Answer:
a. Government should not intervene in the economy.
Explanation:
The concept of laissez-faire arose during the economic liberalism movement and promotes that the government should not intervene in the economy. According to laissez-faire, the main economic role of the government was to regulate and protect rights to private property.
Therefore, the answer is a. Government should not intervene in the economy.
Laissez-faire is a principle of economic liberalism where government intervention in the economy is minimized, allowing individual economic interests to guide the market. It's best described by the statement: Government should not intervene in the economy.
Explanation:The concept of laissez-faire is best described by option a: Government should not intervene in the economy. Originating from the French phrase that literally means 'let do', laissez-faire is a fundamental principle associated with economic liberalism, where the role of the government in the economy is minimized.
This economic ideology assumes that when individuals are free to pursue their own economic interests, the result is beneficial for society as a whole. In a laissez-faire system, the market is guided by the invisible hand of supply and demand, not by government intervention.
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On January 1, Swifty Corporation had 63,100 shares of no-par common stock issued and outstanding. The stock has a stated value of $4 per share. During the year, the following transactions occurred. Apr. 1 Issued 18,900 additional shares of common stock for $12 per share. June 15 Declared a cash dividend of $1.90 per share to stockholders of record on June 30. July 10 Paid the $1.90 cash dividend. Dec. 1 Issued 8,400 additional shares of common stock for $13 per share. Dec. 15 Declared a cash dividend on outstanding shares of $2.10 per share to stockholders of record on December 31. (a) Prepare the entries, if any, on each of the three dates that involved dividends
Final answer:
The entries for dividends involve recording the declaration and payment of dividends on June 15 and July 10 for the first dividend, and another declaration on December 15 for the second dividend, accounting for the total shares outstanding at each date including new share issues.
Explanation:
To prepare the journal entries for the dates involving dividends for Swifty Corporation, we need to record the declaration of the dividends and the payment of the dividends.
June 15: Declaration of Cash Dividend
Retained Earnings Debit: 63,100 shares x $1.90 per share = $119,890Dividends Payable Credit: $119,890This entry recognizes the declaration of a $1.90 per share dividend to be paid on July 10.
July 10: Payment of Cash Dividend
Dividends Payable Debit: $119,890Cash Credit: $119,890This entry represents the actual payment of the dividend declared on June 15.
December 15: Declaration of Cash Dividend
Before we record the December dividend, note the increase in shares from the April and December stock issues:
Initial shares: 63,100April 1 issue: 18,900December 1 issue: 8,400Total shares by December 15: 63,100 + 18,900 + 8,400 = 90,400 sheetsRetained Earnings Debit: 90,400 shares x $2.10 per share = $189,840Dividends Payable Credit: $189,840This entry is to record the declaration of a $2.10 per share dividend to stockholders of record on December 31.
Nance Corporation’s December 31, 2017 balance sheet showed the following: 6% preferred stock, $20 par value, cumulative, 30,000 shares authorized; 20,000 shares issued $ 400,000 Common stock, $10 par value, 3,000,000 shares authorized; 1,950,000 shares issued, 1,920,000 shares outstanding 19,500,000 Paid-in capital in excess of par value – preferred stock 60,000 Paid-in capital in excess of par value – common stock 28,000,000 Retained earnings 9,650,000 Treasury stock (30,000 shares) 630,000 Nance declared and paid a $90,000 cash dividend on December 15, 2017. If the company’s dividends in arrears prior to that date were $24,000, Nance’s common stockholders received $66,000. $53,000. $42,000. no dividends.
Nance Corporation's common stockholders received $42,000 in dividends on December 15, 2017.
Explanation:The question asks how much Nance Corporation's common stockholders received in dividends on December 15, 2017 after taking into account the preferred stock dividends in arrears. To compute this, we first need to determine the dividend payout for the preferred stocks. Since the corporation has a 6% preferred stock with a par value of $20, the annual dividend per share for the preferred stocks is 6% x $20 = $1.20. Given that 20,000 shares were issued, the total annual dividend for preferred stock is $1.20 x 20,000 shares = $24,000. Taking into account the $24,000 dividends in arrears, we get a total of $24,000 + $24,000 = $48,000 to be paid to preferred stock holders.
Subtracting this from the total cash dividend declared of $90,000, we find that the common stockholders received $90,000 - $48,000 = $42,000 in dividends. The answer is $42,000.
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Stock Y has a beta of 1.40 and an expected return of 14.8 percent. Stock Z has a beta of .85 and an expected return of 11.3 percent. If the risk-free rate is 4.85 percent and the market risk premium is 7.35 percent, are these stocks overvalued or undervalued?
Answer:
Stock Y has overvalued and Stock Z as undervalued
Explanation:
In this question, we apply the Capital Asset Pricing Model (CAPM) formula which is shown below
Expected rate of return = Risk-free rate of return + Beta × (Market rate of return - Risk-free rate of return)
For Stock Y
= 4.85% + 1.40 × 7.35%
= 4.85% + 10.29%
= 15.14%
For Stock Z
= 4.85% + 0.85 × 7.35%
= 4.85% + 6.2475%
= 11.0975%
The (Market rate of return - Risk-free rate of return) is also called market risk premium and the same is applied in the answer
As we see the expected return of both the stock So, Stock Y has overvalued and Stock Z as undervalued
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Use the following information to answer question(s) below. On January 1, 2011, Punch Corporation purchased 80% of the common stock of Soopy Co. Separate balance sheet data for the companies at the acquisition date(after the acquisition) are given below:PunchSoopy Cash $34,000 $206,000 Accounts Receivable 144,000 26,000 Inventory 132,000 38,000 Land 68,000 32,000 Plant assets 700,000 300,000 Accum. Depreciation (240,000) (60,000) Investment in Soopy392,000Total assets$1,230,000 $ 542,000 Accounts payable $206,000 $142,000 Capital stock 800,000300,000 Retained earnings224,000 100,000Total liabilities & equities$ 1,230,000 $ 542,000 At the date of the acquisition, the book values of Soopy's net assets were equal to the fair value except for Soopy's inventory, which had a fair value of $60,000.
Determine below what the consolidated balance would be for each of the requested accounts. What amount of Inventory will be reported?
Answer:
Consider the following explanation
Explanation:
consolidated balance
Cash 240,000
Accounts Receivable 170000
Inventory 192,000
Land 100000
Plant assets-net 700,000
Goodwill 68000
Total assets 1,470,000
Total liabilities: 206,000 + 142,000 = 348,000
The typical family on the Planet Econ consumes 10 pizzas, 7 pairs of jeans, and 20 gallons of milk. In 2016, pizzas cost $10 each, jeans cost $40 per pair, and milk cost $3 per gallon. In 2017, the price of pizzas went down to $8 each, while the prices of jeans and milk remained the same. Between 2016 and 2017, a typical family's cost of living:
Answer:
decreased by 4.5%
Explanation:
A family consumes: 10 pizzas, 7 pairs of jeans, and 20 gallons of milk.
In 2016, pizzas cost $10 each, jeans cost $40 per pair, and milk cost $3 per gallon.
The family's total cost of living in 2016 is:
[tex]C_{2016} = 10*\$10 +7*\$40 +20*\$3\\C_{2016} = \$440[/tex]
In 2017, pizzas cost $8 each, jeans cost $40 per pair, and milk cost $3 per gallon.
The family's total cost of living in 2017 is:
[tex]C_{2017} = 10*\$8 +7*\$40 +20*\$3\\C_{2016} = \$420[/tex]
The change, in percentage, of a typical family's cost of living is:
[tex]R=\frac{C_{2017}-C_{2016}}{C_{2016}} \\R=\frac{420-440}{440} \\R=0.045\ or\ 4.5\%[/tex]
The cost of living decreased by 4.5%
The Portland Division's operating data for the past two years is as follows: Year 1 Year 2 Return on investment 12 % 24 % Net operating income ? $ 288,000 Turnover ? 2 Margin ? ? Sales $ 1,600,000 ? The Portland Division's margin in Year 2 was 150% of the margin for Year 1. The net operating income for Year 1 was:
Multiple Choice
A. $192,000
B. $128,000
C. $266,667
D. $208,000
To find the net operating income for Year 1 in the Portland Division, we need to determine the margin for Year 1. Given that the margin for Year 2 was 150% of the margin for Year 1, we can solve for the margin of Year 1 and calculate the net operating income.
Explanation:To find the net operating income for Year 1, we need to determine the margin for Year 1.
We know that the margin for Year 2 was 150% of the margin for Year 1. Let's assume the margin for Year 1 is x.
From the given information, we can write the equation: 1.5x = Margin for Year 2.
Next, we can find the margin for Year 2 by multiplying the turnover and margin.
From the given information, we have: 2 * x = Margin for Year 2.
Solving these equations simultaneously, we get x = 1, and the margin for Year 1 is 1.
Therefore, the net operating income for Year 1 is $192,000 (1 * $192,000 = $192,000).
What is the process in which workers are given time off with pay to think about whether or not they wish to continue working for the company and will follow the rules? A. Alternative dispute resolution B. Phased retirement C. Disciplinary action without punishment D. Offboarding E. Progressive disciplinary action
Answer:
C. Disciplinary action without punishment
Explanation:
The act of giving a worker time off to rethink and re-adequate his course of action without suspending payments is called disciplinary action without punishment, which is an effective form of positive reinforcement and usually accompanied by reminders, recommendations and discussions between the employee and the administration.
Common stock valuelong dashVariable growth Lawrence Industries' most recent annual dividend was $1.80 per share (D0equals$ 1.80), and the firm's required return is 11%. Find the market value of Lawrence's shares when dividends are expected to grow at 8% annually for 3 years, followed by a 5% constant annual growth rate in years 4 to infinity.
Answer:
market value of Lawrence's shares is $34.113
Explanation:
given data
annual dividend = $1.80 per share
Current year dividend Do = $ 1.80
required return = 11%
dividends expected grow = 8% annually
time = 3 year
growth rate = 5%
to find out
the market value of Lawrence's shares
solution
we will apply here Gordon Growth Model for terminal value in year 3 that is
Gordon Growth Model P3 = [tex]\frac{D4}{r-G}[/tex]
and [tex]\frac{D4}{r-G}[/tex] = [tex]\frac{D3(1+G)}{r-G}[/tex]
here r is required return and G is growth rate and D1 is Expected dividend of next 1 year
so here we get D1, D2, D3 and D4 they are as
D1 = $1.8×(1+0.08)
D1 = $1.944
and
D2 = $1.944×(1+0.08)
D2 =$2.0995
and
D3 = $2.0995×(1+0.08)
D3 = $2.267
and
D4 = $2.267×(1+0.05)
D4= $2.38
so
we get here now market value of the share year 3rd end that is
P3 = [tex]\frac{2.38}{0.11-0.05}[/tex]
P3 = $39.67
and
Market value of the share today is
Market value = [tex]\frac{D1}{(1.11)1} + \frac{D2}{(1.11)2} + \frac{D3}{(1.11)3} + \frac{D4}{(1.11)4}[/tex]
put here all value
Market value = [tex]\frac{1.944}{(1.11)1} + \frac{2.0995}{(1.11)2} + \frac{2.267}{(1.11)3} + \frac{39.67}{(1.11)4}[/tex]
solve we get
Market value = $34.113
so market value of Lawrence's shares is $34.113
Huron Company produces a commercial cleaning compound known as Zoom. The direct materials and direct labor standards for one unit of Zoom are given below:
Standard Quantity or Hours Standard Price
or Rate Standard
Cost
Direct materials 6.00 pounds $ 2.30 per pounds $ 13.80
Direct labor 0.50 hours $ 10.00 per hour $ 5.00
During the most recent month, the following activity was recorded:
During the most recent month, the following activity was recorded:
a. 11,000 pounds of material were purchased at a cost of $2.10 per pound.
b. All of the material purchased was used to produce 1,500 units of Zoom.
c. 500 hours of direct labor time were recorded at a total labor cost of $6,500.
Required:
1.
Compute the materials price and quantity variances for the month. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
2. Compute the labor rate and efficiency variances for the month. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
Answer:
1. $2,200 Favorable ; $4,600 Unfavorable
2. $1,500 Unfavorable ; $2,500 Favorable
Explanation:
1. Material price variance:
= Actual quantity × Standard cost per unit-Actual cost
= (11,000 × $2.30) - ($2.10 × 11,000 )
= $2,200 Favorable
Material quantity variance:
= (Standard quantity × Standard cost per unit) - (Actual quantity × Standard cost per unit )
= (1,500 × 6 × $2.30) - (11,000 × $2.30)
= $4,600 Unfavorable
2. Labor rate variance:
= (Actual hours × Standard rate) - Actual labor paid
= (500 × $10) - $6,500
= $1,500 Unfavorable
Labor efficiency variance:
= (Standard hours × Standard rate) - (Actual hours × Standard rate )
= (1,500 × 0.50 × $10) - (500 × $10)
= $2,500 Favorable
If an excise tax is imposed on restaurant meals, a. fewer meals will be produced and sold b. more meals will be produced and sold c. the government's tax revenue will fall d. the market price of meals will decrease e. restaurants will sell more meals, but at a lower price per meal
Answer:
Correct option is (a)
Explanation:
Excise tax is an indirect tax which is not imposed on customers directly. Excise tax is imposed on producers or sellers for goods produced and they in turn transfer the burden of tax on customers in the form of higher prices. That is why, it is called indirect tax.
It is usually imposed on those goods such as liquor and tobacco whose consumption the Government needs to decrease. If excise tax is imposed on restaurant meals, then the restaurant will be able to produce and sell less at the same price it was charging earlier. If the restaurant wishes to sell more, then it will have to charge higher price.
What is the definition of a dominant strategy in game theory?
1- to allocate all personnel resources towards defensive talent in order to dominate opposing offenses
2- the best strategy to pick, assuming the other player picks their own best choice
3- to make the exact same move that was made by the other player
4- the choice that causes the payoff for the other player to be minimized, regardless of the payoff it earns
5- the best strategy to pick no matter which moves are chosen by the other player
Answer:
5- the best strategy to pick no matter which moves are chosen by the other player
Explanation:
Dominant strategy is the best strategy to pick no matter which moves are chosen by the other player.
Dominant strategy is used in game theory to determine the best strategy for oligopoly firms in a collusion.
For example, in a prisoners dilemma, there are two prisoners, if both of them confess, they get 5 years in prison, if both of them don't confess, they are set free and if one confesses and the other doesn't, the prisoner that confesses gets 2 years in prison while the other who doesn't confess gets 10 years in prison.
The dominant strategy here is for the prisoners to confess. It is the best strategy regardless of what the other prisoner does.
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Last year Jain Technologies had $250 million of sales and $100 million of fixed assets, so its FA/Sales ratio was 40%. However, its fixed assets were used at only 75% of capacity. Now the company is developing its financial forecast for the coming year. As part of that process, the company wants to set its target Fixed Assets/Sales ratio at the level it would have had had it been operating at full capacity. What target FA/Sales ratio should the company set? a. 28.5% b. 30.0% c. 31.5% d. 33.1% e. 34.7%
Answer:
B. 30.0%
Explanation:
Sales ratio = Fixed Assets\ Full Capacity Sales
Target FA\Sales ratio = 100 000 000/250 000 000*75%=0.3
B. 30.0% The correct answer is B.
Woodward Corporation reported pretax book income of $1,000,000. Included in the computation were favorable temporary differences of $200,000, unfavorable temporary differences of $50,000, and favorable permanent differences of $100,000. Compute the companyâs current income tax expense or benefit.
Answer
The answer and procedures of the exercise are attached in a microsoft excel document.
Explanation
Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in a single sheet with the formulas indications.
The correct answer is option (a) $250,000.
To calculate Woodward Corporation's current income tax expense or benefit, we need to adjust the pretax book income for the reported differences. Here is the step-by-step calculation:
Pretax book income: $1,000,000Add favorable temporary differences: $200,000Subtract unfavorable temporary differences: $50,000Add favorable permanent differences: $100,000Taxable income: $1,000,000 + $200,000 - $50,000 + $100,000 = $1,250,000Assuming the tax rate is 20%, the current income tax expense is calculated as follows:
Current income tax expense = Taxable income * Tax rateCurrent income tax expense = $1,250,000 * 20% = $250,000Therefore, the correct answer is (a) $250,000.
Complete Question
Woodward Corporation reported pretax book income of $1,000,000. Included in the computation were favorable temporary differences of $200,000, unfavorable temporary differences of $50,000, and favorable permanent differences of $100,000. Compute the company's current income tax expense or benefit.
a) $250,000
b) $240,000
c) $260,000
d) $230,000
Feeling Better Medical Inc., a manufacturer of disposable medical supplies, prepared the following factory overhead cost budget for the Assembly Department for October of the current year. The company expected to operate the department at 100% of normal capacity of 7,000 hours.
Variable costs:
Indirect factory wages $21,000
Power and light 15,540
Indirect materials 13,440
Total variable cost $49,980
Fixed costs:
Supervisory salaries $12,720
Depreciation of plant and equipment 32,630
Insurance and property taxes 9,950
Total fixed cost 55,300
Total factory overhead cost $105,280
During October, the department operated at 7,400 standard hours, and the factory overhead costs incurred were indirect factory wages, $22,420; power and light, $16,130; indirect materials, $14,500; supervisory salaries, $12,720; depreciation of plant and equipment, $32,630; and insurance and property taxes, $9,950.
Required:
Prepare a factory overhead cost variance report for October. To be useful for cost control, the budgeted amounts should be based on 7,400 hours. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Round your per unit computations to the nearest cent, if required. If an amount box does not require an entry, leave it blank.
Feeling Better Medical Inc.
Factory Overhead Cost Variance Report—Assembly Department
For the Month Ended October 31
Normal capacity for the month 7,000 hrs.
Actual production for the month 7,400 hrs.
Budget Actual Favorable Variances Unfavorable Variances
Variable costs:
Indirect factory wages
Power and light
Indirect materials
Total variable cost
Fixed costs:
Supervisory salaries
Depreciation of plant and equipment
Insurance and property taxes
Total fixed cost
Total factory overhead cost
Total controllable variances
Excess hours used over normal at the standard rate for fixed factory overhead
Answer
The answer and procedures of the exercise are attached in the following archives.
Explanation
You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.
Valerie bought 200 shares of Able stock today. Able stock has been trading for some time on the NYSE. Valerie's purchase occurred in which market?
A. Dealer market
B. Over-the-counter market
C. Secondary market
D. Primary market
E. Tertiary market
Answer:
(c) Secondary market
Explanation:
Secondary market :
The secondary market, additionally called the reseller's exchange and pursue on open offering is the budgetary market wherein recently gave money related instruments, for example, stock, securities, choices, and fates are purchased and sold.
After the initial issuance, investors can purchase from other investors in the secondary market.
For what kinds of needs do you think a firm would issue securities in the money market versus the capital market? A firm would issue securities in the money market versus the capital market because:
Answer:
Explanation:
Capital markets are majorly used for long- term fixed assets, making a company use it over for several years , also with maturities greater than one year. On the other hand money markets are short-term markets, so firms using these would be in need of funds for less than a year. Transactions in short-term or marketable securities take place in the money market
Your firm needs a computerized line-boring machine that costs $90,000 and requires $16,000 in maintenance costs for each year of its 3-year life. After 3 years, this machine will be replaced. The machine falls into the MACRS 3-year class life category. The MACRS percentages for each year are 33.33 percent, 44.44 percent, 14.82 percent, and 7.41 percent, respectively. Assume a tax rate of 35 percent and a discount rate of 10 percent. Assume the machine can be sold for $12,000 at the end of year 3. What is the aftertax salvage value of the machine?A) $5,633B) $7,800C) $7,920D) $10,134E) $10,678
Answer:
The aftertax salvage value of the machine is D) $10,134
Explanation:
Hi. first, we need to find out the book value of the machine at the selling date, that is 3 years from now, and the book value is as follows.
[tex]BookValue=90,000-90,000*0.3333-90,000*0.4444-90,000*0.1482=6,669[/tex]
Since taxes are based on the profit you make by selling something, our profit is:
[tex]Profit=12,000-6,669=5,331[/tex]
Therefore, our taxes are:
[tex]Taxes=5,331*0.35=1,866[/tex]
So, the after tax salvage value of the machine is the money you received on the sale minus the taxes you have to pay, that is:
Salvage Value of the Machine = $12,000 - $1,866?= $10,134
That is option D)
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Wright Services, Inc., has $ 8 comma 800 cash on hand on August 1. The company requires a minimum cash balance of $ 7 comma 400. August cash collections are $ 548 comma 400. Total cash payments for August are $ 563 comma 380. Prepare a cash budget for August. How much cash, if any, will Wright need to borrow by the end of August?
Answer:
- $13,580
Explanation:
The preparation of the cash budget for August month is shown below:
Cash on Hand on August 1 $8,800
Add: August cash collections $548,400
Total cash available $557,200
Less: Total cash payments - $563,380
Ending cash balance - $6,180
Less: Minimum cash balance - $7,400
Borrowed amount - $13,580
Assume that labor demand is given by Qd = 200 - 10P and labor Supply is given by Qs = 10P - 20, where P = wage and Q = quantity of labor. If a minimum wage of $15 is imposed on this market, what is the net effect on wages paid to labor in this market? Group of answer choices $240 loss $100 loss $200 gain $360 gain $50 gain
Imposing a minimum wage of $15 in this labor market will lead to a net gain of $360 in wages paid to labor.
Explanation:Imposing a minimum wage of $15 in this labor market will lead to an increase in wages paid to labor in this market. The minimum wage of $15 will be above the equilibrium wage, causing a surplus of labor as the quantity supplied exceeds the quantity demanded. At the minimum wage, the quantity demanded will be 12 units (200-10*15) and the quantity supplied will be 130 (10*15-20), resulting in a surplus of 118 units. Therefore, the net effect on wages paid to labor in this market will be a $360 gain.
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Complete Question
Assume that labor demand is given by Qd = 200 - 10P and labor Supply is given by Qs = 10P - 20, where P = wage and Q = quantity of labor. If a minimum wage of $15 is imposed on this market, what is the net effect on wages paid to labor in this market?
Group of answer choices
a. $240 loss
b. $100 loss
c. $200 gain
d. $360 gain
e. $50 gain
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Use the following information to determine the ending cash balance to be reported on the month ended June 30 cash budget.
Beginning cash balance on June 1, $94,400.
Cash receipts from sales, $415,000.
Budgeted cash payments for purchases, $270,000.
Budgeted cash payments for salaries, $95,400.
Other budgeted cash expenses, $57,400.
Cash repayment of bank loan, $32,400.
Budgeted depreciation expense, $34,400.
Answer:
The ending cash balance on the month ended June 30 cash budget: $54,200
Explanation:
Ending cash balance = Beginning cash balance + Cash flow in - Cash flow out
In the company:
Cash flow in = Cash receipts from sales = $415,000
Cash flow out = Cash payments for purchases + Cash payments for salaries + Other cash expenses + Cash repayment of bank loan = $270,000 + $95,400 + $57,400 + $32,400 = $455,200
Ending cash balance = $94,400 + $415,000 - $455,200 = $54,200
Note: Depreciation is a non-cash accounting expense, so it doesn't involve cash flow.
William Beville’s computer training school, in Richmond, stocks workbooks with the following characteristics:Demand D = 19,500 units/yearOrdering cost S = $25/orderHolding cost H = $4/unit/yeara) Calculate the EOQ for the workbooks.b) What are the annual holding costs for the workbooks?c) What are the annual ordering costs?
Answer:
a) EOQ = 494 units
b) Annual Holding cost = $988
c) Annual order cost = $988
Explanation:
See images to get the explanation and computation:
a) EOQ = 494 units
b) Annual Holding cost = $988
c) Annual order cost = $988
What is cost?A cost is the worth of money that has been expended to produce something or provide a service and is therefore no longer available for use in production, research, retail, and accounting. In the case of an acquisition cost, the money spent on the acquisition is considered the cost.
Fixed and variable costs are the two main categories of expenses incurred by enterprises. Variable costs change with output, whereas fixed costs do not. Overhead costs are another name for fixed expenses. They must be paid whether a company produces 100 or 1,000 widgets.
A cost is an outlay needed to create, market, or prepare an item for regular usage. In other terms, it's the cost incurred to produce a good, buy inventories, sell goods, or prepare equipment for use in a commercial activity.
Any system for allocating expenses to a business component is known as costing. Costing is frequently used to establish costs for customers, distribution channels, employees, regions, products, product lines, processes, subsidiaries, and whole businesses.
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Doug's Boat Shop, Inc. reports operating income of $260,000 and interest expense of $31,200. The average common stockholders' equity during the year was $50,000. The beginning assets balance is $115,000 and ending assets balance is $180,000. What is the leverage ratio? (Round your final answer to two decimal places.)
Answer:
1. Interest coverage ratio=8.33
2. debt stockholder ratio=0.624
3. debt ratio=0.21
Explanation:
Leverage ratio is a financial tool used to determine a company's level of debt and it's ability to handle debt without going bankrupt.
1. Consider the interest coverage ratio formula;
interest coverage ratio=operating income/interest expense
where;
operating income=$260,000
interest expense= $31,200
replacing;
interest coverage ratio=260,000/31,200=8.33
2. Consider the debt to equity ratio formula;
debt to equity ratio=debt/stockholder equity
where;
debt=interest expense=$31,200
stockholder equity= $50,000
replacing;
debt stockholder ratio=31,200/50,000=0.624
3. Consider the debt ratio formula;
debt ratio=debt/assets
where;
debt=interest expense=$31,200
average assets=(beginning asset balance+ending asset balance)/2
average assets=(115,000+180,000)/2=$147,500
replacing;
debt ratio=31,200/147,500=0.21
The leverage ratio for Doug's Boat Shop, Inc. is calculated by dividing the average assets of $147,500 by the average common stockholders' equity of $50,000, resulting in a leverage ratio of 2.95.
Explanation:The leverage ratio is calculated by dividing the total average assets by the average common stockholders' equity. The average assets can be found by taking the average of beginning and ending assets. In this example, the balance of the beginning asset is $115,000, and the balance of the ending asset is $180,000, so the average asset is (115,000 + 180,000) / 2 = $147,500.
Given the average common stockholders' equity during the year was $50,000, the leverage ratio would be $147,500 / $50,000 = 2.95.
After rounding to two decimal places, the leverage ratio for Doug's Boat Shop, Inc. is 2.95.
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The Hot Dog Shack wants to raise $1.2 million by selling some coupon bonds at par. Comparable bonds in the market have a 6.5 percent annual coupon, 15 years to maturity, and are selling at 97.687 percent of par. What coupon rate should The Hot Dog Shack set on its bonds?
Answer:
6.75%
Explanation:
In this question, we use the Rate formula which is shown in the spreadsheet.
The NPER represents the time period.
Given that,
This is correct Present value = $976.87
Assuming figure - Future value or Face value = $1,000
PMT = 1,000 × 6.5% = $65
NPER = 15 years
The formula is shown below:
= Rate(NPER,PMT,-PV,FV,type)
The present value come in negative
So, after solving this, the answer would be 6.75%
Leslie, Inc., followed the practice of depreciating its building on a straight-line basis. A building was purchased in 2016 and had an estimated useful life of 25 years and a residual value of $20,000.
The company's depreciation expense for 2016 was $15,000 on the building.
What was the original cost of the building?
a. $395,000
b. $500,000
c. $520,000
d. Cannot be determined from the information given.
Answer:
a. $395,000
Explanation:
Since the depreciating method is practiced in a straight-line basis, the equation for the value of the building as a function of the time in years (V(t)) is:
[tex]V(t) = -kt + C[/tex]
Where k is the yearly depreciation rate of $15,000 per year and C is the initial cost.
For t = 25 years, V(t) = $20,000. Thus:
[tex]V(t) = -15,000t + C\\V(25) = 20,000 = -15,000*25 +C\\C= 20,000 + 15,000*25\\C= 395,000[/tex]
The original cost of the building was $395,000
Chesters turnover rate for this year is 6.3%. This rate is projected to remain the same next year and no further downsizing will occur from automating. Chester plans to spend an additional $500 beyond the extra amount above the$1000 recruiting base it spent this year. The goal of this additional investment is to improve the quality of applicants. What would the total recruiting cost be for chester next year?a-$163,990b-$178,898c-$149,806d-193,806
Answer:
d-193,806
Explanation:
Please see attachment
Based on Chester's turnover rate and the additional cost of recruiting, the total recruiting cost for Chester would be D. $193,806.
The total recruiting cost for Chester can be found by the formula:
= (Recruiting base spending + Current year spending + Additional spending) x Number of employees next year
Number of employees next year:
= Current employee number x Turnover rate
= 468 x 6.3%
= 29.484
Recruiting cost is:
= (1,000 + 5,000 + 500) x 29.484
= $193,806
In conclusion, option D is correct.
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Mikkelson Corporation's stock had a required return of 12.50% last year, when the risk-free rate was 3% and the market risk premium was 4.75%.
Then an increase in investor risk aversion caused the market risk premium to rise by 2%. The risk-free rate and the firm's beta remain unchanged.
What is the company's new required rate of return?
(Hint: First calculate the beta, then find the required return.) Do not round your intermediate calculations.
a. 16.50%
b. 13.04%
c. 12.87%
d. 12.71%
e. 14.36%
Answer:
a. 16.50%
Explanation:
Find the beta as of last year using CAPM;
CAPM ; r = risk free + beta(Market risk premium)
0.125 = 0.03 + beta(0.0475)
Subtract 0.03 from both sides;
0.125-0.03 = 0.0475beta
0.095 = 0.0475beta
Divide both sides by 0.0475;
0.095/0.0475 = beta
beta = 2
Next, use CAPM again to find the new required return with a market risk premium is 4.75%+ 2% = 6.75%
r = 0.03 + 2(0.0675)
r = 0.03 + 0.135
r = 0.165 or 16.5%
Therefore, the new required return is 16.5%
Suppose a firm has 15 million shares of common stock outstanding and six candidates are up for election to five seats on the board of directors.
a.
If the firm uses cumulative voting to elect its board, what is the minimum number of votes needed to ensure election of one member to the board?
Minimum number of votes
b.
If the firm uses straight voting to elect its board, what is the minimum number of votes needed to ensure election of one member to the board?
Answer:
Consider the following calculations
Explanation:
a.) Under cumulative voting scenario,
Total number of votes available = Common Shares Outstanding × No of directors
= 15 x 5 million
= 75 million
As there are six candidates for the five board positions, the five candidates with highest number of votes will be elected to the board and the candidate with the least total votes will not be elected.
Minimum votes needed to ensure election =1/6 x 75 million + 1 vote to break any ties
= 12,500,001 votes
If one candidate receives 12,500,001 votes, the leftover is total 62,499,999 votes.
No matter how these votes are spread over the remaining 5 director candidates, it is impossible for each of the 5 to receive more than 12,500,001. This would require more than 5 × 12,500,001 votes, or more than the remaining 62,499,999 votes.
b.) Now, in case of straight voting,
Vote on board of directors occurs one director at a time.
=> Number of votes eligible for each director = Number of Shares Outstanding = 15,000,000
Minimum number of votes needed to ensure election is through simple majority i.e. = 15,000,000/2 + 1 = 7,500,001 votes
In cumulative voting, 5 votes are needed to ensure the election of one board member. In straight voting, 7.5 million votes are needed to ensure the election of one board member.
Explanation:a. In cumulative voting, the minimum number of votes needed to ensure election of one member to the board is equal to the number of seats available. Since there are five seats on the board, the firm needs at least 5 votes to ensure the election of one member.
b. In straight voting, the minimum number of votes needed to ensure election of one member to the board is equal to half of the total number of shares plus one. In this case, half of 15 million is 7.5 million, and when we add one, we get 7.5 million + 1 = 7.5 million votes.
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Bell’s Shop can make 1000 units of a necessary component with the following costs: Direct Materials $24000 Direct Labor 6000 Variable Overhead 3000 Fixed Overhead ? The company can purchase the 1000 units externally for $39000. The unavoidable fixed costs are $2000 if the units are purchased externally. An analysis shows that at this external price, the company is indifferent between making or buying the part. What are the fixed overhead costs of making the component?
Final answer:
The fixed overhead costs of making the component are $6000.
Explanation:
To determine the fixed overhead costs of making the component, we need to compare the cost of making the component with the cost of buying it externally. The total cost of making the component includes direct materials, direct labor, variable overhead, and fixed overhead. We are given that the direct materials cost is $24000, direct labor cost is $6000, and the variable overhead cost is $3000. The fixed overhead cost can be calculated by subtracting the sum of the other costs from the cost of purchasing the component externally:
Fixed Overhead = Cost of Purchasing Externally - (Direct Materials + Direct Labor + Variable Overhead)
Fixed Overhead = $39000 - ($24000 + $6000 + $3000)
Fixed Overhead = $39000 - $33000
Fixed Overhead = $6000
Fixed overhead cost of making component: $6,000. Total cost of making equals external purchase cost at $39,000.
To find the fixed overhead costs of making the component, we need to determine the total cost of making the component and compare it with the cost of purchasing externally.
Given:
- Direct Materials: $24,000
- Direct Labor: $6,000
- Variable Overhead: $3,000
- Fixed Overhead: ?
- External purchase cost for 1000 units: $39,000
- Unavoidable fixed costs if purchased externally: $2,000
Step-by-Step Calculation:
1. Total Cost of Making Internally:
- Total Variable Cost = Direct Materials + Direct Labor + Variable Overhead
- Total Variable Cost = $24,000 + $6,000 + $3,000 = $33,000
- Total Cost of Making = Total Variable Cost + Fixed Overhead
- Total Cost of Making = $33,000 + Fixed Overhead
2. Total Cost of Purchasing Externally:
- External purchase cost = $39,000
3. Equating Costs to Determine Fixed Overhead:
- The company is indifferent between making or buying, meaning the costs are equal.
- Set the total cost of making equal to the external purchase cost and solve for Fixed Overhead:
[tex]\[ $33,000 + \text{Fixed Overhead} = $39,000 \][/tex]
[tex]\[ \text{Fixed Overhead} = $39,000 - $33,000 \][/tex]
[tex]\[ \text{Fixed Overhead} = $6,000 \][/tex]
Answer:
The fixed overhead costs of making the component are $6,000.
Commons, Inc. provides the following information for 2018:
Net income $36,000
Market price per share of common stock $16/share
Dividends paid $0.70/share
Common stock outstanding at Jan. 1, 2018 130,000 shares
Common stock outstanding at Dec. 31, 2018 165,000 shares
The company has no preferred stock outstanding. Calculate the dividend yield for common stock?
Answer:
4.375%
Explanation:
The formula to compute the dividend yield for common stock is shown below:
= Dividend per share ÷ Market price per share
= $0.70 per share ÷ $16 per share
= 4.375%
It shows a relationship between the dividend per share and the market price per share so that the accurate amount of dividend yield can come.
All other information which is given is not relevant. Hence, ignored it
You are considering 3 independent projects, project A, project B, and project C. Given the following cash flow information, calculate the payback period for each
Project AProject BProject C
Initial Outlay-1,000-10,000-5,000
Inflow Yr 16005,0001,000
Inflow Yr 23003,0001,000
Inflow Yr 32003,0002,000
Inflow Yr 41003,0002,000
Inflow Yr 55003,0002,000
If you require a 3-year payback before an investment can be accepted, which project(s) would be accepted?
Full Point will be given for work shown
Answer:
Project A should be accepted as it has less payback period
Explanation:
In the payback, we analyze in how many years the invested amount is recovered. The computation is shown below:
For Project A
In year 0 = $1,000
In year 1 = $600
In year 2 = $300
In year 3 = $200
In year 4 = $100
In year 5 = $500
If we sum the first 2 year cash inflows than it would be $900
Now we deduct the $900 from the $1,000 , so the amount would be $100 as if we added the third year cash inflow so the total amount exceed to the initial investment. So, we deduct it
And, the next year cash inflow is $200
So, the payback period equal to
= 2 years + $100 ÷ $200
= 2.5 years
For Project B
In year 0 = $10,000
In year 1 = $5,000
In year 2 = $3,000
In year 3 = $3,000
In year 4 = $3,000
In year 5 = $3,000
If we sum the first 2 year cash inflows than it would be $8,000
Now we deduct the $8,000 from the $10,000 , so the amount would be $2,000 as if we added the third year cash inflow so the total amount exceed to the initial investment. So, we deduct it
And, the next year cash inflow is $3,000
So, the payback period equal to
= 2 years + $2,000 ÷ $3,000
= 2.67 years
For Project C
In year 0 = $5,000
In year 1 = $1,000
In year 2 = $1,000
In year 3 = $2,000
In year 4 = $2,000
In year 5 = $2,000
If we sum the first 3 year cash inflows than it would be $4,000
Now we deduct the $4,000 from the $5,000 , so the amount would be $1,000 as if we added the fourth year cash inflow so the total amount exceed to the initial investment. So, we deduct it
And, the next year cash inflow is $2,000
So, the payback period equal to
= 3 years + $1,000 ÷ $2,000
= 3.5 years
So, Project A should be accepted as it has less payback period
Project A and B have payback periods within the required 3 years, while Project C has a payback period exceeding 3 years, therefore only projects A and B would be accepted.
To calculate the payback period for each project, we must assess how long it takes for the initial investment to be recovered through the project's cash inflows. The payback period is the length of time required to recover the cost of an investment.
For Project A:
Year 1: Inflow of $600, remaining balance is $400 (1000-600).
Year 2: Inflow of $300, remaining balance is $100 (400-300).
Year 3: Inflow of $200, the remaining balance is recovered and the payback period is within 3 years.
For Project B:
Year 1: Inflow of $5,000, remaining balance is $5,000 (10000-5000).
Year 2: Inflow of $3,000, remaining balance is $2,000 (5000-3000).
Year 3: Inflow of $3,000, exceeding the remaining balance; thus, the payback period is within 3 years.
For Project C:
Year 1: Inflow of $1,000, remaining balance is $4,000 (5000-1000).
Year 2: Inflow of $1,000, remaining balance is $3,000 (4000-1000).
Year 3: Inflow of $2,000, remaining balance is $1,000 (3000-2000).
It is only by the end of Year 4, with another inflow of $2,000, that the remaining balance is recovered, making the payback period for Project C over 3 years.
Given a required payback period of 3 years, only projects A and B would be accepted as their payback periods are within this timeframe.