The aggregate demand curve slopes downward due to three effects: The wealth effect, the interest-rate effect, and the foreign exchange effect. These cause an increase in consumption, lower interest rates leading to more investment, and a depreciation of the exchange rate resulting in increased net exports when the price level falls.
Explanation:The aggregate demand curve slopes downward because of three fundamental effects: the wealth effect, the interest rate effect, and the foreign exchange effect.
The wealth effect implies that as price levels decrease, the purchasing power of money increases, leading to an increase in consumption. If, for example, the price of all goods and services fall, consumers can buy more with the same amount of money.
The interest rate effect indicates that as price levels decline, the demand for money reduces leading to lower interest rates. These lower rates encourage more borrowing and hence, lead to increased investment spending.
The foreign exchange effect means a lower price level causes the real exchange rate to depreciate, which stimulates spending on net exports.
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Richards Corporation had net income of $275,132 and paid dividends to common stockholders of $48,300. It had 57,200 shares of common stock outstanding during the entire year. Richards Corporation's common stock is selling for $59 per share. The price-earnings ratio (rounded to two decimal places) is
Answer:
The Price-earnings ratio is 14.88 (to two decimal places)
Explanation:
The Price-earnings ratio (P/E ratio) is a measure of the relationship between a company's stock price and its earning per share of issued stock. Mathematically, P/E ratio is calculated by dividing a company's current stock price by its earnings per share:
P/E ratio = current stock price ÷ earnings per share
current stock price = $59 per share
Earning per share = ???
Next we are going to calculate the earnings per share (EPS) by using the following formula:
EPS = (net income - dividend paid) ÷ (number of shares outstanding)
EPS = (275,132 - 48,300) ÷ (57,200)
EPS = 3.966
∴ P/E ratio = current stock price ÷ Earning per share (EPS)
P/E ratio = 59 ÷ 3.966 = 14.876 = 14.88 (to two decimal places)
BMW has developed two new print ads designed to appeal to women.One ad uses local scenes from around its South Carolina plant and emphasizes the "made in America" aspect.The other ad uses a spokesperson and emphasizes the safety of the car.Which type of ad effectiveness measure should BMW use to test which ad is most effective?
A)split-run testing
B)day-after recall
C)consumer juries
D)physiological measures
E)portfolio tests
Answer:
The correct answer is letter "A": split-run testing.
Explanation:
A split-run test is useful for companies advertising their products through e-mails or print advertisements. The firm takes a sample of the target population and divides the test into two sections to measure the responsiveness of consumers to one and another promotion. The advertisement that ends up resulting in being more beneficial is sent to all the audience the institution has.
1. Firm A has 10 million shares outstanding, currently trading at $5/share. They are worried about possible hostile acquisitions, so they adopt a poison pill that consists of call options that allow shareholders to purchase 1 additional share per share owned. The poison pill options will allow the shareholders to purchase their new share at a price of $2/share if a hostile bidder purchases 20% of the equity of Firm A. (Assume all options are exercised)
Show the impact of this poison pill if a bidder buys 20% of Firm A:
Answer:
We are told that Firm A has 10 million Shares outstanding, Currently trading at $ 5/share.
They adopt Poison pill to avoid possible Hostile Acquisitions.
What then is poison pill?
Poison Pill: Poison Pill technique is used to avoid the acquisitions which may take place due to the hostile takeovers. This is a defensive mechanism used by the target company to prevent the bidders from takeover. At that time it allows the shareholders to buy more shares at a discount , if one shareholders purchase the 20% of the shares.
Here, the posison pill allows the shareholders to purchase additional share per share owned. This allows the shareholders to purchase their new shares at a price of $2/sahre if a hostile bidder purchases 20% of the equity of firm.
If a bidder buys 20% of Firm A, this allows the other share holders to buy the shares at discount which would dilute the bidders interest and increase the cost of the bid.This makes the bidder to withdraw from the decision to takeover. He has to negotiate with board inorder to revoke the plan. The Board of Directors revokes the plan by attaching option or warrant to the existing shares.
So, the Bidder may withdraw the plan to takeover due to increase in the cost of the bid due to the purchases made by the othershareholders at discount.
Explanation:
An investor starts with $1 million and converts it to 0.75 million pounds, which is then invested for one year. In a year the investor has 0.7795 million pounds, which she then converts to dollars at an exchange rate of 0.72 pounds per dollar. The U.S. dollar annual rate of return earned was _____.
Answer:
8.26%
Explanation:
If the investor had, at the end of the year, 0.7795 million pounds, when converting that amount to U.S. dollars at an exchange rate of 0.72 pounds per dollar, the investor would have:
[tex]A = 0.7795\ million\ pounds*\frac{\$1}{0.72\ pounds}\\A=\$1.08264\ million[/tex]
Since the investment lasted for exactly 1 year, the annual rate of return was:
[tex]r=\frac{\$1.08264}{\$1}-1\\ r=0.08264\\r=8.26\%[/tex]
The U.S. dollar annual rate of return earned was 8.26%.
Answer:
Multiple choices are:
4.97%
5.27%
6.45%
7.69%
8.26%
The U.S. dollar annual rate of return earned was is 8.26%
Explanation:
Initial investment =$1 million
dollar value of investment after 1 year=pounds value*$1/pounds exchange rate
pounds value of investment after 1 year=0.7795 million pounds
$1 equals to 0.72 pounds in year
dollar value of investment after 1 year=0.7795*$1/0.72
dollar value of investment after 1 year=$1.082638889
U.S dollar annual rate of return earned=dollar value of investment after 1 year-initial dollar investment/initial dollar investment
U.S dollar annual rate of return earned=($1.082638889 million-$1 million)/$1 million*100
U.S dollar annual rate of return earned=0.082638889
U.S dollar annual rate of return earned=8.26%
(Cost of debt) Belton Distribution Company is issuing a $1 comma 000 par value bond that pays 8.9 percent annual interest and matures in 15 years that is paid semiannually. Investors are willing to pay $962 for the bond. The company is in the 18 percent marginal tax bracket. What is the firm's after-tax cost of debt on the bond?
Answer:
After tax cost of debt is 7.69%
Explanation:
The after tax cost of debt can be computed by first of all determining the pre-tax cost of debt .
The pre-tax of debt is the yield to maturity computed using the rate formula in excel as follows:
=rate(nper,pmt.-pv,fv)
nper is the number of times the bond would pay coupon interest over the entire bond life ,which is 15 years multiplied by 2=30
pmt is the semi-annual interest which is $1000*8.9%/2=$44.5
pv is the current price of the bond at $962
fv is the face value of the bond at $1000
=rate(30,44.5,-962,1000)=4.69%
this is the semi-annul yield ,annual yield is 9.38%
The 9.38% is the pretax
after tax cost of debt=9.38%*(1-0.18)=7.69%
0.18 is the 18% tax rate
For twenty years, Maynard works for Natural Gas Wells, Inc., which employs more than five hundred persons in two states. Natural Gas Wells drills for and mines natural gas to sell and transport to refineries, which in turn pipes liquefied gas to other states. Maynard starts as an unskilled worker in the drilling fields. After a career of positive job evaluations and pay raises, Maynard is ultimately promoted to the position of chief of maintenance for a dozen wellheads. Five years later, a new employee, Oberto, is hired to oversee operations at all of the wellheads. Oberto demotes Maynard, who is now over the age of forty, and freezes his salary. Oberto demotes five other employees over the age of forty and places Maynard under the supervision of Pitt, who is twenty-three. Maynard overhears Pitt say, "We’re going to have to do away with these old men." Maynard quits and files a suit against Natural Gas Wells for employment discrimination. Should he prevail?
Answer: He will most likely PREVAIL
Explanation:
Oberto's actions are in direct violation of the Age Discrimination in Employment Act of 1967 that forbids age discrimination acts in employment against people over the age of 40.
Maynard directly overhears his Supervisor, Pitt confirm that the demotion was based on age as well as the added evidence that the others that were demoted were over the age of 40 as well.
Under this Act, Maynard will most likely triumph in court.
Maynard may have grounds to prevail in his suit against Natural Gas Wells for employment discrimination based on age. The demotion, freezing of salary, derogatory remarks, and placement under a younger supervisor suggest discriminatory intent.
Explanation:Maynard may have grounds to prevail in his suit against Natural Gas Wells for employment discrimination. Age discrimination occurs when an employer treats an employee less favorably because of their age. In this case, Maynard and five other employees over the age of forty were demoted and placed under the supervision of a much younger employee who made derogatory remarks about older employees. This could be seen as evidence of discriminatory intent based on age.
Maynard was promoted to the position of chief of maintenance for a dozen wellheads.A new employee, Oberto, is hired to oversee operations at all of the wellheads.Oberto demotes Maynard, who is over the age of forty, and freezes his salary.Oberto demotes five other employees over the age of forty and places Maynard under the supervision of Pitt, who is twenty-three.Maynard overhears Pitt say, "We’re going to have to do away with these old men."Maynard quits and files a suit against Natural Gas Wells for employment discrimination.Your small remodeling business has two work vehicles. One is a small passenger car used for job site visits and for other general business purposes. The other is a heavy truck used to haul equipment. The car gets 25 miles per gallon (mpg). The truck gets 10 mpg. You want to improve gas mileage to save money, and you have enough money to upgrade one vehicle. The upgrade cost will be the same for both vehicles. An upgraded car will get 40 mpg; an upgraded truck will get 12.5 mpg. The cost of gasoline is $2.65 per gallon. Calculate the annual fuel savings in gallons for the truck and car assuming both vehicles are driven 12,000 miles per year. (Do not round intermediate calculations.)
Answer:
Explanation:
First - if we upgrade the Car :
Current cost of fuel in car - 12000/25*2.65 = 1272$
after upgrading the car , cost of fuel in car - 12000/40*2.65 = 795$
Net saving in fuel cost - 1272-795 = 477$
Second - if we upgrade the Truck :
Current cost of fuel in truck - 12000/10*2.65 = 3180$
after upgrading the truck , cost of fuel in truck - 12000/12.5*2.65 = 2544$
Net saving in fuel cost - 3180-2544 = 636 $
So, we should upgrade the truck, because it will give more saving in fuel cost.
ANNUAL FUEL SAVINGS IN GALLONS:
CAR - 477/2.65 = 180 GALLONS
TRUCK - 636/2.65 = 240 GALLONS
Indigo Corporation factors $256,800 of accounts receivable with Kathleen Battle Financing, Inc. on a with recourse basis. Kathleen Battle Financing will collect the receivables. The receivables records are transferred to Kathleen Battle Financing on August 15, 2020. Kathleen Battle Financing assesses a finance charge of 2% of the amount of accounts receivable and also reserves an amount equal to 4% of accounts receivable to cover probable adjustments. (b) Assume that the conditions are met for a transfer of receivables with recourse to be accounted for as a sale. Prepare the journal entry on August 15, 2020, for Indigo to record the sale of receivables, assuming the recourse obligation has a fair value of $4,660.
Answer:
The journal entry on August 15, 2020 is as follows:
August 15, 2020
Cash $241,392
Due from factors $10,272
Loss on sale of receivables $7,136
Recourse liability $2,000
Account receivable $256,800
Explanation:
In order to prepare the journal entry on August 15, 2020, we would have to get the the computation of net proceeds and then the Computation of gain or loss.
Therefore, Computation of net proceeds=
Cash received($256,800×94%)=$241,392
Add Due from factor($256,800×4%)=$10,272
Less recourse obligation=$2,000
Hence, Net proceeds=$249,664
Next, we calculate the Computation of gain or loss=
Carrying value=$256,800
Less net proceeds=$249,664
Hence, there is a Loss=$7,136
Therefore, the journal entry on August 15, 2020 is as follows:
August 15, 2020
Cash $241,392
Due from factors $10,272
Loss on sale of receivables $7,136
Recourse liability $2,000
Account receivable $256,800
To record the sale of receivables with recourse, Indigo Corporation will debit the Accounts Receivable and Sales Revenue accounts, credit the Recourse Obligation and Finance Charge Expense accounts, and calculate the gain on the sale.
Explanation:The sale of receivables with recourse to be accounted for as a sale involves recording the transaction in the books of the seller. In this case, Indigo Corporation factors $256,800 of accounts receivable with Kathleen Battle Financing, Inc. on a with-recourse basis. To record the sale, Indigo will debit the Accounts Receivable and Sales Revenue accounts, credit the Recourse Obligation and the Finance Charge Expense accounts, and calculate the gain on the sale. The journal entry on August 15, 2020, will be as follows:
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Velma and Keota (V&K) is considering an investment opportunitiy. The investment requires V&K to spend $11,751.44 to acquire a piece of asset. The asset will have an expected useful life of five years and no salvage value. This investment will generate expected cash inflows of $3,100 per year for the next five years. V&K has established a 9 percent minimum rate of return for all investments. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required Calculate the total present value of all cash inflows for this investment opportunity. (Round final answer to the second decimal point. Do not round intermediate calculations.) Calculate the net present value of this investment opportunity. (Round final answer to the second decimal point. Do not round intermediate calculations.) Calculate the internal rate of return for this investment opportunity.
Answer:
The total present values of cash inflows is $12,057.92
The net present value is $306.48
The IRR is 10%
Explanation:
The total present values was computed by multiplying each of the cash flow by a discount factor ,which is given as 1/(1+r)^n
r is the percent minimum rate of return
n is the relevant year of cash flow
The computation is found in the attached.
The net present is the sum of present of inflows minus cash outflow
The formula for IRR is ,=irr(values) as contained in the excel file attached.
The total present value of all cash inflows is $12,433.85. The net present value of this investment opportunity is $682.41. The internal rate of return for this investment opportunity is approximately 8.54%.
Explanation:To calculate the total present value of all cash inflows, we need to find the present value of each cash inflow and sum them up. Using the formula for calculating the present value of an ordinary annuity, we can find that the present value of each cash inflow is $2,486.77. Therefore, the total present value of all cash inflows is $12,433.85.
The net present value of an investment is calculated by subtracting the initial investment from the total present value of all cash inflows. In this case, the net present value is $12,433.85 - $11,751.44 = $682.41.
The internal rate of return (IRR) is the discount rate that makes the net present value of an investment equal to zero. To find the IRR, we can use the interpolation method. By interpolating between the discount rates of 8% and 9%, we can estimate that the IRR is approximately 8.54%.
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Look at the following data: durable goods = $200 billion; nondurable goods = $350 billion; services = $600 billion; fixed investment + inventory investment = $200 billion; government purchases = $400 billion; exports = $30 billion; imports = $79 billion. GDP is equal to
Answer:
The answer is $1,701 billion
Explanation:
Gross Domestic Product (GDP) is the cumulative (total) market value of the final outputs (goods and services) produced within an economy(country) during a given period of time usually a year.
GDP = C + I + G + (X - M)
where C - expenditure by households or consumers
I - investments by businesses or firms
G - expenditure from the government
X - exports from the country
M - imports into the country
Total consumers' expenditure is:
durable goods = $200 billion;
nondurable goods = $350 billion; services = $600 billion
Total. $1,150 billion
Total business investment is $200billion
Therefore, GDP is
$1,150 + $200 + $400 + ($30 - $79)
=$1750 - $49
= $1,701 billion
Final answer:
The GDP for the provided country data is calculated using the formula for GDP, which includes adding up consumption (sum of durable, nondurable goods, and services), investment, government spending, and subtracting net exports (exports minus imports). The GDP for the country in question is $1,701 billion.
Explanation:
GDP Calculation
To calculate the Gross Domestic Product (GDP) of a country, you can use the formula:
GDP = Consumption + Investment + Government Spending + (Exports - Imports)
Using the data provided for the country in the question:
Durable goods = $200 billion
Nondurable goods = $350 billion
Services = $600 billion
Fixed investment + Inventory investment = $200 billion
Government purchases = $400 billion
Exports = $30 billion
Imports = $79 billion
We sum up durable goods, nondurable goods, and services to get total consumption:
Consumption (C) = Durable goods + Nondurable goods + Services
= $200 billion + $350 billion + $600 billion
= $1,150 billion
Then calculating Net Exports (Exports - Imports):
Net Exports (NX) = Exports - Imports
= $30 billion - $79 billion
= -$49 billion
Now we can plug these values into the GDP formula:
GDP = C + Investment + Government Spending + NX
= $1,150 billion + $200 billion + $400 billion - $49 billion
= $1,701 billion
Therefore, the GDP is $1,701 billion.
ACME Corporation sells a product for $170 per unit. The product's current sales are 10,000 units and its break-even sales are 8,100 units. The margin of safety as a percentage of sales is closest to __________.
Answer:
Margin of safety ratio= 0.19= 19%
Explanation:
Giving the following information:
ACME Corporation sells a product for $170 per unit. The product's current sales are 10,000 units and its break-even sales are 8,100 units.
To calculate the margin of safety as a percentage, we need to use the following formula:
Margin of safety ratio= (current sales level - break-even point)/current sales level
Margin of safety ratio= (170*10,000 - 170*8,100) / (170*10,000)
Margin of safety ratio=(1,700,000 - 1,377,000) / 1700,000
Margin of safety ratio= 0.19= 19%
The Variable Speed Company manufactures a line of high quality tools. The company sold 1,000,000 hammers at a price of $4 per unit last year. The company estimates that this volume represents a 20% share of the current hammers market. The market is expected to increase by 5%. Marketing specialists have determined that, as a result of a new advertising campaign and packaging, the company will increase its share of this larger market to 24%. Due to changes in prices, the new price for the hammer will be $4.30 per unit. This new price is expected to be in line with the competition and have no effect on the volume estimates. What are the estimated sales revenues in the coming year
Answer:
Estimated sales revenue next year =$ 5,418,000.
Explanation:
Current market size = Company share/percentage of market share
= 1,000,000./0.2
=5,000,000 units
New market size with 5% increase
= 105%× current market size
=105% × 5,000,000
=5,250,000 units
Company new if it will now accounts for 24% of the market size
Company new market share = 24% × New market size
= 24%× 5,250,000
= 1,260,000 units
Estimated sales revenue next year
= Price per unit × new market share
= $4.30 per unit. × 1,260,000
=$ 5,418,000.0
Answer:
The estimated sales revenue for the coming year is $5,418,000.00
Explanation:
Quantity sold initially 1,000,000
initial total market share =1,000,000/20%
initial market total market share=5,000,000 hammers
new total market share=5,000,000*(1+5%)
=5,000,000*(1+0.05)
=5,000,000*1.05
=5,250,000
Variable speed new share of market is 24%
market share in units=24%*5,250,000=1,260,000
Estimate sales revenue=variable market share*new unit price
new unit price is $4.30
estimated sales revenue=1,260,000*$4.30=$5,418,000.00
Money, Inc., a calendar year S corporation in Denton, Texas, has two unrelated shareholders, each owning 50% of the stock. Each shareholder has a $400,000 stock basis as of January 1, 2015. At the beginning of 2015, Money has an AAA of $300,000 and AEP of $600,000. During 2015, Money has an operating income of $100,000. At the end of the year, Money distributes securities worth $1,000,000, with an adjusted basis of $800,000. b. At the end of the year, before the distribution, each shareholder's basis is $___after the distribution, each shareholder's basis is $______ . Each shareholder has $____ of dividend income.
Answer:
each shareholder has $250,000 of the dividends.
Explanation:
At the end of the year, just before the distribution, each shareholder's basis is:
= $400000 + 10000 + 50000
= $550,000
after the distribution, each shareholder's basis is:
= 300000 + 200000
= $500000
therefore, each shareholder has $250,000 of the dividends.
A bond with a face value of $6,000 and an annual coupon rate of 12% convertible semiannually will mature in ten years for its face value. If the bond is priced using a nominal yield rate of 6% convertible semiannually, what is the amount of premium in this bond and what is the amount for amortization of premium in the 7th coupon
Answer:
Premium is $2,677.95
The premium amortization on the 7th payment is $119
Explanation:
In order to arrive at the premium on the bond,it is necessary to compute the issuing price of the bond,which can be done using the pv formula in excel as shown below:
=-pv(rate,nper,pmt,fv)
rate is the semi-annual yield to maturity on the bond which is 6%/2=3%
nper is the number of coupon interest payable by the bond,which is 10 years multiplied by 2=20
pmt is the semi-annual coupon payable by the bond i.e 12%/2*$6000=$360
fv is the face value of the bond which is $6,000
=-pv(3%,20,360,6000)
pv=$8,677.95
premium=issue price -face value
premium=$$8,677.95-$6,000
premium=$2,677.95
The premium amortization is the excess of coupon payment over the interest expense.
In the attached, I calculated the premium amortization on the 7th payment.
I started by taking the issue price of $8677.95 ,added interest expense at 3% semi-annually ,deducted the coupon payment of $360,thereby leaving the outstanding balance at end of the year.
Note that the premium amortization is the excess of coupon payment over interest expense as colored coded.
Bond priced at a premium. Requires further calculation to find exact premium and amortization in 7th coupon.
This scenario involves a bond priced at a premium due to a lower nominal yield (interest rate) compared to the coupon rate. We can calculate the premium and amortization of premium for the 7th coupon period.
Key Information:
Face Value (F) = $6,000Coupon Rate (C) = 12% annually (6% semiannually)Maturity = 10 years (20 semiannual periods)Nominal Yield (Y) = 6% annually (3% semiannually)Calculations:
Coupon Payment per Period (Cpt):
Cpt = F * (C / 2) = $6,000 * (6% / 2) = $180
Present Value of all Coupon Payments (PVcp):
We can use the formula for the present value of an annuity to calculate the PV of all coupon payments. However, a shortcut exists for constant coupon bonds:
PVcp = F * [ 1 - (1 + Y / 2)^(-N) ] / (Y / 2)
N = Number of periods (20)
Present Value of Face Value at Maturity (PVF):
PVF = F / (1 + Y / 2)^N
Bond Price (Pb):
Pb = PVcp + PVF
Premium:
Premium = Pb - F
Amortization Schedule:
The bond is priced at a premium because the nominal yield is lower than the coupon rate. This difference is amortized over the life of the bond, reducing the carrying value (book value) towards the face value at maturity.
Amortization of Premium in the 7th Coupon Period (Ap7):
Carrying Value at the Beginning of Period 7 (CVb7):
This depends on the amortization method used (straight-line or effective interest). We'll assume a straight-line method for simplicity.
CVb7 = Pb - (Number of Periods Completed * Coupon Payment)
Since we don't have the calculated value of Pb yet, we'll come back to this after calculating the bond price.
Scheduled Interest Payment (Sp7):
Sp7 = F * (Y / 2) = $6,000 * (3% / 2) = $90
Amortization of Premium (Ap7):
Ap7 = CVb7 - Sp7 - F / (1 + Y / 2)^n
n = Period number (7)
Solving for Bond Price and Amortization:
We need to solve for the bond price (Pb) first to determine the carrying value at the beginning of period 7 (CVb7). Then, we can calculate the amortization for the 7th coupon period (Ap7).
This typically involves iterative calculations using a financial calculator or spreadsheet. However, we can understand the concepts and the approach to solving this problem.
By calculating the present value of coupon payments and the face value at maturity, we can determine the bond's price and whether it's priced at a premium or discount. The amortization schedule tracks the reduction in premium over time.
Grunewald Industries sells on terms of 2/10, net 40. Gross sales last year were $4,380,000 and accounts receivable averaged $493,500. Half of Grunewald's customers paid on the 10th day and took discounts. What are the nominal and effective costs of trade credit to Grunewald's nondiscount customers
Answer:
Nominal 24.83%
Effective 27.86%
Explanation:
Terms 2/10, n/40 means there is a discount of 2% is available on payment of due amount within discount period of 10 days after sale with net credit period of 40 days.
Gross Sales = $4,380,000
Received within 10 days = $2,190,000
As $2,190,000 of Gross sales payments are made within discount period, discount will be availed on this value.
Discount = $2,190,000 x 2% = $43,800
Nominal Cost of trade = 2%
Effective cost of Trade
Nominal Cost of trade = 2% / (1 - 2%) x (365 / (40 -10 )
Nominal Cost of trade = 24.83%
Effective cost of Trade = ( 2%/(1-2%) )^(365/(40-10)) - 1
Effective cost of Trade = 27.86%
Answer:
Nominal cost = 17.7 %.
Effective cost = 19.2 %
Explanation:
Calculate daily sales based on a 365-day year,
calculate the average receivables for discount customers,
find the DSO for the nondiscount customers
Sales per day = $4,380,000 / 365 days = $12,000
Discounted sales = 0.50 ($12,000) = $6,000
Accounts receivable attributable to discount customers = 10 * $6,000 = $60,000
Accounts receivable attributable to non-discount customers = $493,500 - $60,000 = $433,500
Alternatively
$493,500 / $12,000 = 41.13 days i.e. 41 days
41 days = 0.50 (10) + .50 * DSO nondiscount
Non discount = 36/.50 = 72 days
Non discount are require to pay in 40 days but they are paying in 72 days
Effective cost = (1 + 2/98 ) ^ (365 / 42) - 1
1.192 - 1 = 0.192 = 19.2 %
Nominal cost = 2/98*365/42 = 0.177 = 17.7 %.
Sam is considering investing in a bond with a face value of $20,000. The bond pays an interest of 4% payable quarterly. If he expects to make a 1 ½ % return per quarter on this investment with a maturity of 20 years, determine the most he can pay for the bond ________. a. $18,102.65 b. $14,923.86 c. $15,355.40 d. $16,000
Final answer:
To calculate the maximum price Sam can pay for the bond, we need to discount the future quarterly interest payments and the face value repayment at the end of 20 years at the desired quarterly return rate, using the bond pricing formula. However, the options provided do not align with typical bond pricing results, suggesting there may be additional factors or a missing piece of the question.
Explanation:
The student is asking how to calculate the maximum price Sam should pay for a bond to achieve a desired return, given certain investment conditions. This is a typical present value problem in financial mathematics that necessitates understanding of bond pricing and the concept of the discount rate.
To calculate the most Sam can pay for the bond to achieve a 1 ½ % return per quarter, we need to discount each of the bond's future cash flows back to the present at the desired rate of return and sum them to find the present value. The bond pays 4% annual interest, which is 1% quarterly on its $20,000 face value (a payment of $200 every quarter). Over 20 years, or 80 quarters, the bond will pay this interest, then repay the face value at maturity.
Using the formula PV = C * [1 - (1 + r)^-n] / r + FV / (1 + r)^n, where PV is the present value of the bond, C is the quarterly interest payment, r is the quarterly discount rate, n is the total number of payments, and FV is the face value of the bond, we can solve for the present value of the bond, given Sam's required return. The calculation can be complex, so rather than detailing it here, we refer to a financial calculator or spreadsheet to compute the exact value.
Note that the options provided do not seem to match the result of a typical bond pricing equation, and it's possible that additional context or constraints from the question might be missing.
c. The most he can pay for the bond is $15,355.40.
Sam is considering investing in a bond with a face value of $20,000 paying an interest of 4% payable quarterly. He expects to make a 1.5% return per quarter on this investment with a maturity of 20 years. To determine the most he can pay for this bond, we need to calculate the bond's present value (PV) using the formula:
PV = C × \/(1 + r)^1 + C × \/(1 + r)^2 + ... + C × \/(1 + r)^n + M\/ (1 + r)^n
Where C = Quarterly coupon payment, r = required rate of return per quarter, and n = total number of quarters.
Given:
Face Value (M): $20,000Quarterly Coupon Payment (C): 0.04/4 × 20,000 = $200Required Quarterly Return (r): 0.015Total Quarters (n): 20 × 4 = 80Using the formula, we calculate PV as follows:
PV = $200 × [1 - (1 + 0.015)^-80] / 0.015 + $20,000 / (1 + 0.015)^80
After calculating, PV ≈ $15,355.40.
Therefore, the most Sam can pay for the bond is $15,355.40, which corresponds to option c.
The following data is related to sales and production for Spark Enterprises at a volume of 120,000 units: Total fixed costs: $300,000 Total costs: $450,000 This question has 5 parts, you must answer all 5. Each part is worth .5 points. If Spark makes 75,000 units what is the fixed cost per unit?
Answer:
$4 per unit
Explanation:
Fixed costs are those costs which remains same whatever the level of activity is. I t remains constant and do not change with the change in the level of sales / production.
But fixed cost per unit may change with the change in the activity level. if the production volume increases the per unit fixed cost decreases and if the production volume decreases the per unit fixed cost increases
In this question the fixed cost is $300,000 when the production volume is $120,000
Now Volume is revised and decreased to 75,000 units
Fixed cost per unit = $300,000 / 75,000 units = $4 per unit
suppose that a new alloy is invented which uses copper and zinc in fixed proportions where 1 unit of output requires 3 units of copper and 3 units of zinc for each unit of alloy produced. If no other inputs are needed, the price of copper is $3, and the price of zinc is $3, what is the average cost per unit when 4,000 units of the alloy are produced?
Answer:
$18 per unit
Explanation:
Average cost per unit is the cot of the product to product on average basis. Any product uses different costs to produce like material, Labor and overheads.
In this question there is only material cost of Copper and Zinc material to make Alloy.
Total Cost = 4,000 units [($3x3)+($3x3)] = $72,000
Average cost per unit = Total Cost / Total numbers of unit
Average cost per unit = $72,000 / 4,000 = $18 per unit
Answer:
the average cost per unit when 4,000 units of the alloy are produced : $18.00
Explanation:
Step 1. Calcutate the the Unit Cost of the New
Materials Costs
Copper (3 units × $3) = $9.00
Zinc (3 units $3) = $9.00
Total = $18.00
Step 2 Calculate the Total Cost of the New
Total Cost=Unit Cost × Total Units of Production
= $18.00 × 4,000 units
= $72,000
For its first year of operations, Tringali Corporation's reconciliation of pretax accounting income to taxable income is as follows: Pretax accounting income $ 300,000 Permanent difference (14,600 ) 285,400 Temporary difference-depreciation (19,000 ) Taxable income $ 266,400 Tringali's tax rate is 25%. Assume that no estimated taxes have been paid. What should Tringali report as its deferred income tax liability as of the end of its first year of operations?
a. $110,016.
b. $122,400.
c. $117,180
d.$120,681
Answer: $4,750
Explanation:
In calculating the deferred tax liability Tringali should use only the Temporary Difference as the Permanent difference is not considered and the temporary difference creates a difference in tax that will be paid later.
Doing that therefore will result in the following,
= 25% * 19,000
= $4,750
$4,750 is the amount that Tringali should report as its deferred income tax liability as of the end of its first year of operations.
I do not see it in the options but it is the correct answer.
Blossom Company took a physical inventory on December 31 and determined that goods costing $560,000 were on hand. Not included in the physical count were $8,000 of goods purchased from Sunland Corporation, f.o.b. shipping point, and $29,000 of goods sold to Ro-Ro Company for $40,000, f.o.b. destination. Both the Sunland purchase and the Ro-Ro sale were in transit at year-end. What amount should Blossom report as its December 31 inventory
Answer:
Blossom December 31 inventory $ 608,000
Explanation:
Blossom Company
Physical inventory on December 31 $560,000
Add goods purchased from Sunland Corporation $8,000
( the terms are f.o.b point they are buyer's inventory when the purchase was made)
Add goods sold to Ro-Ro Company for $40,000
( they will be added as it is f.o.b destination that is unless it reaches destination it is sellers' inventory)
Blossom December 31 inventory $ 608,000
F.O. B shipping point transfers the title to the buyer when the purchases is made.
F. O. B shipping destination are seller's goods until they reach their destination
When the sale is recorded the sales units are recorded in the ending inventory because of f.o.b destination but when the purchases are made the units are included in the ending inventory because of terms f.o.b point.
Darrel&Co. makes electronic components. Chris Darrel, the president, recently instructed Vice President Jim Bruegger to develop a total quality control program. "If we don't at least match the quality improvements our competitors are making," he told Bruegger, "we'll soon be out of business." Bruegger began by listing various "costs of quality" that Darrel incurs. The first six items that came to mind were (Click the lcon to view the information.) Classify each item as a prevention cost, an appraisal cost, an internal failure cost, or an extenal failure cost. The, determine the total cost of quality by category. Begin by classifying each item as a prevention cost, an appraisal cost, an internal failure cost, or an external failure cost by entering each amount in the appropriate column, then, determine the total cost of quality by category. (If a box is not used in the table leave the box empty do not enter a zero.) Provention Cost Appraisal Cost Internal Failure Cost External Failure Cost C. Total More Info a. Costs incurred by Darrel customer representatives traveling to customer sites to repair defective products, $15,500 b. Lost profits from lost sales due to reputation for less-than-perfect products, $80,000 c. Costs of inspecting components in one of Darrels production processes, $32,500 d. Salaries of engineers who are redesigning components to withstand electrical overloads, $100,000. e. Costs of reworking defective components after discovery by company inspectors, $55,000. f. Costs of electronic components returned by customers, $70,000.
Prevention Cost Appraisal Cost Internal Failure External Failure
Cost cost
a 15,000
b 80,000
c 32,500
d 100,000
e 55,000
f 70,000
Total 100,000 32,500 55,000 165,000
No More Books Corporation has an agreement with Floyd Bank whereby the bank handles $7.0 million in collections a day and requires a $450,000 compensating balance. No More Books is contemplating canceling the agreement and dividing its eastern region so that two other banks will handle its business. Banks A and B will each handle $3.5 million of collections a day, and each requires a compensating balance of $300,000. No More Books’ financial management expects that collections will be accelerated by one day if the eastern region is divided.
Answer:
A. NPV $6,850,000
B. $178,100
Explanation:
Bank collections = $7,000,000 per day
Required compensating balance = $300,000
Existing compensating balance = $450,000
Annual T-bill rate = 5%
NPV = bank collections – new compensating balance – existing compensating balance
= $7,000,000 – (2*$300,000 - $450,000)
=$7,000,000-($600,000-$450,000)
=$7,000,000-$150,000
= $6,850,000
The NPV shows that the company should proceed with the new system because it would allow No More Books Corporation to save money.
B.Net Savings (annually)
= NPV * Annual Interest Rate
= $6,850,000 * (0.026)
= $178,100
The Net Present Value is $6,850,000 and the Net Savings (annually) is $178,100.
Given Information
Bank collections = $7,000,000 per day
Required compensating balance = $300,000
Existing compensating balance = $450,000
Annual T-bill rate = 5%
NPV = Bank collections - New compensating balance - Existing compensating balance
NPV = $7,000,000 – (2*$300,000 - $450,000)
NPV =$7,000,000-($600,000-$450,000)
NPV = $7,000,000-$150,000
NPV = $6,850,000
Here, the NPV shows that the company should proceed with the new system because it would allow No More Books Corporation to save money.
B. Net Savings (annually) = NPV * Annual Interest Rate
B. Net Savings (annually) = $6,850,000 * (0.026)
B. Net Savings (annually) = $178,100
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A car rental agency uses 96 boxes of staples a year. The boxes cost $4 each. It costs $20 to order staples, and carrying costs are $0.80 per box on an annual basis.
1. Determine the annual cost of ordering and carrying the boxes of staples.
A. $55
B. $48
C. $196
D. $69
E. $20
Answer:
The correct answer is $55.42.
Explanation:
According to the scenario, the computation of the given data are as follows:
Boxes use = 96 boxes
Cost = $4 per box
Staple cost = $20
Carrying cost = $0.80
So, we can calculate the annual cost of ordering and carrying by using following formula:
Annual cost = (EOQ ÷ 2) × Carrying cost + (Boxes use ÷ EOQ) × Staple cost
Where, EOQ = ( 2 × 96 × 20 ÷ 0.80)^1/2 = 69.28
So, by putting the value, we get
Annual cost = ( 69.28 ÷ 2) × $0.80 + ( 96 ÷ 69.28) × $20
= $27.71 + $27.71
= $55.42
The total annual cost of ordering and carrying the boxes of staples would be $480.80 when considering the cost of the staples, ordering cost, and carrying cost. This value, however, is not represented in the listed options.
Explanation:In order to determine the annual cost of ordering and carrying the boxes of staples for the car rental agency, one should consider both the cost of the staples themselves, the ordering cost, and the carrying cost. The total cost of the staples per year is 96 boxes times $4 each, which comes to $384. The cost of ordering is a flat $20. Lastly, the carrying cost is $0.80 per box annually, so multiply 96 boxes by $0.80 which results to $76.80. Adding all these costs together will give the annual cost of the staples for the agency.
So, the annual cost of ordering and carrying the boxes of staples is $384 (cost of staples) + $20 (ordering cost) + $76.80 (carrying cost) = $480.80. This value isn't listed among the options provided, indicating a potential mistake in the problem statement or the given answers.
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The expected rates of return on portfolios A and B are 11% and 14%, respectively. The beta of A is 0.8 and the beta of B is 1.5. The T-bill rate is currently 6%, while the expected rate of return on S&P500 index is 12%. The standard deviation of portfolio A is 10% annually, while that of B is 31%, and that of the index is 20%. If you currently hold a market index portfolio, would you choose to add either of these portfolios to your holdings? Discuss your answer.
Answer:
Portfolio B has a higher return but more volatile stocks. However it depends on how the individual can tolerate risks.
Explanation:
Expected return= free return + Beta (Expected rate of return – risk free rate)
Portfolio A
6%+ +.8*6%
= 6%+4.8%= 10.8%
Portfolio B
6%+1.5(6%)
6%+9%= 15%
It depends on different factors. Portfolio B has a higher return but more volatile stocks. However it depends on how the individual can tolerate risks.
During the Great Recession of 2008-2009 and the current pandemic, corporate cash conversion cycles typically increased in length by a significant amount. Why might this have occurred? How can this be mitigated? Was it a good decision by corporate CFOs to allow this to happen? Explain.
Answer:
During the Great Recession of 2008-09 money cycle was commonly expanded because of profound sorrow in economy. Worldwide interest for the items were low and organizations were confronting request emergency therefore organizations were offering high length of credit line and timing because of which assortment period from the indebted individuals expanded essentially and accordingly money cycle has increased. Aside from the credit assortment different fund organizations were mindful about the working capital financing and were offering credit for exceptionally brief time frame therefore credit instalment period was diminished to a huge level which lead to increment in real money cycle.
There was no different choices for CFOs to control the circumstances as these issues occurred because of huge changes in economy and this was crazy of CFO. CFO can do one thing they can deal with their assets by proficiently using the float,factoring administrations and by better management of account holders money and stock administration.
A confidence interval, at the 95% confidence level, will be used to answer the question, "What is the mean annual salary (in US dollars) of a Tesla car owner?" Data was collected from 36 Tesla owners across the US. The mean annual salary of those 36 Tesla owners was $289000 with a standard deviation of $1342.
Answer:
The answer to the question is given below in the explanation section
Explanation:
From the question we recall the following
The mean: this is the the value at the center of the confidence interval which represents the quantity.
let Z* denotes when building the confidence level
]The mean = 289000, n = 36, standard deviation= 1342
Z* for 95% Confidence Interval = 1.96
The margin of error = 1.96*[1342/√(36)] = 438.39
The 95% Confidence Interval is given by:
Lower CI = Mean - Margin of error = 289000 - 438.39 = 288561.61
Upper CI = Mean + Margin of error = 289000 + 438.39 = 289438.39
When the sample is decreased to 20 Tesla owners, the confidence interval widens.
A 95% confidence interval for the mean annual salary of Tesla car owners is calculated using a t-distribution with the given sample mean and standard deviation. The confidence interval helps estimate the true mean salary within a certain level of certainty.
Explanation:The question presented requires the construction of a 95% confidence interval for the mean annual salary of Tesla car owners, based on a sample mean of $289,000 and a standard deviation of $1,342 from 36 Tesla owners. To create the confidence interval, the appropriate distribution to use is the t-distribution, since the standard deviation is from a sample and the sample size is relatively small. Calculating the confidence interval involves finding the t-value that corresponds to the 95% confidence level and the degrees of freedom (which is the sample size minus one), and then multiplying this value by the standard error of the sample mean, which is the sample standard deviation divided by the square root of the sample size.
Using the sample data and the appropriate statistical methods, we can estimate the range in which the true mean annual salary of all Tesla car owners is likely to fall, with 95% certainty. This analysis is essential for making informed business decisions or for academic study.
On October 15, 2021, a 6% stock dividend was declared and distributed. The fair value of the common stock on this date was $32.3 per share. Fractional share rights represented 100,000 shares. Cash was paid in lieu of issuing fractional share rights. On the date of declaration and payment, the company had 10.3 million shares of common stock outstanding. The par of the common shares was $5 per share.
Prepare any necessary journal entries to record the above events.
Answer:
The answer is given below;
Explanation:
For Dividend
Dividend Expense (10.3*5*6%) Dr. $3.090 Million
Bank Cr.$3.090 Million
For fractional Shares,
Capital 100,000*32.3 Dr.$ 3,230,000
Cash Cr.$ 3,230,000
Thornton Airline Company is considering expanding its territory. The company has the opportunity to purchase one of two different used airplanes. The first airplane is expected to cost $13,770,000; it will enable the company to increase its annual cash inflow by $5,100,000 per year. The plane is expected to have a useful life of five years and no salvage value. The second plane costs $27,900,000; it will enable the company to increase annual cash flow by $9,300,000 per year. This plane has an eight-year useful life and a zero salvage value.
Required
Determine the payback period for each investment alternative and identify the alternative Thornton should accept if the decision is based on the payback approach. (Round your answers to 1 decimal place.)
Answer:
The correct answer for first plane is 2.7 years and for second plane is 3 years and first plane should be accepted.
Explanation:
According to the scenario, the computation of the given data are as follows:
Payback period = Cost of first airplane ÷ Annual cash inflow
First plane cost = $13,770,000
Cash flow = $5,100,000
So, Payback period for first plane = $13,770,000 ÷ $5,100,000
= 2.7 years
Second plane cost = $27,900,000
Cash flow = $9,300,000
So, Payback period for second plane = $27,900,000 ÷ $9,300,000
= 3 years
First plane should be accepted as it has less payback period.
Assume that a new law is passed which restricts investors to holding only one asset. A risk-averse investor is considering two possible assets as the asset to be held in isolaiton. The assets' possible returns and related probabilities are as followsAsset X Asset Y Pr Rx Pr Ry.10 -3% .05 -3%.10 2 .10 2.25 5 .30 5.25 8 .30 8.30 10 .25 10Which asset should be preferred?a. Asset X, since its expected return is higher.b. Asset Y, since its beta is probably lower.c. Asset Y, since its coefficient of variation is lower and its expected return is higher.d. Asset X, since its standard deviation is lower.e. Either one, since the expected returns are the same.
Answer:
(C) Asset Y, since its coefficient of variation is lower and its expected return is higher
Explanation:
Given the various probabilities (P) and returns (R) for Asset X and Asset Y, their expected return is computed as follows.
Asset X = [tex]Summation(P_{r} *R_{x} )[/tex]
= (0.1*-3%) + (0.1*2%) + (0.25*5%) + (0.25*8%) + (0.3*10%)
Expected return (Asset X) = 6.15%
Asset Y = [tex]Summation(P_{r} *R_{y} )[/tex]
= (0.05*-3%) + (0.1*2%) + (0.3*5%) + (0.3*8%) + (0.25*10%)
Expected return (Asset Y) = 6.45%.
Due to its higher expected return, Asset Y should be preferred.
The answer is option C because it contained a statement that Asset Y has a higher expected return.
Option (B) is wrong because we are not certain if Asset Y has a lower beta. We were not given any information to compute the beta.
Options (A), (D) and (E) are wrong because they did not specify Asset Y has the preferred asset.
The following information relates to Carried Away Hot Air Balloons, Inc.: Advertising Costs $ 15 comma 800 Sales Salary 13 comma 800 Sales Revenue 650 comma 000 President's Salary 52 comma 000 Office Rent 66 comma 000 Manufacturing Equipment Depreciation 1 comma 000 Indirect Materials Used 8 comma 300 Indirect Labor 11 comma 100 Factory Repair and Maintenance 800 Direct Materials Used 22 comma 410 Direct Labor 35 comma 600 Delivery Vehicle Depreciation 940 Administrative Salaries 25 comma 000 How much was Carried Away's manufacturing overhead?
Answer:
$21,200
Explanation:
The computation of manufacturing overhead is shown below:-
Total manufacturing overhead = Indirect Labor + Indirect Materials + Factory Repair and Maintenance + Manufacturing Equipment Depreciation
= $11,100 + $8,300 + $800 + $1,000
= $21,200
Therefore for computing the total manufacturing overhead we simply added all relevant cost Indirect Labor, Indirect Materials, Factory Repair, and Maintenance, and Manufacturing Equipment Depreciation. The rest all cost is not relevant for total manufacturing cost.
Final answer:
Carried Away Hot Air Balloons, Inc.'s manufacturing overhead includes various indirect costs such as $15,800 for advertising, $1,000 for equipment depreciation, $8,300 for indirect materials, $11,100 for indirect labor, and $800 for factory repairs, totaling to $37,000.
Explanation:
To calculate Carried Away Hot Air Balloons, Inc.'s manufacturing overhead, we need to consider all the indirect costs associated with production that are not directly tied to the production of goods, such as direct material or direct labor. Manufacturing overhead includes costs like indirect materials used, indirect labor, and depreciation on manufacturing equipment along with other factory-related expenses such as repair and maintenance.
In the provided information, the following items are components of manufacturing overhead:
Advertising Costs: $15,800Manufacturing Equipment Depreciation: $1,000Indirect Materials Used: $8,300Indirect Labor: $11,100Factory Repair and Maintenance: $800The sum of these costs will give us the total manufacturing overhead, which can be calculated as follows:
$15,800 (Advertising Costs) + $1,000 (Manufacturing Equipment Depreciation) + $8,300 (Indirect Materials Used) + $11,100 (Indirect Labor) + $800 (Factory Repair and Maintenance) = $37,000.
Therefore, Carried Away's manufacturing overhead is $37,000.