using declining balance method:
Depreciation in a year = 2 * Depreciation rate x Asset carrying value = 2 * (1/useful life) x Asset carrying value.
So, depreciation in 2014 = 2 x 1/10 x 32,000 = $6,400
depreciation in 2015 = 2 x 1/10 x ( 32,000-6,400) = $5,120
c. Using the units-of-production method:
Depreciation expenses for a year will be equal [ (Historical cost - estimated residual value)/ Expected production capacity] x Production level during a year
So, depreciation in 2014 = (32,000-7,000)/20,000 x 1,200 = $1,500
depreciation in 2015 = (32,000-7,000)/20,000 x 1,650 = $2,062.5