Answer:
The correct answer is letter "A": The EBITDA coverage ratio increases.
Explanation:
The Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) ratio is an accounting indicator that measures the profitability of a company. It is calculated by subtracting the costs of goods sold and administrative expenses from the firm's income. The EBITDA is typically used to value the capacity for generating benefits of an entity considering only its productive activity because it indicates the returns obtained from the direct exploitation of the business.
Therefore, if the EBITDA of a firm increases it is because its financial position has possibly increased.
Final answer:
An increase in the EBITDA coverage ratio typically suggests an improvement in a company's financial position by indicating better earnings relative to its operating costs. Other options such as declining liquidity ratios, asset turnover, and ability to cover interest expenses generally signify financial weakness.
Explanation:
Among the given options, an increase in the EBITDA coverage ratio would generally indicate an improvement in a company's financial position, holding other things constant. This ratio measures a company's ability to pay off its operating expenses, not including taxes, interest, depreciation, and amortization with its operating profit. A higher EBITDA coverage ratio suggests the company is generating sufficient earnings to cover its operating costs, which is a positive sign of financial health. Option A
In contrast, declining current and quick ratios imply weakening short-term liquidity, a decrease in total assets turnover indicates less efficiency in using assets to generate revenue, a decline in the TIE (times interest earned) suggests a decrease in the ability to cover interest expenses, and an increase in the DSO (days sales outstanding) implies slower collection of receivables, potentially affecting cash flow.
Two economists estimate the government expenditure multiplier and come up with different results. One estimates the multiplier at 0.8, while the other comes up with an estimate of 1.4. Explain why these estimates are different in terms of the assumptions that each economist is making. A. Compared to the first economist, the second economist is assuming a longer time frame for the effects of the increased expenditure to be observed. B. Compared to the first economist, the second economist must be assuming either a larger induced increase in consumption, a smaller crowding out effect, or both. C. Compared to the first economist, the second economist must be assuming either a smaller induced increase in consumption, a larger crowding out effect, or both. D. Unlike the first economist, the second economist must be assuming that the government expenditure is devoted to useful projects.
Answer:
B. Compared to the first economist, the second economist must be assuming either a larger induced increase in consumption, a smaller crowding out effect, or both.
Explanation:
Boland Company sells a product that is priced at $20 per unit. The per unit contribution margin is equal to 25 percent of the sales price. If fixed costs amount to $55,000 and the company has a desired profit of $20,000, the number of units that must be sold to earn the desired profit is:______
Answer:
The number of units needed to be sold to earn a desired profit is 15000 units.
Explanation:
The desired profit is the profit that a firm wants to earn. The umber of units needed to earn a desired profit can be calculated using the break even approach.
Under break even the number of units required to break even are calculated by dividing the total fixed costs by the contribution margin per unit.
To calculate the number of units needed to earn desired profit, we need to add the desired profit figure to the fixed cost and divide the total by contribution margin per unit.
The contribution margin per unit is = 20 * 0.25 = $5 per unit
The units needed to earn desired profit = (55000 + 20000) / 5
Units needed to earn desired profit = 15000 units
"Southern Foods just paid an annual dividend of $3.10 a share. Management estimates the dividend will increase by 4 percent for one year then 8 percent for two years then 2% forever. The required rate of return is 12 percent. What is the value of this stock today"
Answer:
THE VALUE OF THE STOCK TODAY IS $35.63
Explanation:
The dividend discount model bases the value of the stock on the present value of the expected future dividends from the stock. Using the three stage growth model of DDM, we can calculate the price of this stock today. The price/value of this stock today is,
P0 = 3.1 * (1+0.04) / (1+0.12) + 3.1 * (1+0.04) * (1+0.08) / (1+0.12)^2 +
3.1 * (1+0.04) * (1+0.08)^2 / (1+0.12)^3 +
[ (3.1 * (1+0.04) * (1+0.08)^2 * (1+0.02) / (0.12 - 0.02)) / (1+0.12)^3 ]
P0 = $35.63
Analysts project the following cash flows for Hopkin’s Corporation during the next three years: Year 1: – $27 million (this is negative $27 million), Year 2: $42 million, Year 3: $52 million. Free cash flow is then expected to grow at a constant 6% rate. Hopkin’s weighted average cost of capital is WACC = 11%. 12) (8 pts) What is Hopkin’s terminal, or horizon, value? (Hint: Find the value of all free cash flows beyond Year 3 discounted back to Year 3.
Answer:
The terminal value is $1102.4 million
Explanation:
The terminal value is the value of future cash flows discounted back to the period from where the cash flow growth becomes constant. The calculation of terminal value is important in Discounted cash flow models because terminal value contains a large percentage of the company's value. The formula to calculate the terminal value of this company will be,
Terminal value = FCF3 * (1+g) / (WACC - g)
Terminal Value = 52 * (1+0.06) / (0.11 - 0.06)
Terminal Value = $1102.4 million
Here are the 2018 and 2019 (incomplete) balance sheets for Newble Oil Corp.BALANCE SHEET AT END OF YEAR(Figures in $ millions)Assets 2018 2019 Liabilities and Shareholders' Equity 2018 2019Current assets $ 319 $ 465 Current liabilities $ 255 $ 249Net fixed assets 1,290 1,465 Long-term debt 875 1,010a&b. What was shareholders' equity at the end of 2018 and 2019?c. If Newble paid dividends of $145 million in 2019 and made no stock issues, what must have been net income during the year?d. If Newble purchased $345 million in fixed assets during 2019, what must have been the depreciation charge on the income statement?e. What was the change in net working capital between 2018 and 2019?f. If Newble issued $218 million of new long-term debt, how much debt must have been paid off during the year? (Enter your answer in millions.)
Answer:
Newble Oil Corp Balance Sheet for 2018:
Current Assets - $319 million
Net Fixed Assets - $1,290 million
Total Assets = $1,609 million
Current Liabilities - $255 million
Long-term Debts - $875 million
Total Liabilities = $1,130 million
a) Equity = Total Assets ($1,609 million) minus Total Liabilities ($1,130 million) = $479 million
Newble Oil Corp Balance Sheet for 2019:
Current Assets - $465 million
Net Fixed Assets - $1,465 million
Total Assets = $1,930 million
Current Liabilities - $249million
Long-term Debts - $1,010 million
Total Liabilities = $1,259 million
b) Equity = Total Assets ($1,930 million) minus Total Liabilities ($1,259 million) = $671 million
c) Net Income during 2019, if Newble paid dividends of $145 million:
2019 Equity plus Dividends paid minus 2018 Equity = Net Income
($671 + $145 - $479) million = $337 million
d) Depreciation charge for 2019 if Newble purchased $345 million in fixed assets:
2018 fixed assets plus new acquisition minus 2019 fixed assets =
$(1,290 + 345 - 1,465) million = $170 million
e) Change in net working capital between 2018 and 2019:
Net working capital = Current Assets minus Current Liabilities
2018 net working capital = $319 - $255 = $64 million
2019 net working capital = $465 - $249 = $216 million
Therefore, the change in net working capital is $216 - $64 = $152 million.
f) Debt paid off during the year:
2018 debt plus new issue minus 2019 debt balance equals debt paid off.
$(875 + 218 - 1,010) millions = $83 million
Explanation:
a) Equity is the difference between total assets and total liabilities. In accounting equation, assets = liabilities + equity.
b) Dividends is a distribution from retained earnings (equity). It decreases the retained net income, which increases the equity.
c) Depreciation also decreases the assets. To find the charge for the period, we add compare the new assets balance with the old, taking into consideration new acquisitions.
d) Net working capital is the difference between current assets and current liabilities.
e) Debts paid off during the year can be obtained by comparing old debt balance with the new and additional debt issued during the period.
The shareholders' equity in 2018 and 2019 was $479 million and $671 million, respectively. The net income for 2019 was $337 million. The company spent $170 million in depreciation charges and had a net working capital change of $69 million. The company repaid $83 million in long-term debt.
Explanation:The balance sheet is essentially a snapshot of a company's financial position at a specific point in time. It is composed of assets, liabilities, and shareholders' equity, and it always balances, meaning that the total assets are always equal to the total liabilities and shareholders' equity combined.
To calculate the shareholders' equity, you simply subtract the total liabilities from the total assets. Therefore, for 2018:
Shareholders' Equity = Total Assets - Total Liabilities = $1,609 ($319 + $1,290) - $1,130 ($255 + $875) = $479 million
Following the same formula for 2019 gives:
Shareholders' Equity = Total Assets - Total Liabilities = $1,930 ($465 + $1,465) - $1,259 ($249 + $1,010) = $671 million
Net Income can be calculated by adding dividends to the change in shareholders' equity, which leads to:
Net Income = Dividends + Change in Shareholders' Equity = $145 + $192 ($671 - $479) = $337 million
The Depreciation Charge can be calculated by subtracting the net increase in fixed assets ($1,465 - $1,290 = $175 million) from the gross purchase of fixed assets. So:
Depreciation Charge = Gross Purchase of Fixed Assets - Net Increase in Fixed Assets = $345 - $175 = $170 million
Change in net Working Capital can be computed as:
Change in Net Working Capital = Current Assets 2019 - Current Assets 2018 - (Current Liabilities 2019 - Current Liabilities 2018) = $69 million
If Newble issued $218 million of new Long-term Debt, to find the repaid debt we must subtract the net change in debt between 2019 and 2018 from it:
Repayment of Long-term Debt = New Long-term Debt Issued - Change in Long-term Debt = $218 - $135 ($1,010 - $875) = $83 million
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In the absence of market failures, when the government taxes market participants, the effect is to move the market: Group of answer choices away from the competitive equilibrium, thereby enhancing social efficiency. closer to the competitive equilibrium, thereby enhancing social efficiency. closer to the competitive equilibrium, thereby reducing social efficiency. away from the competitive equilibrium, thereby reducing social efficiency.
Answer:
Closer to the competitive equilibrium, thereby reducing social efficiency.
Explanation:
The market is not failed itself, so there is no need of taxes to clear it but to arrange revenue for government taxes some of the luxurious products the tax shifts supply curve to left and decrease equilibrium quantity which makes the dead weight loss in the market and the quantity get away from the efficient level.
In absence of market failures, when the government taxes market participants, the effect is to move the market :
These are selected 2017 transactions for Swifty Corporation: Jan. 1 Purchased a copyright for $122,750. The copyright has a useful life of 5 years and a remaining legal life of 30 years. Mar. 1 Purchased a patent with an estimated useful life of 4 years and a legal life of 26 years for $51,120. Sept. 1 Purchased a small company and recorded goodwill of $154,200. Its useful life is indefinite.prepare all the adjusting enteries at dec 31st to record amortization required by event.
Answer:
Dr Amortization expense $24,550
Cr Copyright asset $24,550
Dr Amortization $10,650
Cr Patent asset $10,650
Explanation:
It is noteworthy that an intangible such as patents,copyrights ,goodwill and so on whose useful life is infinite is not amortized,hence the goodwill would not be amortized as a result there is adjusting entries in respect of goodwill.
However, it is also imperative that an intangible asset is amortized using the lower of useful life and legal life,as a result copyright would be amortized over 5 years and patent over 4 years.
Copyright yearly amortization=$122,750/5 years=$24,550
Patent's apportioned amortization=$51,120/4 years*10/12=$10,650
The amortization in each case is debited to amortization expense account and credited to individual asset account.
Lion Corp. has a $4,000 par value bond outstanding with a coupon rate of 4.6 percent paid semiannually and 20 years to maturity. The yield to maturity on this bond is 2.1 percent. What is the dollar price of the bond
Answer:
$5,627
Explanation:
Price of the bond is the present value of all cash flows of the bond. These cash flows include the coupon payment and the maturity payment of the bond. Both of these cash flows discounted and added to calculate the value of the bond.
According to given data
Face value of the bond is $4,000
Coupon payment = C = $4,000 x 4.6% = $184 annually = $92 semiannually
Number of periods = n = 20 years x 2 = 40 period
Market Rate = 2.1% annually = 1.05% semiannually
Price of the bond is calculated by following formula:
Price of the Bond = C x [ ( 1 - ( 1 + r )^-n ) / r ] + [ F / ( 1 + r )^n ]
Price of the Bond = 92 x [ ( 1 - ( 1 + 1.05% )^-40 ) / 1.05% ] + [ $4,000 / ( 1 + 1.05% )^40 ]
Price of the Bond = $2,992.30 + $2,634.95
Price of the Bond = $5,627.25
Answer:
Price of the bond =$5626.2518
Explanation:
The price of a bond is the present value (PV) of the future cash inflows expected from the bond discounted using the yield to maturity.
The price of the bond can be calculated as follows:
PV of interest payment + PV of redemption Value
Step 1
PV of interest payment
Interest payment =( 4.6%× $4000)/2
=$ 92
Semi annual yield = 2.1/2 = 1.05 %
PV of interest payment
= 92× (1-(1.0105)^(-20×2))/0.0105)
= 2992.30
Step 2
PV of redemption value
= 4,000 × (1+0.0105)^(-20×2)
= 2633.948
Step 3
Price of bond
= $12992.30+ $2633.94
=$5626.2518
The Berwin Company established a master budget volume of 35,000 units for April. Actual overhead costs incurred amounted to $98,500. Actual production for the month was 34,000 units. The standard variable overhead rate was $1.75 per direct labor hour. The standard fixed overhead rate was $1.50 per direct labor hour. One direct labor hour is the standard quantity per finished unit. Assume the allocation base for fixed overhead costs is the number of direct labor hours. SR1a. A. Compute the total manufacturing overhead cost variance.
Answer:
$12,000 Favorable
Explanation:
Given that,
Actual overhead costs incurred = $98,500
Actual production for the month = 34,000 units
Standard variable overhead rate = $1.75 per direct labor hour
Standard fixed overhead rate = $1.50 per direct labor hour
One direct labor hour is the standard quantity per finished unit.
Firstly, we need to find out the overhead applied by multiplying the actual production units with the standard overhead rate and standard quantity per finished unit.
Total standard overhead rate:
= Standard variable overhead rate + Standard fixed overhead rate
= $1.75 + $1.50
= $3.25
Overhead applied:
= Actual production × standard quantity per finished unit × Total standard overhead rate
= 34,000 × 1 × $3.25
= $110,500
Therefore, the total manufacturing overhead cost variance is determined by deducting the Actual overhead costs from the overhead applied.
It is calculated as follows:
= Overhead applied - Actual overhead costs incurred
= $110,500 - $98,500
= $12,000 Favorable
You are considering buying common stock in Grow On, Inc. You have projected that the next dividend the company will pay will equal $3.90 and that dividends will grow at a rate of 6.0% per year thereafter. If you would want an annual return of 25.0% to invest in this stock, what is the most you should pay for the stock now?
Answer:
$20.52
Explanation:
Given that
Estimated dividends for next period = $3.90
Required rate of return = 25%
Growth rate = 6%
The computation of Price of stock is given below:-
Price of stock = Estimated dividends for next period ÷ (Required rate of return - Growth rate)
= $3.90 ÷ (0.25 - 0.06)
= $3.90 ÷ 0.19
= $20.52
Therefore for computing the price of stock we simply applied the above formula.
Del Gato Clinic's cash account shows a $15,307 debit balance and its bank statement shows $13,567 on deposit at the close of business on June 30. Outstanding checks as of June 30 total $1,199. The June 30 bank statement lists a $15 bank service charge. Check No. 919, listed with the canceled checks, was correctly drawn for $389 in payment of a utility bill on June 15. Del Gato Clinic mistakenly recorded it with a debit to Utilities Expense and a credit to Cash in the amount of $398. The June 30 cash receipts of $2,933 were placed in the bank’s night depository after banking hours and were not recorded on the June 30 bank statement. 1.Prepare its bank reconciliation using the above information.
Answer and Explanation:
The preparation of the bank reconciliation is presented below:
Del Gato Clinic's
Bank reconciliation statement
June 30
Particulars Amount Particulars Amount
Bank cash balance $13,567 Company cash balance $15,307
Add: Deposits Add: Recording error $9
in transit $2,933
Less: Outstanding Less: service fee -$15
Check - $1,199
Bank balance Company balance
After reconciliation $15,301 After reconciliation $15,301
The recording error is come from
= $398 - $389
= $9
And we do the adjustment accordingly that increased and decreased the company cash and bank cash balance
Final answer:
Bank reconciliation for Del Gato Clinic identifies discrepancies between the book balance and the bank statement, involving deposits in transit, outstanding checks, a bank service fee, and an error in recording a check amount.
Explanation:
Bank Reconciliation for Del Gato Clinic :
The process of bank reconciliation involves matching the balances in an entity's accounting records for a cash account with the corresponding information on a bank statement. The goal of this exercise is to identify any discrepancies between the two sources and make the necessary adjustments to confirm the actual cash balance. Below is the step-by-step bank reconciliation for Del Gato Clinic as of June 30:
Start with the ending balance per bank statement: $13,567.
Add deposits in transit (June 30 cash receipts not recorded by the bank): $2,933.Subtract outstanding checks: -$1,199.Adjusted bank balance: $15,301 (13,567 + 2,933 - 1,199).Start with the ending balance per books: $15,307.Subtract bank service fees not yet recorded in the books: -$15.Adjust for Check No. 919 recording error (subtract the difference between recorded amount and the actual amount): -$9 (398 - 389).Adjusted book balance: $15,283 (15,307 - 15 - 9).After the adjustments, there is a small difference of $18 between the adjusted bank balance and the adjusted book balance ($15,301 vs. $15,283). This difference needs to be investigated and corrected in the company's accounting records for proper reconciliation.
Final answer:
Bank reconciliation for Del Gato Clinic identifies discrepancies between the book balance and the bank statement, involving deposits in transit, outstanding checks, a bank service fee, and an error in recording a check amount.
Explanation:
Bank Reconciliation for Del Gato Clinic :
The process of bank reconciliation involves matching the balances in an entity's accounting records for a cash account with the corresponding information on a bank statement. The goal of this exercise is to identify any discrepancies between the two sources and make the necessary adjustments to confirm the actual cash balance. Below is the step-by-step bank reconciliation for Del Gato Clinic as of June 30:
Start with the ending balance per bank statement: $13,567.
Add deposits in transit (June 30 cash receipts not recorded by the bank): $2,933.Subtract outstanding checks: -$1,199.Adjusted bank balance: $15,301 (13,567 + 2,933 - 1,199).Start with the ending balance per books: $15,307.Subtract bank service fees not yet recorded in the books: -$15.Adjust for Check No. 919 recording error (subtract the difference between recorded amount and the actual amount): -$9 (398 - 389).Adjusted book balance: $15,283 (15,307 - 15 - 9).After the adjustments, there is a small difference of $18 between the adjusted bank balance and the adjusted book balance ($15,301 vs. $15,283). This difference needs to be investigated and corrected in the company's accounting records for proper reconciliation.
Walker, Inc., uses a standard cost system. Overhead cost information for Product One for the month of October follows: Total actual overhead incurred $14,750 Fixed overhead budgeted $1,800 Total standard overhead rate per direct labor hour $4.25 Variable overhead rate per direct labor hour $3.75 Standard hours allowed for actual production 3,500 What is the overall (or net) overhead variance?
Answer:
$125
Explanation:
Total actual overhead incurred $14,750
Less Standard hours allowed for actual production 3,500 ×Total standard overhead rate per
direct labor hour $4.25 ($14,875)
Overhead variance $125
Therefore the overall (or net) overhead variance is $125
1. If Bodin Company plans to sell 480,000 units during the year, compute the number of units the firm would have to manufacture during the year. Hilton, Ronald. Managerial Accounting: Creating Value in a Dynamic Business Environment (p. 405). McGraw-Hill Higher Education. Kindle Edition.
Answer:
450,000 Units
Explanation:
The complete part of the question is as below:
Bodin Company budgets on an annual basis. The following beginning and ending inventory levels (in units) are planned for the year 20x1. Two units of raw material are required to produce each unit of finished product.
January 1 December 31
Raw material 35,000 45,000
Work in process 12,000 12,000
Finished goods 80,000 50,000
Solution:
Units to be manufactured to sell 480,000 Units = Sales + Closing Inventroy - Opening Inventory
= 480,000 + 50,000 - 80, 000 = 450, 000 Units
The number of units Bodin would have to manufacture is 450,000 Units
Answer:
A.
Bodin will have to manufacture 450,000 units and procure materials of 910units (if it plans to sell 480,000 units in the year)
B.
If it plans to sell 500,000 units however, it will have to produce additional stock of 470,000 units and procure materials of 950,000 units.
Explanation:
Production planning is a key requirement during the budget process
It works side by side with the sales budget. It is intended to fulfill the projected demand the business is positioning itself for in the period being reviewed.
It considers all levels of production needs in achieving each unit of production. Raw material, labour, conversion costs etc.
Kindly review the attached for the detailed presentation of answers.
Jovan's Movers rents out trucks with a crew of two on a daily basis, usually to homeowners who are moving or to companies with delivery problems. On one particular day Jovan is a truck short and intends to hire one from a local truck rental firm. However, he does not know how large the load is that needs to be moved.How big a truck should he rent? A large truck costs $200 per day (including insurance, fuel, etc.), a small truck $130 per day. A small truck is cheaper but if the load is too large, the crew may have to make two trips. Jovan assesses the additional cost of making two trips (overtime and truck mileage) at $150 beyond the costs for a single trip. He assesses the probability that two trips will be necessary if he rents a small truck at 0.40. Assume that if Jovan rents a large truck it can accommodate any size load in a single trip.a. Assuming there are no other ramifications to the decision, should Jovan rent a large truck or a small truck? Construct a decision tree (manually or using PrecisionTree) to support your answer and explain your recommendation. Would your answer change if the probability that two trips will be necessary is 50% instead of 40%?b. What is the most Jovan would pay to know for sure whether a small truck or a large truck would be adequate for the job? For example, suppose he could hire someone to inspect the contents of the move in advance. Construct a second decision tree to support your answer and estimate if the probability of needing two trips with a small truck is set to 40% as in part a).c. Suppose Jovan is risk averse, with a risk tolerance value of $1,000 (assume the exponential utility function applies). Would this change your answer to part a)?
Answer:
Explanation:
In this problem business of Jovan is to rent out trucks and earn revenues. On a particular day there is a shortage of one truck. It can be taken on rent from other party. If a big truck is hired, then any load can be carried. But the rental cost is $200. Small truck cannot carry weight beyond a range. In that case two trips are needed. Rental of one trip of small truck is $130. Cost of two trip is $150 extra. So it is $130+$150=$280. Probability of two trips is 40%. So based on these data, following decision tree diagram is draw:
From this decision tree expected rental cost of small truck based on probability is-
Expected rental of small truck =0.6 x $130 + 0.4 x $280
=$78+\$112
=$190
Decision: Since expected rental of small truck is $190, it is lower than rental of big truck of $200. So small truck is recommended.
If probabilities of trips are 50:50, then expected rental of small truck is-
Expected rental of small truck =0.5 x $130 + 0.5 x $280
=$65 + $140
=$205
Now it is more than rental of big truck. So hiring of big truck is recommended.
b) Now Jovan wants to hire an outside consultant. He will assess and recommend whether to hire a big truck or a small truck. If he recommend for big truck, then big truck will be hired. Otherwise a small truck will be bought. As per current situation probability of two trip is 40%. If consultant approves this situation, then big truck will be hired. Thus probability of hiring big truck is 40% under recommended scenario. So probability of hiring small truck with one trip is 60%. On this basis decision chart is drawn below:
Based on this diagram, expected cost of hiring a truck is-
Expected rental =0.4 x $200 + 0.6 x $130
= $80 + $78
= $158
If you compare this expected cost with the expected cost of $190 in part (a), then it is lower by $190-$158=$32
Hence, maximum $32 can be paid to consultant for hiring and taking perfect decision.
c) Now Jovan has been taken as risk averser. His risk tolerance value is $1,000. Suppose utility function is exponential of following form-
U=e^{P} where p is the probability of two trips by small truck
As a risk averser he will undertake risk only when this U value is $1,000.
U=e^{P} = $1,000
Take log on both side to get-
Plog e = log1,000
{P}{log}2.71828 = log1,000 [ since e =2.71828]
{P}= 3 / 0.43429189
=6.929 percent
So the risk averse Jovan will go for small truck only when probability of two trips for small car is 6.929 percent. Here it is 40%. So big truck will be hired.
Software Distributors reports net income of $53,000. Included in that number is depreciation expense of $9,000 and a loss on the sale of land of $4,800. A comparison of this year's and last year's balance sheets reveals a decrease in accounts receivable of $23,000, a decrease in inventory of $14,000, and an increase in accounts payable of $43,000. Required Prepare the operating activities section of the statement of cash flows using the indirect method.
Answer and Explanation:
Cash flows (Indirect method) from Operating Activities.
Particular Amount
Net Income $53,000
Adjustment:
Add: Depreciation expense $9,000
Loss on sale of land $4,800
Decrease in A/c receivables $23,000
Decrease in Inventory $14,000
Increase in A/c payable $43,000
Net Cash flows from Operating activities $146,800
A market is in long-run equilibrium and firms in this market have identical cost structures. Suppose demand in this market decreases. Which of the following are correct descriptions of what happens to the individual firms and the whole market as the market first leaves and then returns to long-run equilibrium?
Answer:
It will cause Market price to decrease in the short-run. There will be short-run decrease on Individual firms' profit-maximizing output .A good number of Firms will exit the market in the long run. Finally, market quantity will decrease in the long-run.A decrease in demand in a market in long-run equilibrium causes a fall in price and output, leading to economic losses that force firms to exit. The market eventually returns to the long-run equilibrium, where all firms earn zero economic profits. The process of reaching this state is influenced by firms' decisions to enter or exit the market.
Explanation:When the demand in a market decreases, the immediate result is a reduction in market price and output. This causes economic losses that lead to firms exiting the market, thereby reducing the overall market supply. This process continues until the point where the remaining firms are only earning normal profits, and the market has returned to the state of long-run equilibrium.
In long-run equilibrium, all firms in perfectly competitive markets earn zero economic profits. This is because as long as a firm is earning positive economic profits, other firms will enter the market and increase supply, which then lower the price and eventually the profit to zero.
Consequently, entry and exit decisions play an essential role in the adjustment process to long-run equilibrium. When firms are making profits, new firms will enter, enlarging the industry and driving down prices until no further firms want to enter because there are no more profits above the normal. Conversely, if firms are making losses, firms will exit, shrinking the industry and driving up prices until firms no longer want to exit because all remaining firms are making normal profit.
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An investor will pay $2,318.63 for an n-year $2,000 par bond with a coupon rate of 10% compounded semiannually or he will pay $2,531.05 for an nyear $2,000 par bond with a coupon rate of 11% compounded semiannually. Assuming that the investor gets the same yield on the two bonds, find this yield rate expressed as a nominal rate convertible two times per year. Also find n.
Answer:
28 years
Explanation:
check the pictures attached below for the explanation and i hope it helps. Thank you
The yield rate for both bonds is approximately 8.02% annually, compounded semiannually. The number of periods n is found to be 20 periods or 10 years. These results are obtained by equating the present value equations for both bonds and solving for the yield rate and period.
To solve this, we can use the present value formula for bonds:
1. Identify Variables:
Bond 1:Price = $2,318.63Coupon Rate = 10% semiannual (5% per period)Face Value = $2,000Bond 2:Price = $2,531.05Coupon Rate = 11% semiannual (5.5% per period)Face Value = $2,0002. Present Value (PV) Formula:
We use: [tex]PV = C * (1 - (1 + r)^-n) / r + F / (1 + r)^n[/tex]
PV = Present Value (Price of Bond)C = Coupon Payment = Face Value * Coupon Rater = Yield Rate per periodn = Number of periodsF = Face Value3. Equate Present Value Equations:
For Bond 1: $2,318.63 = $100 * (1 - (1 + r)²ⁿ) / r + $2,000 / (1 + r)²ⁿ
For Bond 2: $2,531.05 = $110 * (1 - (1 + r)²ⁿ ) / r + $2,000 / (1 + r)²ⁿ
4. Solving for Yield Rate (r) and Number of Periods (2n):
Using a financial calculator or solving via iterations, you will find:
r ≈ 0.0401 (4.01% semiannually)
5. Nominal Annual Yield Rate:
Nominal Yield Rate = 2 * r = 2 * 0.0401 = 0.0802 or 8.02%
6. Solving for Number of Periods (n):
Substitute r back into one of the equations to solve for n:
$2,318.63 = $100 * (1 - (1 + 0.0401)²ⁿ ) / 0.0401 + $2,000 / (1 + 0.0401)²ⁿ
Solving this equation, n = 10 years or 20 periods.
The Oxford Heating Company has been very successful in the past four years. Over these years, it paid common stock dividend of $4 in the first year, $4.20 in the second year, $4.41 in the third year, and its most recent dividend was $4.63. The company wishes to continue this dividend growth indefinitely. The expected growth rate in dividends is closest to
Answer:
The correct answer is 5%.
Explanation:
According to the scenario, the computation of the given data are as follows:
We can calculate the growth rate by using following formula:
Growth rate = (Dividend of 3rd year ÷ Dividend of 1st year)^1/2 -1
By putting the value in the formula, we get
Growth rate = ($4.41 ÷ $4 )^1/2 - 1
= ( $0.41)^1/2 -1
= 0.05 or 5%
The expected growth rate in dividends for the Oxford Heating Company can be calculated using the compound annual growth rate (CAGR) formula. Over three periods, the dividends grew from $4.00 to $4.63, which equates to a CAGR of approximately 5%.
Explanation:The student is asking for assistance in calculating the expected growth rate of dividends for the Oxford Heating Company which has shown a pattern of increasing dividend payments over four years. To find this growth rate, we can use the formula for the compound annual growth rate (CAGR), which is:
CAGR = (EV / BV)^(1/n) - 1
where EV is the ending value, BV is the beginning value, and n is the number of periods.
Using the given dividends:
Year 1: $4.00Year 2: $4.20Year 3: $4.41Year 4: $4.63we have EV = $4.63, BV = $4.00, and n = 3 (as we are looking at the growth over three periods - from Year 1 to Year 4).
Applying the values to the CAGR formula gives us the expected growth rate of approximately 5%.
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The following table reports real income per person for several different economies in the years 1960 and 2010. It also gives each economy's average annual growth rate during this period. For example, real income per person in the Central African Republic was $1,010 in 1960, and it actually declined to $628 by 2010, The Central African Republic's average annual growth rate during this period was -0.95%, and it was the poorest economy in the table in the year 2010.
The real income-per-person figures are denominated in U.S. dollars with a base year of 2005. The following exercises will help you to understand the different growth experiences of these economies.
Economy Real Income per Person in 1960 (Dollars) Real Income per Person in 2010 (Dollars) Annual Growth Rate (Percent)
Australia 13,817 37,338 2.01
Finland 8,837 31,601 2.58
Thailand 772 8,467 4.91
Ireland 7,807 41,558 3.40
Pakistan 717 2,477 2.51
Central African Republic 1,010 628 -0.95
Indicate which economy satisfies each of the following statements.
Statment Australoa Cental African Republic Finland Ireland Pakistan Thailand
This economy experienced the fastest rate of growth in real income per person from 1960 to 2010
This economy had the highest level of real income per person in the year 2010
Consider the following list of four countries. Which economy began with a level of real income per person in 1960 that was below that of Finland and grew fast enough to catch up with and surpass Finland's real income per person by 2010
a. Australia
b. Central African Republic
c. Ireland
d. Pakistan
Answer:
Thailand
Ireland
c
Explanation:
Thailand has the highest annual growth rate so it is fastest economy to grow in rela income per person form 1960 to 2010 that is 4.91%
Irleand has the highest real income per person in year 2010 that is $41,558
Ireland, Pakistan and Thailand had lower real income per person than Finland in 1960 but only Ireland had higher real income per person than Finland in 2010.
what role does profit play in a mixed market economy
Answer:
A mixed economy has three of the followingcharacteristics of a market economy.
Answer:
it acts as an incentive for people to start businesses
Explanation:
profit is a reward for entrepreneurial activity, including risk taking and innovation
What is the difference between accounting profit and economic profit?Accounting profit emphasizes cost of debt and equity while economic profit focuses on cost of debt.Accounting profit is synonymous with NI, while economic profit represents EPS.Accounting profit accounts for interest expense while economic profit accounts for interest expense and opportunity cost.Accounting profit can be calculated by NOPAT – [WACC × (Costly Capital)], while economic profit is simply NI.
Answer:
The answer is C. Accounting profit accounts for interest expense while economic profit accounts for interest expense and opportunity cost.
Explanation:
Accounting cost is the difference between total revenue and total cost. The total cost are related to the operation of the business. These cost are also known as explicit cost. Accounting cost does not consider implicit cost(opportunity cost) Examples of accounting cost are interest expense, depreciation expense, cost of sales etc.
Economic cost is the difference between total revenue and the addition of explicit and implicit cost. Implicit cost(opportunity cost) is the cost of alternative forgone i.e the course of action that was abadoned for the current action. Economic cost considers all the accounting cost and the Implicit cost
"Noise" (in the traditional communication process) refers to: A. any distractions that reduce the effectiveness of the communication process. B. radio advertising interference only. C. messages which are too loud or bold. D. efforts by a firm's competitors to block its message channel. E. the encoded message before it is decoded.
Answer:
A. any distractions that reduce the effectiveness of the communication process
Explanation:
Noise is the disturbance occurs between the sender and the receiver or the sender and the audience through which the distractions of the persons could occur
With the presence of the noise, it is very difficult to communicate with someone as there is a chance of miscommunications that reflects the reduction in the effectiveness of the communication process. It can be in terms of the sound of the machine, a mental disturbance, etc
Benefits and Costs of Global Sourcing A key activity in supply chain management is the approach an international company takes in determining where and how to source its inputs. Supply chain management has become an increasingly popular and strategically important topic in international business in recent years. An important activity in supply chain management is the approach an international company takes in determining where and how to source its inputs. This exercise examines potential benefits and costs associated with global sourcing. Read the case below and answer the questions that follow. MyBad Boards designs and manufactures high performance skateboards and related gear used in extreme sports. The company's products are sold widely in North America, Europe, Australia, and East Asia, with sales of more than $20 million last year. The company currently manufactures all of its products in the United States, using raw materials and components sourced domestically. However, after experiencing rapid growth during the past five years, the company is considering the alternative of purchasing some or all of its materials from international suppliers. Which is not a reason that MyBad Boards might choose to source globally
Answer:
1. "The potential for highly competitive local markets".
This is not a reason for sourcing globally. All of the other listed items are drivers for MyBadBoards to source globally.
Explanation:
Answer:
Explanation:
The question is incomplete because the options are absent but from the first sentence "Benefits and Costs of Global Sourcing (of raw materials used in the production of goods and services)", there is good enough information.
In Supply Chain Management, a company determines where and how to source it's inputs or raw materials (land, labour, capital and entrepreneur). MyBad Boards is an international company - it exports its goods or it sells them outside of the country of production which is the USA.
The company made sales revenue exceeding $20 million last year (the 5th year of experiencing rapid growth). The company manufactures all of its products in the United States ONLY. This means that the company has manufacturing plant(s) in the USA alone. All the company's inputs are also sourced from within the USA.
The company has now decided to consider purchasing SOME or ALL of its inputs globally (outside the United States). The question is which of the options (missing options) is not a reason for this decision? This means that ALL BUT ONE of the options will be possible reasons for the new decision/consideration.
I will herefore give possible reasons for the new consideration. They will be benefit-seeking reasons rather than cost-raising reasons. Any reason in your options (which are missing here) that is in negation with any of the below options, would be the answer you are looking for.
(A) MyBad Boards will consider global sourcing of inputs if the prices or cost of these inputs has increased domestically (that is, in the USA).
(B) MyBad Boards will consider global sourcing of inputs - after 5 years of doing so domestically - if there is now a high competition (with other extreme-sports gear producers) for these raw materials hence a shortage in their availability; within the United States.
(C) MyBad Boards will consider global sourcing of inputs if it wants to have a new production plant outside of the United States.
(D) MyBad Boards will consider global sourcing of inputs if it feels/discovers that it can get the same quality of raw materials for lower prices, outside of the United States.
(E) MyBad Boards will consider global sourcing of inputs if it wants to start a new production line and the inputs needed for this new product are unavailable or of low quality or of a relatively high price in the United States.
Norton Co., a U.S. corporation, sold inventory on December 1, 2018, with payment of 10,000 British pounds to be received in sixty days. The pertinent exchange rates were as follows: Dec. 1 Spot rate: $ 1.7241 Dec. 31 Spot rate: $ 1.8182 Jan. 30 Spot rate: $ 1.6666 What amount of foreign exchange gain or loss should be recorded on January 30?
Answer:
exchange loss on 30 January is -$1,516
Explanation:
The amount of loss or gain to recognize in the books on January 30 depends on the movement in exchange rate between December 31 and January 30.
Invariably,exchange rate has declined by -0.1516 (1.6666-1.8182) between December 31 and January 30,hence the exchange loss that should be recorded on January is shown below:
exchange loss= -0.1516 *10,000=-$1,516
Assume that in recent years both expected inflation and the market risk premium (rM − rRF) have declined. Assume also that all stocks have positive betas. Which of the following would be most likely to have occurred as a result of these changes? a. The required returns on all stocks have fallen by the same amount. b. The average required return on the market, rM, has remained constant, but the required returns have fallen for stocks that have betas greater than 1.0. c. The required returns on all stocks have fallen, but the fall has been greater for stocks with higher betas. d. Required returns have increased for stocks with betas greater than 1.0 but have declined for stocks with betas less than 1.0. e. The required returns on all stocks have fallen, but the decline has been greater for stocks with lower betas.
Answer: c. The required returns on all stocks have fallen, but the fall has been greater for stocks with higher betas.
Explanation:
The Capital Asset Pricing Model formula can be applied to this question.
The formula is,
Er = rF + b( rM - rF)
Where
Er is the required return
rF is the risk free rate
b is beta
rM - rF is the market premium.
Now looking at that formula, you can tell that if market premium falls, the required return would fall as well.
However, for stocks with larger betas, they would drop more spectacularly because they would be coming from higher values to lower.
Take a stock with beta 4 vs one with beta 5 for instance.
Assume that Market premium went from 6% to 3% and a risk free rate of 3%.
Beta 5 stock
When market premium is 6,
= 3% + 5 (6%)
= 33%
When market premium is 3,
= 3% + 5(3%)
= 18%
Beta 4 stock
When market premium is 6
= 3% + 4 (6%)
= 27%
When market premium is 3
= 3% + 4 (3%)
= 15%
Notice how the stock with beta 5 fell by 15% while the stock with beta 4 fell by 12%.
Chang Industries has bonds outstanding with a par value of $216,000 and a carrying value of $227,000. If the company calls these bonds at a price of $221,000, the gain or loss on retirement is:
A. 5,000 gainB. 6,000 gainC. 6,000 lossD. 5,000 lossE. 11,000 gain
Answer:
A. $6,000 gain
Explanation:
Data provided
Carrying Value = $227,000
Call Price = $221,000
The computation of gain or loss on retirement is shown below:-
Gain on Retirement = Carrying Value - Call Price
= $227,000 - $221,000
= $6,000
Therefore for computing the gain on retirement we simply deduct the call price from carrying value.
A company issues 10%, 5-year bonds with a par value of $270,000 on January 1 at a price of $280,682, when the market rate of interest was 9%. The bonds pay interest semiannually. The amount of each semiannual interest payment is:
Answer:
$13,500 semiannually
Explanation:
The Interest payment of a bond is calculated using the par value and the coupon rate of the bond. It is calculated by multiplying par value with coupon rate of the bond. Premium or Discount is amortized separately and added in the interest expense value.
As per given data
Par value = $270,000
Coupon Rate = 10%
Interest Payment = $270,000 x 10% = $27,000 annually = $13,500
The company pay $13,500 semiannually as interest payment
Denton Company had the following department information for the month of September: Total materials costs, $50,000; equivalent units of materials, 20,000; total conversion costs, $30,000; and equivalent units of conversion costs, 10,000. What is the total manufacturing cost per unit for the month of September
Answer:
$5.50
Explanation:
Material cost per unit = $50,000/20,000 = $2.50
Conversion costs = $30,000/10,000 = $3.00
Total manufacturing cost per unit = Material cost per unit + Conversion costs = $2.5$ + $3 = $5.50
Therefore, the total manufacturing cost per unit for the month of September is $5.50.
DLW, Inc just started its business. DLW purchased factory equipment for $800,000 on January 1. It is estimated that the equipment will have a $30,000 salvage value at the end of its estimated 10-year useful life. If the company uses the straight-line method of depreciation, the amount of annual depreciation recorded for the second year after purchase would be:
Answer:
Annual depreciation= $77,000
Explanation:
Giving the following information:
Purchase price= $800,000
Salvage value= $30,000
Useful life= 10 year
Under the straight-line method of depreciation, the depreciation expense is constant along the useful life.
We need to use the following formula:
Annual depreciation= (original cost - salvage value)/estimated life (years)
Annual depreciation= (800,000 - 30,000)/10
Annual depreciation= $77,000
A stock market crash will cause Group of answer choices aggregate demand to decrease, which the Fed could offset by purchasing bonds. aggregate demand to decrease, which the Fed could offset by selling bonds. aggregate demand to increase, which the Fed could offset by selling bonds. aggregate demand to increase, which the Fed could offset by purchasing the money supply.
Answer:
A stock market crash will cause aggregate demand to decrease, which the Fed could offset by purchasing bonds.
Explanation:
A stock market crash happens when the prices of stocks fall generally and suddenly that investors are taken unawares. It triggers some reactions which further threatens the market overall and depresses aggregate demand. It also weakens investors' confidence, reduces productivity, consumption, and the ability of firms to fund their activities, and leads the economy to recession.
Stock market crashes are triggered by unexpected economic event, catastrophe, or crisis. For example, the collapse of Lehman brothers as a result of bankruptcy. They are further exacerbated by panic reactions, underlying economic underperformance, and investors' fear.
The Fed as the US central bank in charge of the monetary policy can try to stem the downward spiral caused by a stock market crash by purchasing bonds. This makes more money available in the economy for consumption.
Before the crash, the Fed can decide to bail out the institution, e.g. an airline or a financial institution, that could trigger a crash. But, most stock market crashes are not foreseen.